Middle Market Investment Banks: A Complete Overview

Are you looking for the best middle market investment banks? If so, this blog is curated specifically for you. In this blog, we will provide a complete overview of middle-market investment banks with definitions, side-by-side comparisons with bulge bracket and boutique banks, and salaries. 

When talking about investment banks, the first names that pop to mind are high tier, multi-national banks like Goldman Sachs and JP Morgan. However, there are also MM investment banks that cater to hundreds of companies in the middle market. The middle market tier is where most of the M&A transactions occur. 

However, when it comes to banks in the middle market, you should not believe everything you read or hear on the internet. There are a plethora of online articles that rank these banks and claim that X or Y Bank is the best. But in reality, it is more complicated than that. This is why we will not rank any banks but provide an in-depth guide on mid-market investment institutions so you can make an informed choice yourself. 

Let’s dive in. 

What are Middle Market Investment Banks?

Middle Market Investment Banks are financial institutions that offer a wide range of financial services to mid-level firms that sit between bulge brackets and regional boutiques. They primarily advise on deal sizes between those two and offer fairly solid exit opportunities. 

These banks often have a chill working culture with moderate but worthwhile pay, making it one of the best options for freshers and experienced bankers alike. They are also known as MM banks and mainly target relatively smaller organisations with an annual revenue of less than $500 million. 

Sometimes, MM Banks also participate in multi-billion dollar deals as the competition is very steep in the financial industry with many big competitors emerging in the industry. Similar to bulge bracket banks, middle-market banks also offer more than just mergers & acquisitions advice.

They also provide services like sales & trading, capital markets, wealth management, and equity research. There are around one or two dozen banks in the USA that qualify as middle market investment banks. 

Note: The term middle market is very ambiguous so you can find various definitions on the internet. 

According to Wikipedia, the middle market refers to companies with an annual revenue of $100 million to $3 billion or $10 million to $1 billion or $50 million to $1 billion. 

While there is not a single universal definition of the middle market, it can be safe to say that an average-sized deal between $50 million to $500 million qualifies as the middle market. 

Primary Characteristics of the Top Middle Market Investment Banks

While MM banks are known for mergers and acquisitions advisory, they also offer other services to firms. Here are the primary characteristics of the best middle market investment banks in the USA. 

Geography: MM Banks have a reputable presence in their home country with multiple branches in various regions. However, they don’t have much of an international presence when compared to elite bulge bracket banks like JP Morgan and Morgan Stanley. 

Services: As mentioned above, MM banks offer more services than just M&A advisory. These banks operate in restructuring, ECM, and DCM. Moreover, they also have other divisions like ER and S&T. However, some MM banks are actually less diversified than they seem. 

Exit Opportunities: When talking about exit opportunities, it is harder to win offers at upper-middle market equity firms and mega-funds. In comparison, it is easier to win offers at smaller PE firms and hedge funds. You can also opt to move to a larger bank or corporate finance. 

Read Also:- 6 Best Money Market Accounts of 2023

Middle Market Investment Banks Vs. Retail Banks

If you are new to the finance world and are wondering what is the difference between an investment bank and a typical retail bank, here we have provided a side-by-side comparison of an investment bank and a typical retail bank. Take a look-

Parameters	Investment Bank	Retail Banks
Deposits	No	Yes
Loans	No	Yes
Number of Customers	Few Hundred Customers	Millions of Customers
Services	Offers bespoke services tailored to every firm	A standardized banking process
Day-to-Day Transactional Services	No	Savings AccountsDebit CardsPersonal LoansInsuranceMortgages
Strategic Advisory Services	Offer strategic advice to firms like debt and equity investments, capital market products, acquisitions, etc.	They explain their services to the customers but don’t provide strategic advice for your next move.

Why Do Firms Choose Middle Market Investment Banks?

Middle Market investment banks mainly cater to middle market companies. Moreover, they also provide services to these firms that bulge bracket or boutique investment banks do not. 

Fees

One of the major differences between MM banks and bulge bracket banks is the monthly retainer fee. The monthly fee charged by a middle market investment bank is much less compared to elite bulge bracket banks. Moreover, mid-tier companies are not willing or simply can’t afford to pay the $100k+ monthly retainer fee charged by bulge bracket banks. 

Local

Middle market investment banks have a much bigger local presence than bulge bracket banks, which are mainly located around the biggest cities in a country. The widespread local presence of middle market banks makes them an ideal choice for tier 3 and 4 companies in a country. 

Speciality

By mainly catering to mid-tier companies, middle market banks hold a speciality in that area that most bulge bracket banks don’t. For example- a bulge bracket bank won’t be aware of the top firms in a local distribution market whereas an MM bank is more informed about the local market of the county. 

Middle Market Investment Banks Vs. Bulge Bracket Investment Banks

The biggest difference between bulge bracket and middle market investment banks is the average deal size. While MM banks primarily handle deals worth $10 million to $500 million, bulge bracket banks tend to focus on projects that are over $1 billion in value. Other major differences include services provides, exit opportunities, and geographic reach. 

Here we have listed the major differences between bulge bracket and middle market investment banks. 

Parameters	Middle Market Investment Banks	Bulge Bracket Investment Banks
Deal Size	Between $10 million to $500 million	Over $1 billion
Services Provided	Wealth Management FinancingRestructuringM&A	M&A, Equity, Debt, Restructuring, Wealth Management, Equity Reserach, Sale & Trading
Industry	Caters to multiple industries	Caters to multiple industries
Location	Solid local presence but lacks international presence	Solid international presence
Hours	65-75 hours	90-100 hours
Salary	Medium	Very High
Exit Opportunities	Medium-sized firms(private equity and hedge fund)	Mega private equity firms and hedge funds. Important Roles in corporate finance.

Middle Market Investment Banking Salary and Compensation

One of the ever-fleeting questions in the financial world is “Do middle market investment banks pay less?” Of course, yes! MM Investment Banks do pay less when compared to elite bulge bracket banks. But that is mainly due to smaller deal sizes. 

However, in return for paying less, analysts at MM banks work fewer hours and fewer responsibilities and work on simpler deals. The pay isn’t half bad and is more than enough to make a living. Moreover, MM IBs also offer invaluable working experience. Here we have listed the basic salary and compensations of different positions in a typical middle market investment bank. 

Position	Promotion Timeline	Base Salary (In $)	Total Compensation
Analyst	2-3 years	60,000 to 80,000	120,000 to 150,000
Associate	2-3 years	130,000 to 150,000	200,000 to 280,000
Vice President	5-10 years	200,000 to 220,000	300,000 to 500,000
Director/ Senior Vice President	5-10 years	200,000 to 300,000	500,000 to 700,000
Managing Director	-	N/A	N/A

Read Also:- A Comprehensive Guide on Commodity Investment

Work Culture at a Middle Market Investment Bank

At first glance, the working process and culture of a middle market investment bank seems quite lucrative and liberal. 

Working Hours: MM investment banks have fewer average hours per week than elite bulge bracket banks. Instead of 80 hours per week, you can expect to work around 65 to 75 hours/week as an Analyst. However, it mainly depends on the firm and location as some firms also have a reputation as ‘sweatshops’ and require employees to work long shifts. 

Fewer Deals: In an MM investment bank, you probably won’t be working on multiple deals at the same time as you would in a bulge bracket or boutique bank. Most MM banks work in tandem with long-time existing clients. 

These are the primary differences between a mid-tier investment bank and an elite bulge bracket banks. Fewer working hours mean you can focus more on your personal life. However, the jobs are still demanding and will require your full concentration and focus for the initial few years. 

Advantages of Working at a Middle Market Investment Bank

While MM banks work at fewer deals, there are still plenty of inherent benefits of working at a middle market investment bank. Here we have listed some of them. 

Ideal for Late Starters and Career Switchers: Compared to bulge bracket and boutique investment banks, recruitment in MM banks is a lot less competitive. Even if you failed at a large bank, you can still win internships and job offers in an MM bank. Moreover, the recruiting process is also quite lenient if you are a working professional who is looking for a career switch. 

Better Culture and Deal Experience: Since there are fewer mid-tier bankers, you have the opportunity to contribute more to each deal as an Analyst or Associate. Moreover, some firms are relaxed and lenient and don’t make it feel like you are working in a sweatshop. These are the major factors that make middle market investment banks more appealing to long-term bankers. 

Cash Compensation: While some banks do provide clawback agreements if you decide to resign early, the compensation is all cash and is not paid in stock like most bulge bracket banks. 

Read Also:- How to Manage Investment Portfolio? Tips for Young Investors

Drawbacks of Working in a Middle Market Investment Bank

While everything may seem like roses and butterflies on the internet, there are also some major drawbacks to working in an MM investment bank. 

Smaller Deals: As an analyst or associate, your responsibilities are more focused towards the deal process and you probably won’t be able to gain exposure to the technical process. 

Lesser-known Brands: MM Banks are renowned locally and don’t have much of an international presence. This makes it more challenging if you decide to leave finance and switch industries. 

Lesser Compensation: While the compensation is offered in 100% cash, in total dollars, it is still relatively less than what you would get in bulge bracket and boutique banks due to smaller deal sizes. 

Variable Work Experience: The work experience is mainly dependent on key individuals and firms. While some are quite consistent, others fluctuate a lot and are not reliable. 

Fewer Exit Opportunities: It is highly unlikely that you will get admission into the best private equity firms. However, you can still be recruited by smaller firms and banks. 

Final Thoughts

First and foremost, don’t believe everything you read on the internet and always double-check for yourself anything you read online. That being said, even if you work for a middle market investment bank, you are still ahead of 95% of MBA graduates. Yes, they are relatively worse when compared to EB or BB banks, but they still offer better opportunities than working in a non-IB firm. 

So, if you have a job opportunity from a middle market IB, you can take it if the working conditions are in your favour. Lastly, you should ignore any and all rankings of banks, firms, or companies. Each of them has its own pros and cons and excels in certain categories. 

Frequently Asked Questions(FAQs)