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Health Care Bankers Enjoy Strong Demand, Scarce Supply

April 10, 2007

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By Jon Jacobs
April 4, 2007

Investment bankers with experience in arranging health care deals are benefiting from robust hiring demand as high-ticket mergers proliferate throughout the sector.

The hiring outlook for health-care bankers looks to remain strong for at least the next 12 months, recruiters say. At the moment, the busiest niches are biotech, health care services and medical technology.

Both bulge-bracket and boutique banks are seeking to upgrade their health care teams, fill vacancies and, in some cases, ramp up to keep pace with increased deal business.

“There is good momentum right now … people are looking to hire at all levels,” says Simon Hall, managing partner of the global financial services practice at Heidrick & Struggles. He adds that demand is strongest for senior managing directors with good relationships, and for junior vice presidents and senior associates who can assist with execution.

There is active interest in recruiting the most “seasoned, distinguished” health care bankers, says the chief executive of a finance-focused search firm, who asked to remain anonymous. Along with M&A, he cites convertible securities deals, a popular financing avenue among health care companies last year.

As with so much else on Wall Street, the private equity explosion is an underlying driver. Besides fueling deal activity, PE firms are generating vacancies on Wall Street in a direct way – by pulling talent out of investment banks. Still, health care investment banking salaries “haven’t been bid up nearly as much as technology investment bankers,” notes Marc Lewis, CEO of national executive search firm Leadership Capital Group.

Trends and Demand

Another recruiter reports seeing two-year guarantees offered to some new hires, rather than the usual one year.

Recruiters see an open door for sell-side equity analysts who have personal connections among health-care company CEOs and CFOs to move over to investment banking.

Another emerging trend is senior industry executives jumping to dealmaker roles within investment banks. At least two health care CEOs made that move in late 2006: Tony Scullion of Nasdaq-traded Memory Pharmaceuticals joined Boston boutique Leerink Swann as a managing director, and Kenneth Moch left biotech firm Alteon Inc. for San Francisco-based ThinkEquity Partners.

While health care banking slots aren’t necessarily opening up in greater numbers than investment banking jobs generally, candidates with health care experience and high-level industry contacts have a leg up compared with their colleagues who serve other sectors: they are in scarce supply.

“Unlike FIG (financial institutions groups), industrial and general M&A, within health care it’s a very very small talent pool,” says Heidrick & Struggles’ Hall.

But even in the face of busy deal calendars, Hall says many employers are wary of raising headcounts and then having to make layoffs if market conditions change.

As a result, plenty of shuffling is going on among existing health care banking teams. Senior-level hires often spark chain reactions as the jilted employer moves to fill the new vacancy. It’s a process that may be repeated several times. “It is a bit of a merry-go-round,” Hall says.

Hall expects the current cyclical upswing in investment banking to continue for one to three more years. However, health care M&A benefits from secular forces such as the aging population and an inefficient medical delivery system, says Sanford Steever, editor at Irving Levin Associates, a health care finance research and publishing firm based in Norwalk, Conn.