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Jefferies has told its top investment bankers that they must collaborate in order to maximise their bonuses, as the US firm tries to net bigger corporate clients and break into Wall Street’s top echelons.
The edict came at a recent off-site meeting of Jefferies managing directors and was delivered by president Brian Friedman, according to people familiar with the matter.
The move marks a shift from Jefferies’ historic compensation structure, which has typically rewarded senior bankers based primarily on the value of the deals they bring in. It comes as the bank tries to foster more collegiality in order to win spots on larger corporate mandates.
The bank is hoping, backed by aggressive hiring in recent years, to graduate from the mid-sized deals involving buyout firms that have become its bread and butter to more major corporate transactions, which demand bigger teams of bankers.
That includes work for companies on the kind of multibillion-dollar mergers and acquisitions that have typically flowed to bulge-bracket investment banks such as Goldman Sachs and JPMorgan Chase, as well as elite boutique advisers such as Centerview and Evercore.
Such deals demand rosters of bankers with expertise ranging from debt financing to sector specialisms, in contrast with the private equity mandates Jefferies has become known for, which require much smaller teams.
Speaking about the off-site meeting for managing directors, Friedman, who runs Jefferies alongside longtime chief executive Rich Handler, told the Financial Times: “The message was one of reality, that to properly serve our clients . . . we must bring the best of Jefferies to them, and the best of Jefferies means whatever is relevant.”
“To the extent anyone might think they can work on a narrow basis and that might result in them getting better rewarded, that myth was quashed.”
Jefferies is the last independent broker-dealer of significant size on Wall Street. It is known for an old-school culture that promises lucrative pay packets — year-end bonuses are normally paid in cash as opposed to stock at most other investment banks — but has a reputation for aggressive clawbacks if employees leave for a competitor.
The bank has been trying to expand its work with corporate clients since 2019, having built up a strong business advising private equity. As part of that aim, it has poached senior bankers from rivals with expertise in areas such as healthcare, industrials and chemicals.
Winning work from corporates “generally takes longer and it’s something that we recognised and were conscious of as we built our capabilities and built our brand”, Friedman said.
Recent wins include advising drugmaker Blueprint on its $9.5bn takeover by Sanofi and building products distributor GMS on its $5.5bn acquisition by Home Depot.
Jefferies has expanded rapidly in recent years. Its rank of top managing directors has swelled by about 70 per cent since 2019, as it has capitalised on upheaval at rivals such as Credit Suisse and Barclays to poach bankers.
The bank ranked sixth globally in the first half of the year for M&A fees, according to data from the London Stock Exchange Group, outpacing Bank of America and Barclays.
However, the group’s share price has fallen by about a quarter in the year to date, as market volatility surrounding US President Donald Trump’s trade war has hampered an anticipated surge in dealmaking. It generates the vast majority of its revenues from advisory work on M&A, and debt and equity underwriting.
Japanese lender Sumitomo Mitsui Banking Corporation has been building a growing stake in Jefferies, and has a collaboration agreement with the bank to work together to advise and lend to investment-grade companies globally.
