Banking

Silicon Valley Bank is recruiting A-list dealmakers with multi-million-dollar guarantees, and bankers are jumping at the ‘once in a decade’ opportunity

  • SVB Leerink has hired a rash of senior healthcare and technology bankers this year.
  • SVB’s potential as a full-service dealmaker has lured hires from UBS, Citigroup, and Goldman Sachs.
  • But pricey guarantees and an uncapped bonus pool also help to woo senior bankers.
  • See more stories on Insider’s business page.

In May, a team of UBS technology, media, and telecom bankers suddenly jumped ship from the Swiss lender. The group, led by Jason Auerbach, is highly regarded on Wall Street, and it’s one of the most lucrative teams at UBS, sources familiar with the bank told Insider.

Auerbach’s team — which in recent years has landed roles on prominent initial public offerings including DoorDash, Lyft, and Peloton — had been aggressively courted by other firms as well, according to two sources familiar with the matter.

“You literally cut the brain out — the entire brain of tech,” a source close to UBS said.

The lift-out of about 15 bankers — a previously unreported figure that includes junior and midlevel staff, in addition to at least eight managing directors — a source familiar with the matter said, is a rare enough occurrence on Wall Street.

A UBS representative declined to comment.

But their destination added to the intrigue: SVB Leerink, a niche player best known for its healthcare advisory and research practice.

The UBS coup, while the most audacious, is but one in a string of marquee hires this year for the investment-banking boutique, which formed in 2018 when the commercial bank SVB Financial bought Boston’s Leerink for $280 million plus a $60 million employee-retention pool to be paid out over five years. 

Since bringing aboard Barry Blake, a rainmaker at Guggenheim in healthcare services, as cohead of investment banking in February, SVB has hired a dozen senior bankers from topflight competitors, including Bank of America, Citigroup, and Goldman Sachs — but not including the UBS team, whose move hasn’t been officially announced.

In recent weeks, the firm hired the IPO heavy hitter Matthew Walsh from Credit Suisse to lead equity capital markets for the investment bank, Bloomberg first reported. A source familiar with the matter confirmed the hire.

Both the quantity and quality of the hires have grabbed Wall Street’s attention. Analysts and veteran executive recruiters said the firm has in short order laid the groundwork to build a competitive full-service healthcare and technology bank.

“Their business is really hitting on all cylinders, and with $140 billion in assets, they’re certainly becoming more than just a boutique,” said David Chiaverini, an analyst at Wedbush. 

That vision — melding Silicon Valley Bank’s extant corporate-banking presence with a nimble yet full-scale investment-banking threat — has galvanized SVB’s recruitment push.

SVB could not be reached for comment for this story. 

One recent hire called it a ‘once in a decade’ opportunity 

One insider who joined the firm in the past year described it as a “once in a decade” opportunity to get in on the ground floor of a rapidly growing financial institution focused on two of the hottest sectors for dealmaking. Another banker hired in the past year independently described the same allure.

The 2018 merger married Leerink’s equity capital markets and research chops in healthcare with Silicon Valley Bank’s sprawling lending business to thousands of startups and emerging unicorns. And thanks to the pandemic, which accelerated both industries, the firm has been able to achieve in the past two years what reasonably should have taken it half a decade, Chiaverini said.

“Its core focus has really just become the hot area, and they’re building out the infrastructure to continue this strong growth, even deeper in specialized areas,” Chiaverini added. While pricey, SVB’s expansion over the past two years is already paying off in terms of new deposits, new relationships, and a fortification of the bottom line.

SVB added a record 1,600 new relationships and $45 billion in client assets in the first quarter, and it now boast $300 billion in total client funds — up from $30 billion a decade ago, said Steven Alexopoulos, an analyst at JPMorgan, in a research note. 

These corporate-banking ties, which provide traction with the C-suite and boardroom, and SVB’s hefty balance sheet — which enables the lucrative lending that is necessary to execute large mergers and acquisitions and fosters relationships with private-equity clients — represent a tantalizing untapped opportunity for investment bankers.

In 2020, 68% of US venture-capital-backed companies that held an initial public offering were SVB clients. But despite tight relationships with such firms since their infancy, SVB has traditionally bowed out at this stage, while a large investment bank took the reins.

Rather than serve as the “farm system” for megabanks, as Alexopoulos put it, SVB sought to join the big leagues and win those lucrative advisory mandates — and not only in healthcare, Leerink’s wheelhouse, but in technology as well.

Unlike other banks with ample lending capacity, SVB can also give its clients more personalized attention, Chiaverini said, and its extensive corporate-banking network means the firm can connect smaller, VC-backed companies with larger partners the bank already works with.

“Their market share is so big that they’re right in the middle of a lot of the dialogue that’s happening in these markets,” Chiaverini added.

Big players such as JPMorgan are also looking for ways in from the other direction: In April, the bank snapped up hires from Silicon Valley Bank and Bank of America to build out its VC-coverage team, situated in the commercial bank. Firm leaders told Insider in May that growing the group will help JPMorgan hang on to tech clients as they grow.

SVB Leerink came into 2021 with a team already capable of competing with top banks on the healthcare equity capital markets league tables. It ranked fifth — behind Goldman Sachs, JPMorgan, Bank of America, and Morgan Stanley — for US healthcare ECM-advisory work done in the first half of 2021, Dealogic said. The bank did 59 deals in the first half of the year that equaled $4.1 billion.

The additional firepower will make them an even greater threat on industry league tables. 

3-year guarantees and uncapped bonus pools

A senior executive recruiter added that the recent hires gave “them the capability to call on the same people with credible investment bankers.”

It hasn’t come cheaply. The market for top-notch healthcare and tech bankers is as intense as it’s ever been, senior executive recruiters said, catalyzed in part by a pandemic that has spurred valuations and rampant deal activity in these sectors.

One recruiter said 50% to 100% premiums are routine now to lure away tech bankers. But for the right banker, that payout is a bargain, the recruiter added.

Individual deals vary, but SVB has paid three-year guarantees to senior bankers in excess of $20 million, sources familiar with the matter said. Executive recruiters and other bankers active in the market estimated Auerbach’s guarantee in the neighborhood of $7.5 million to $10 million annually, and the prevailing view was that the ex-UBS technology boss commanded the top end of that range.

But even such figures could pale compared to what the bankers would earn if they deliver. SVB is also kicking in more to the bonus pool than traditional banks, with no limit on total compensation, sources told Insider. That means bankers could earn a percentage of the revenues they bring in beyond a minimum threshold, and in years with blowout performance, eight-figure paydays for senior bankers would be attainable. 

This doesn’t mean SVB is spending frivolously. Senior executive recruiters said such payouts weren’t impractical because in addition to the intense hiring competition, the upside in healthcare and technology dealmaking is so lucrative that pricey guaranteed deals could realistically pay off in short order.  

For instance, one senior headhunter in technology banking recalled a candidate he placed recently who doubled the revenues in his product area at his new firm in less than a year.

In digital health — the intersection of the two industries — there’ve been more than 50 mergers and acquisitions since this year through May, a record pace said Rock Health, a digital-health fund advisor. 

Still, such an expensive gambit isn’t without risk. While the opportunity is real, there’s no guarantee the marquee bankers SVB’s poached will perform as well as they did at the more established and prestigious firms they came from.

And SVB may face questions about “mission creep” given the expansion, said Brian Foran, an analyst at Autonomous. He added, “They’ve done well enough that I think they’ve earned the right to commit another round of capital to the business and expand.”

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