- JPMorgan recently drew a line in the sand over private equity's recruiting of its newbie bankers.
- Within days, Apollo and General Atlantic said they would bow out of the practice this year.
- Here are some of the other factors that may have played a role in their decision.
When Jamie Dimon speaks, people listen.
Early last week, the JPMorgan CEO blasted the practice of private equity firms hiring junior bankers for future-dated jobs. Days later, buyout shops Apollo Global Management and General Atlantic heeded the warning and announced they'd stop the recruiting tactic.
Even Apollo's CEO, Marc Rowan, seemed to credit Dimon for his firm's decision.
"When someone says something that is just plainly true, I feel compelled to agree with it," Rowan, the Apollo CEO, told Business Insider last week, following his firm's decision to back out of recruiting 2027 associates this year.
Dimon, who has proven influence over a wide range of topics including the economy and the workplace, has been no stranger to critiquing private equity's recruiting practices.
He blasted them last year, telling students at Georgetown University that he believes they're "unethical" and that he wants to ban them.
"I think it's wrong to put you in the position," Dimon said, adding: "You have to kind of decide the next career move before you have a chance to even decide what the company is like."
The question is, why now? Nothing changed last year — so what triggered Apollo and General Atlantic to suddenly reverse course?
Neither firm responded to interview requests from BI to speak with executives in time for the publication of this story. Industry insiders, however, pointed to a series of factors that they said have made it easier for firms to heed Dimon's words of warning, including the persistent slowdown in deal activity and the rise of artificial intelligence, which could supplant the need for some early career jobs.
Frustrations have also been mounting over a recruiting process that has shifted earlier and earlier in recent years.
"The matching process is yielding a lower success rate and many candidates will sign without fully knowing what they're getting into," Matt Ting, the founder of Peak Frameworks, a popular Wall Street careers course provider, told BI in April.
Should any one of these factors change (deal activity picking up, for example), the rat race could come roaring back, some people said.
"Being cynical, it's an easy time for them to make such a decision," said a senior banker, who asked to remain anonymous to protect his job and relationships with financial sponsors.
Mounting frustrations
The golden age of private equity has been over for some time now, thanks to higher borrowing costs and a persistently sluggish deals market.
While it's unclear how this might be impacting hiring at the junior levels, the investment banker said his firm has seen a slowdown in the number of bankers poached.
"The reality is, if things were extremely frothy right now, and they had a ton of deals going on and they needed more people, they'd actually be recruiting people off-cycle out of banks right now to fill seats immediately," the banker said, adding: "And they're not, you know what I'm saying?"
Young bankers who spoke to BI, meanwhile, raised concerns that artificial intelligence could reduce the need for new blood in the coming years. Earlier this year at an industry conference, the CEO of buyout firm Vista Equity Partners predicted some 60% of the conference's attendees would be "looking for work" by next year due to artificial intelligence.
What's more, BI has for years been hearing of growing tensions over the industry's pressure-cooker hiring tactics, which have been known to include middle-of-the-night interviews and demands that candidates make a decision before they leave the room or see their offers evaporate. The intensity has soured some young bankers on joining the industry, as BI has previously reported.
Early recruiting timelines have also led to more candidates walking away from job offers they had signed at the start of their career — leaving firms to scramble to fill an open role.
"One big issue with the early on-cycle is that reneging has gone up a lot," Ting told BI.
What happens next is anyone's guess. For now, investment banks appear hopeful that other private equity firms follow Apollo and General Atlantic's lead. And while the exact role Dimon played remains a mystery, senior bankers say they are grateful to him for having the courage to speak up.
"There's no one else at that level that can make bold proclamations like that," the banker said of Dimon.
When asked if others had tried and failed to do what Dimon has done, the banker laughed.
"You mean lean on some of our biggest fee drivers?" he replied. "It's tough to lean on your clients."
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