HONG KONG – Eighty-hour weeks, multibillion-dollar deals and huge bonuses – until recently, life as an investment banker in Hong Kong was both intense and lucrative.

These days, it is anything but. The big China deals that lined rainmakers’ pockets for decades have evaporated. Banks and law firms alike are cutting jobs. Those advisers that remain are chasing smaller deals and taking extended vacations.

“The golden era of high-flying investment bankers and advisers is pretty much gone,” said Associate Professor Veronique Lafon-Vinais, an investment banker for more than two decades, who now teaches finance at the Hong Kong University of Science and Technology’s business school.

In a bad year for deals globally, the value of mergers and acquisitions (M&As) in mainland China and Hong Kong has fallen 6 per cent to about US$185 billion (S$247.5 billion), Bloomberg-compiled data shows. This is on course to be the lowest total for any year since 2013 and little more than half the annual average since then.

The decline in initial public offerings (IPOs) is more extreme. The year 2023 is poised to be the worst for Hong Kong debuts since 2001, just after the dot.com bubble burst, with US$4.6 billion of IPOs. This is a fraction of the US$52 billion raised three years ago, and down 85 per cent from the past 10-year average of US$31 billion.

Interviews with more than a dozen advisers show that the environment is expected to remain challenging in 2024, with some saying activity is unlikely to pick up until at least 2025.

The overhangs they cite are numerous, including rising overseas financing costs, volatile markets and strained ties between Beijing and Washington, as well as President Xi Jinping’s lingering crackdowns on industries such as property, tech and finance.

Slumping valuations in Hong Kong’s stock market and tighter regulatory controls are also deterring Chinese firms from listing.

Just last week, Alibaba Group Holding shocked investors by terminating plans to spin off and list its US$11 billion cloud business. The company, which cited restrictions by the United States on chip sales to China for the reversal, said it is also suspending a listing for popular grocery business Freshippo.

The result of the changed environment for the investment banking industry is less swagger, more thrift. The business-class travel and high expense accounts have been cut back, with Zoom calls increasingly replacing face-to-face meetings. Rainmakers have been told to roll up their sleeves on deals in countries and sectors they are not familiar with.

With deals shrinking in size and frequency, many advisers are taking advantage of having what used to be a rare commodity: free time.

One senior investment banker travelled overland from the Kyrgyzstan/China border to Turkey with his son on a US$40-a-day budget as part of a month-long break. Another spent four weeks trekking in the fjords of Norway and the mountains of Canada on two separate holidays in 2023. A third took her family hiking in Italy and the Swiss Alps. Others took lengthy sojourns in New Zealand, Croatia and southern France.

Job worries

Family time has replaced overtime. A banking executive revels in taking his daughter to hockey practice every week and having dinner with his wife. High-end gyms, too, are benefiting, as bankers exercise regularly during the work day.

Yet behind the travel and more relaxed lifestyle lies anxiety about the future.

“In this current environment of slow deal flow and layoffs in the finance industry, people are keen to take long holidays, but I expect they also are worried to be away from their office for too long,” said Mr Simon Kavanagh, a partner at Asia-focused investment advisory boutique BDA Partners. “They fear their job may no longer be there when they come back.”

To be sure, banks are contending with a slump in deals around the world. M&A volumes in the US in 2023 are at a decade low of US$1.4 trillion, according to data compiled by Bloomberg. In terms of IPOs, about US$25 billion has been raised on US exchanges this year, a modest bump compared with 2022 but down more than 90 per cent from a blockbuster year in 2021.

Yet the duration and depth of the slump in China, as well as the poor outlook, are prompting banks to take action after earlier expanding aggressively. In the past year, Wall Street banks including Goldman Sachs and Morgan Stanley have conducted multiple rounds of layoffs in Hong Kong.

UBS Group cut about two dozen investment bankers in Asia, mainly China-focused roles based in Hong Kong and including several managing directors. In June, JPMorgan Chase & Co slashed about 30 Asia dealmaking jobs, with Hong Kong and China-based staff taking the biggest hit.

Compensation, too, has taken a hit, with payouts for investment bankers in Asia the worst since the global financial crisis.

The slump in dealmaking is reverberating across other businesses, including consultancies and law firms.

Linklaters laid off 30 lawyers across its Beijing, Shanghai and Hong Kong offices due to the downturn in China. Dentons is retreating by hiving off its mainland Chinese operations.

“This current market is very challenging, perhaps the toughest deal environment I’ve ever seen in my career,” said Mr Frank Bi, a Hong Kong-based partner at law firm Ashurst. “Dealmakers need to adapt to a new reality and find new ways of generating business.” BLOOMBERG