When a senior Goldman Sachs (GS.N) technology banker delivered a grim prediction to his colleagues earlier this year, it marked the beginning of downturn that would result in some bankers leaving.

Mergers and acquisitions among technology companies could be down as much as 80% in 2023, Sam Britton, one of the leaders of Goldman’s global technology, media and telecommunications group, wrote in an internal memo in February, as an economic slowdown and a hostile anti-trust environment weighed on dealmaking appetite.

Britton tried to boost morale, arguing that market conditions could change quickly, according to sources who described the contents of the memo. But the plunge in the deal pipeline prompted soul-searching and job-hopping among investment bankers accustomed to a feast.

In the months that followed, a number of top technology bankers have left firms such as Goldman, Bank of America (BAC.N) and Barclays (BARC.L), often for smaller peers such as Moelis & Co (MC.N), Qatalyst Partners, Evercore (EVR.N), and Jefferies Financial Group (JEF.N), according to interviews with more than a dozen bankers and previous Reuters reporting.

The latter lured the bankers by promising a bigger payout for their deals, often guaranteeing minimum compensation of millions of dollars for two years, those interviewed said. They added that it was unusual for so many senior bankers to jump ship in the space of a few weeks.

A Barclays spokesperson said the bank was confident in its plan to break into the top five investment banks. Representatives of the other banks either declined to comment or did not respond to requests for comment.

Technology was the top sector for mergers and acquisitions for eight consecutive quarters until the second quarter of 2022, when a bout of inflation forced central banks to raise interest rates, weighing on tech stock valuations.

Global deal volumes in the technology sector have dropped by more than half so far this year, according to data from LSEG Deals Intelligence.

Investment bankers and headhunters say the talent flight could change the competitive position of many banks when technology firms decide to embark on big deals again.

“When the pay is less, bankers feel less committed to the bank they are at. The cost of opportunity to switch is less,” said Anthony Keizner, managing partner at executive search firm Odyssey Search Partners.

Goldman has lost several high-ranking technology bankers this year, including Nick Pomponi, former co-head of global software investment banking who left for Evercore, Rob Chisholm, a partner who moved to Qatalyst, and Troy Broderick, who was named chief operating officer of Goldman’s M&A business in May only to leave for Perella Weinberg Partners (PWP.O).

Barclays, which has struggled to retain bankers following a shake-up in the management of its investment banking division, has lost at least nine top technology bankers in recent weeks. They include Laurence Braham, its former global chair of investment banking, and Richard Hardegree, its head of technology M&A, who both moved to UBS, and Steve Markovich, its former global co-head of software investment banking, who left for Centerview.

Ron Eliasek, one of the software industry’s top investment bankers, left his post as global chairman of technology, media, and telecommunications at Bank of America earlier this month to join Jefferies.

In a big bet on technology dealmaking, Moelis & Co (MC.N) hired 46 technology bankers from SVB Securities, the investment banking arm of failed Silicon Valley Bank, including Jason Auerbach who led the team, a Moelis executive told an industry conference last week.

PAY GUARENTEES

In making the switch, many bankers forfeit the resources of big banks that can help win clients, such as top brokerage coverage and a balance sheet to fund deals, in exchange for a bigger cut of the fees from the deals they put together.

Traditionally, smaller firms have been reluctant to offer investment bankers guaranteed compensation, in order to have more of their pay tied to performance. Yet some are now offering guaranteed pay of between $2 million and $12 million over the first two years to poach top talent, the bankers interviewed by Reuters said.

Alan Johnson, managing director of compensation consultancy Johnson Associates, said that first-year guarantees were common practice in the hiring of investment bankers, but second-year guarantee used to be rare.

He added that bankers who leave big banks for smaller firms are signing up for a bigger slice of a smaller pie, so clinching these two-year guarantees eases the pressure on them to help grow the pie as soon as they join.

“You get paid a higher percentage of revenue than in a big bank, but you have to generate the revenue with perhaps less help,” Johnson said.