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Word went down from JP Morgan's head office: get into Russia. But what to do? Buy an existing player? Tried that, but the most attractive candidate, Troika Dialog, is under Kremlin pressure (so the rumour goes) to remain Russian. Who else? Aton Capital, Brunswick and UFG have already been sold. Jennings is making too much money with his newly re-branded Renaissance Group. And no one else is available or sufficiently interesting. What to do?

Then: A smooth-talking banker from a bit-Russian brokerage comes a-knocking, offering up his team at a hefty premium, but still at a fraction of the cost of acquiring another bank. So it was an easy trade for JP Morgan to take out most of MDM Bank's equities team a few weeks ago in what is unlikely to be the last large-scale poaching this hiring season.

The poached people will likely enjoy a premium payday. If it's any indication, equity analysts boasting 1-1/2 years of experience, covering a small handful of second tiers, garnered contracts for upwards of $250K: Nice work if you can get it. A multiple of at least two times the (already ridiculously high) going market rate at more senior levels was probably the premium assigned to lifting the team as one. Even in Moscow's overheated banking environment, that kind of cash for an untried and less-than-seasoned team sets a new standard, and is proof - as if more were needed - of the dire shortage of quality talent.

Remains of the desk

MDM is supposedly thinking about re-launching - yet again - its equity business. But the premium necessary to entice professionals into what, given MDM's record, will likely be a dead-end proposition, particularly in the current bubbly market, would rival even that paid by JP Morgan.

The future of the remaining investment bankers must now be in question, given they have been unable to create a department that can survive for long enough to build up any momentum. CEO Michel Perhirin is struggling to change the direction of the supertanker and has to produce some results before his three-year contract expires at the end of 2008. In the meantime, abandoning equities altogether must be one option; returning to the pump-and-dump, third-tier equity brokerage model the bank employed a few years ago is another.

MDM shareholder Martin Andersson (former head of Brunswick UBS Warburg), who bought a 10% stake in the bank in December, is probably wondering what he got himself into. So is Oleg Vyugin, the former head of Russia's Federal Financial Markets Service, who became chairman of the MDM board of directors in May; he reportedly passed on an offer from Goldman Sachs because he was told that joining a foreign bank would effectively mean that he is removing himself from the running for the job that he really wants, as head of the Central Bank of Russia.

What makes MDM's position even more unstable is that staff members are spoiled for choice if more want to jump ship. Russian shares have been underwater for most of the year, but the hiring frenzy continues apace in anticipation of a post-election continuation of the IPO boom.

VTB, flush with $8bn in cash from its IPO, is said to be considering putting together an equity team as part of a broader push into investment banking - or else it just may poach, say, a team from Aton. In any case, it's still a happy time for the few with the requisite skills, and for the head-hunters who place them.

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