Was wondering if anyone can answer a few questions about a small boutique that focuses in the lower middle market. The firm is bringing me on as the sole analyst (about 3/4 MDs and 2/3 VPs w/ a small equity research group) and was curious as to what to expect. I was wondering how the work experience at these shops is usually viewed to in comparison to BBs? The firm mostly focuses on private investments in public equity as well as some M&A.
They will be sponsoring me to get my licenses when the summer rolls around so I guess worst case I can grab those and jump ship. Wanted to hear the overall opinion on some of these shops and if they would be a good place to start in terms of eventually a top MBA.
Any help is appreciated. Thanks guys.
Interested as well
@srj62" masters
I started off at a sub-ten-man boutique and lateraled after a year. The analyst who left before I started went to HWS for business school, but I would take that with a grain of salt, so to speak. Let me break this into pros and cons. There will be more cons simply because the pros are mostly obvious and do not need to be written out in great detail.
Pros: -More responsibility. You will be the go-to person for modeling, pitch books, CIMs, etc. Clients will talk to you and send materials to you. You may even have full autonomy over several parts of the process.
-Better hours. This is really dependent on the boutique, but I think 50 was the max. I went home around 6PM every day and worked maybe two hours on weekends per month. It was great.
-Transferable skills. Will a boutique allow you to exit to a top business school or a top PE shop? Maybe, but it's highly unlikely. That being said, the skills are transferable, and lateraling from even a "no name" boutique is quite easy compared to FT recruiting.
Cons: -Lack of complexity. Most of the deals I was on were straight forward M&A deals. There was no complicated debt raise securitizations, no complicated cross-border M&A analysis, etc. Most of what you will be doing is simple and straightforward M&A. This results in a skill set that is not directly comparable to that of an analyst at a larger bank.
-Lack of training. Large banks spend tens of thousands on training their analysts. This results in anyone, even a liberal arts major who has no clue what EBITDA is, to be able to hit the ground running on day one. Boutiques cannot afford this training. It can be pretty frustrating sitting there at 2AM with no other analysts or anyone who can help you with your lbo model. Worse yet, you don't even know what you're doing since you received no training.
-Terrible pay. I made $60k all in. Was that good pay for the work I did? Yes, of course, but it is pretty demoralizing when your buddies on Wall Street are making two to three times what you're making and not even working double the hours that you are.
-Unsophisticated clients. In no way am I bashing clients, but this is a valid point to bring up. A boutique's clients are usually very, very knowledgeable about their industry but have no idea how to run a business. For example, they'll run all kinds of personal expenses through the business, which make EBITDA addbacks a nightmare, especially when potential buyers ask "Why was there a vehicle expense last year of $150,000?" or "Why is 50% of your salary expense being added back?". Most clients of a boutique also have no legal team, no accounting team, and no corporate development team, which results in a lot of hand holding through the process. This can definitely lead to some good experience, as you will be forced to really know your stuff in order to teach a client, but it is frustrating at times and takes up a lot of your time.
That is all that I can think of right now. I would definitely take the job. If you do not like it, you can always lateral. Take a look at my lateraling guide. Let me know if you have any more questions.
This is the best summation I have ever seen regarding the subject. Anyone considering taking a job at a no-name boutique needs to read this in its entirety.
Sil - can't thank you enough for the response, very helpful.
Does the same go for a boutique specializing in private placements and PIPES. I believe there is some valuation in the process but are the skills transferable to another group or firm after a year or so? Or do you think I should maybe just get my licenses and try to jump into a more desired area if I am lucky enough?
The firm gave me an opportunity to treat this as an internship while I get licensed and I can join the firm full time if I want when the summer ends.
Thanks
Sil,
Can i ask the size of your deals?
@Sil
Many thanks, I SBed you.
How small can a boutique be? (Originally Posted: 05/11/2012)
Hey WSO,
I have two interviews lined up next week for post-grad internships: one is IBD and the other is equity research. Both shops are actually on Wall Street, however I'm wondering how small a boutique can be before the experience I would gain becomes totally irrelevant?
My fear is that after working at a no-name shop, my experience will still be worthless to MM firms and grad school programs.
Thanks for any input.
How small? A dude with rented office space above Equinox.
Boutique > nothing
Boutique -> MM -> ???
A guy in his home office could be a boutique
Check the firms' track record. Visit their websites and google them. How many deals have they done? What are the dollar amount of the deals closed? What type of deals do they typically work on?
What matters most is not how big is their office/how many offices they have/how many people work there, but rather their deal flows.
Boutique firms typically specialize in a few niches, by doing your homework you can find out what their respective niches are and also the type of works you will be involved with once you start there. This way you will also have something substantial to put in your resume/applications.
Take a look and see if they have bios for key people at the firm. If the people running the place have legit experience at BBs and/or elite boutiques, that's a very good sign.
Boutique is very vague from what I know. It can mean hundreds or only 1 person. If the website is crappy and it doesn't show an executive team, chances are it's a smaller boutique .
Small Boutique Questions (Originally Posted: 12/29/2010)
Ok, so I am likely going to accept an offer in the next couple weeks for an analyst gig at small (5-6 man) boutique starting this summer, and I am slightly concerned about how much I am expected to know in regards to modelling. My specific concerns stems from the fact that I will not be going through a formal training program, and that the one current analyst, who is on his way out, will likely be gone by the time I arrive. I feel fairly comfortable with my skills through internship experience and work on my own, but I would still consider myself a relative beginner. I think my confidence during the interview process about my skills, and general modeling knowledge gave off the impression that I was quite adept, and could handle most scenarios.
My second concern is that I am unsure how solid my modelling skills are going to be coming out of my analyst stint as compared to my BB or MM peers, and how this will affect my exit ops.
So with that said, I have a few questions:
What are some good ways to learn more about the finer details of modelling (i.e. industry specific)? Will I be expected to know these nuances? How much time do associates at small boutiques generally spend helping out analysts(i don't want to feel like I'm wasting their time on things I should know)?
How were some of you fellow monkeys, in similar situations, able to refine your modelling skills so that you were on the same level as those in BB banks?
Will not having gone through formalized training program impede me if I try to lateral to a large (MM or BB) bank after a year?
Sorry, a lot of questions. But they were on my mind and this is the best place to ask.
Thanks
i was in the same spot you are in now, small boutique, specialized industry (healthcare) and pretty worried about how much i needed to know.
the short answer to your question about if you're expected to know about industry specific nuances is that no you are not. the only real way to learn is to fall flat on your face and then fix it. it's really the best way to learn. modeling is sort of like programming, as long as you understand the language itself, you can create anything.
in terms of refining your skills, i was fortunate enough to know how to model beforehand to a certain extent but tbh, the actual mechanics of modeling are very simple no matter where you go. the reason being that there's only so many excel formulas you can choose from. i would say the harder part is figuring out exactly what you're trying to get to and being able to get there in the most eloquent way possible. the logic involved in modeling is what will set you apart. if you can do in two formulas what someone else does in 6, you're a better modeler even tho both models work.
something i struggled and still am struggling with is that your model not only has to work but it has to be easily stripped down for your associate to look at the formulas and understand what you're doing. if you have a million if statements in there, hes going to get pissed even if it works perfectly.
as far as the formalized training program, i wouldnt sweat it too much. the formalized training program you're imagining is really one big party and you dont learn much. if you're a complete n00b when it comes to excel, it will teach you lots, but if you have any sort of background with modeling, training is more of a place for the company to teach you about its different product lines and maybe company specific interfaces.
if anything being at a boutique helps you become a better modeler because you actually build your models from scratch as opposed to being at a bulge where as i understand it, they have a lot of templates to build on.
hope this helps.
Thanks for the response. Appreciate it.
So you don’t know of any books (did you keep any on your desk?) or modelling courses that offer more industry specific direction? Are there certain areas of a model that would be affected more when changing from one industry to the next? The problem with the boutique I will be working at is that it is not specialized in just one industry. They work in about 3 or 4.
Another question I have, that maybe you can touch on, is what did you do when you didn’t have much to do? I can be expected to be working on 2 or 3 deals at any one time, but it could be anywhere from 1-5. I don’t really have a grasp of how busy I will be.
Also, what is the dynamic like at a firm when you know that each deal completed can raise your bonus dramatically, while each deal failed was a complete waste of your time? Does this generally create tension or more of a collaborative, team environment? To be honest, having a lower base and the potential for a higher ‘real’ bonus (and higher all-in) is getting me pretty pumped to hopefully go in and kick some ass.
http://www.scoopbooks.com/ourbooks_2.php
i use that book from time to time for general finance questions and the models will look pretty similar across most industries, any difference in a model resulting from a different industry you'll learn. it's sort of pointless (almost detrimental) to learn it beforehand because its likely you'll learn it differently than how its done in real life and then get in a habit of doing it that way.
you'll have down time and it's something you learn how to deal with. smaller banks are nicer in the sense that you know kind of where your projects are in terms of work. i get the feeling at a bigger bank, ur more out of the loop so things might get dropped on you. at least at my bank, i'll have a pretty good gauge of when work would realistically come. so there's been times where i've been insanely busy and times where showing up at work is merely a formality.
an analyst bonus doesnt really depend on deal success/failure as much as you might think. banks usually pay analysts a street bonus that will differ a bit based on maybe actual firm profitability and your performance. your thinking of more like how much a MD's bonus might change based on deals they bring in. id look to ur friends for a better gauge of where your bonus will end up as opposed to the number of deals that are closed.
Boutique - How small is too small? (Originally Posted: 02/12/2010)
I see a lot of posts talking about boutiques, how much salary should be at XYZ, what should I do if I can't get into a BB, etc. A lot of advice directed to younger members is to look for smaller shops, boutique firms. I haven't seen "how small is too small" asked though. I want to put this question out there, maybe it will give some guidance to those looking at smaller shops as a back up.
How small is too small? Is a boutique with 5 people worth going to over a F500 company? At what point does size and deal flow really negate the benefit of "working in the biz"?
Deal flow is far more important than size. If you're at a 5-man shop but always have a deal or two in the hopper, I'd argue that's pretty solid experience. The problem is 5-man shops likely don't have the infrastructure to help you succeed. You likely won't have a travel agent, your supply closet will be non-existant, and you won't have other analysts to bounce ideas off of. I'd argue that there isn't a particular "size" cutoff for when you might as well just take a back office role, but I would say that there is a "deal flow" cutoff. If you don't expect to get a single deal closed in your 2 years as an analyst, that is likely not a place you want to work at.
Great answer CompBanker- - I was asked this question by an UG last week I would like to hear your opinion on it too.
What do you think a valuation firm that does 95% fairness opinions, ESOP valuations, etc. and maybe 5% of the ibanking activities?
I highly doubt this kid will see any deals within 2 years. But I told him to take it over the F500 since more of these skills are transferable to ibanking down the road.
If you're speaking about somewhere in particular for you, I'd ask your contacts about recent transactions. There are LOTS of people out there hustling for deals and most of the small shops out there will fizzle out without ever having made dollar one. Ask lots of questions about deals they've closed, look for lucites in their office, look up their deals on the Internet and check it out, check their website, ask about how many people are there and how long they've been there. Ask where they were before. Look them up. I can't stress to you enough how much due diligence you should do here. There are just a lot of shops out there who will spin a great yarn as to the awesome shit they're doing, but when you get there it's a bunch of baloney.
Not really asking for myself. Just have been reading a lot of posts for a while and see boutiques as a fall back or as a "better" alternative than F500, BO, Accounting, etc. Thought this might be a good question to ask for kids debating on more corporate finance routes or going to a small shop hoping to make a jump into something bigger.
I think Compbanker and jhoratio made most of the points for someone who would like to consider a boutique career. To provide my experience, I worked at a MM shop for six months as an intern. At our office, there were only TWO bankers. But, we were a regional office, so all put together, there were about 60 to 70 bankers working for the firm. Our office was able to close one deal, and we received mandates from several other clients at the same time. Concurrently, other regional offices were working at their own deals, so all of the guys were working pretty hard every moment. What I noticed during my experience was that you have to be located in a place where there are lots of deal flows, especially if you will get to work at a regional office. Otherwise, there will be constant pressures from the HQ to close a deal. The worst case scenario is when your office gets closed during your stint. If that happens, whether you’ll be able to keep working for the firm will be in question. Then how do you detect which offices are good or bad? For a starting point, I think one could simply check what kinds of companies are located in the state one will be working for. If the firm has a strong track record for entertainment deals, and there are simply no entertainment companies in the state one is going to be located, the chances of closing a deal during one’s stint will be lower. If the firm does all kind of deals without a focus in any certain industries, the overall dynamics of corporate activities will be critical. In this respect, the extreme worst case will be, say, working at Alaska. Second, I would recommend looking at how old the company is and what phase it is in. If the company has a short history, say, less than 10 years, and it is in its expanding phase, there are both risks and returns being located here. Revisiting the case I mentioned above, the company which had strong track record of closing entertainment deals, if they are searching out for doing new sectors and they simply feel the current location is not right for them, the new office will be exposed to many risks. The expertise and knowledge required for other industries will be in question, and more importantly, lack of track records in other industries will act as a detriment. But if this experiment turns out really well, the rewards will be bigger for one’s career. On the other hand, old firms with having relatively diverse sector expertise will be less exposed to failure.
Nice Topic and great posts...
I'm working right now at a very small specialty investment bank (unpaid internship) while I get my MSF. The shop has about 5-6 deals going currently and seems to do well its its very specific niche industry space. The headcount at this shop is very light now. It went from 37 employees down to 15 during the crisis period.
I hope this discussion continues because I am enjoying reading peoples different takes on small shops.
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