Product Group vs Industry Group

dwfrey777:

I haven't thought about the exit opportunities. How about if I plan to stay in the banking industry long term?

Then it really depends on your interests. If you want to get exposure across various products (i.e. M&A, equity offerings, debt offerings) then industry groups are the way to go. One thing you'll want to be aware of is that in some banks, industry groups do the pitching and product groups do the deal execution... Some will like to do the pitching (and hours tend to be more generous), but most people like to execute deals. We'd be of more use if you could give us an idea of what interests you, what you want to learn, what you want to do, etc.

Why? Is there anything wrong with ECM or DCM?

fembotma:

from what I heard, it's Sponsors/LevFin/M&A/other industry groups for PE TMT for VC I think general consensus on these board is don't do product group with anything named capital markets

I've heard that in banks with M&A groups - the M&A analysts make the most money. Don't know if this is true. I know GS and B of A don't have M&A groups.

Do business schools prefer an experience in eihter a product group or an industry group over the other?

Use the search.

There's actually not that much difference on a single deal if say, an HC and an M&A analyst were double-staffed on a big pharma merger ... work is split, maybe the M&A analyst does more of the modeling, but depending on who's the better analyst, they'll get the more interesting and crucial deliverables.

The main difference comes from variety from deal to deal, and the infrastructure work you have to do in between. M&A's a bit of an outlier because you're usually tapped for your technical and model-building skills, but usually industry analysts do the pitching, the relationship stuff, the comps, and (if there's no M&A analyst) most of the model, whereas if you're in DCM or ECM, you'll be adding in debt/equity market slides, pricing loans, and basically being the market-facing side of the deal team. In DCM/ECM, that's all you'll be doing during your two years, however, and from what I hear, IPOs, PIPEs, and follow-ons are interesting the first few times, but it quickly gets somewhat repetitive. On the plus side, however, you do get to do more deals usually than industry analysts.

It really depends, but in general the product group bankers have more prestige than industry bankers (but some industry groups have more prestige than product, think GS TMT). M&A bankers also work more hours on average than any other product/industry group.

In general, guys in industry groups tend to progress higher than product group guys because they have built better relationship with clients (a function of them not constantly doing deals).

Also, in a economic downturn, you want to be in an industry group, not a product group.

In a downturn, there are fewer deals getting done so the first ones usually layed off are the product groups (less demand for their services). Banking is all about bringing in revenue, so in the downturn you want to keep the guys who have already built relationships with the clients. An industry banker can learn to do an M&A deal, but an M&A banker can't learn to build a relationship.

Industry bankers are at a disadvantage when it comes to PE placement since they lack the expertise in deal execution. Industry expertise is a plus, but knowing LBO's like the back of your hand is more of an advantage.

Coming into banking, the Vault guide actually did a great job of differentiating the two, definition-wise. I would check that out. I would say that while product groups get all the love on this board, I actually really enjoy working in a coverage group and do get the opportunity to do some more technical work every once in a while. If you find an industry that you love reading about and that you genuinely find interesting, I would think twice before turning it down so you can work in a product group.

If you want to stay in banking long-term, being in an Industry/Coverage group at the VP+ allows you to get in front of more clients and build relationships. Generally, you will be better compensated as a result, as you will have that oh-so important rolodex once you hit MD. Product bankers, at least at the senior level, are more of a commodity, as they focus more on the execution rather than the client. And at the end of the day, it's the guy with the clients that brings in the revenue, not so much the guy double-checking the model.

because people obsess with M&A and LevFin because everyone else slobbers over these groups.

In the long run, always be the relationship banker. Better compensated + you can go wherever you want (assuming of course that since you made MD, you have strong relationships with potential clients)

It seems like most here look to get into M&A/LevFin out of UG to get into PE some day and I understand why one would be more prepared for such in the future.

But to hear that coverage groups get more well compensated seems interesting to me. I always thought that M&A/LevFIn were considered the workhorses and work compensated as such.

However, at an analyst position would you still choose relationship banking even though as an analyst you will probably not be meeting with clients anyways?

ok within a product group you get to cover a lot of industries and in an industry group you do a lot of products!

jim3481:

? Are industry groups a subcategory under product groups (ie. M&A- Energy)? Is that how it works? Help, anyone?

Sometimes a product group will have subcategories that are industry groups. It really depends on the product group.

Althouhg it is true that product groups usually do have industry subgroups, i think the orignial poster is slightly confused at the difference. Industry groups and product groups are two separate groups. Although larger product groups can be aligned to an industry.

Industry groups are coverage groups. They build relationships and pitch ideas to clients. They focus on an industry and a specific set of clients. They partner with the product groups that focus on a product. If the company wants to do an IPO, they coverage bankers bring in the ECM bankers to help execute the deal. The ECM bankers bring in their expertise in the equity markets, while the industry bankers bring in their relationship and the knowledge of the industry (especially important for due diligence)

Industry groups generally have a better understanding of the company, and are closer to the numbers initally to decide what product to pitch. However, a common complaint for analyst in coverage (industry) groups that they seem to pitch too much and then pass the deals to the product groups. The complementary downside to the product group is that they may not get as involved in the company and just repeating the same steps over and over.

When chosing a group, take a look at your interests and strengths. Don't pick an industry group when you're not interested in the industry. Similarly don't pick a product group when you don't like the product. Also, make sure you fit into the group. Reach out to current analysts to get a better feel.

capital markets people work way less hours. why would you not do that?

"capital markets people work way less hours. why would you not do that?"

eh from what I hear thats sorta true since they dont work weekends. but i heard that they will definitely stay late if there is a large amount of dealflow

you rank the groups that you want to be in but they will put you in a group that 1) they need people in; 2) they think you will fit best in; 3) left over slots

consider what you like to do and nothing more when choosing groups. it's too hard to pick a group based on guessing what will become hot in the next 12-24 months. let fate decide that. just concentrate on discovering what you like and let them know about it.

forgot one key question...

What are some areas which may be opportunistic?

Reason being... half of the ppl I reach out to refer me to X, Y, and Z in A, B, and C group telling me to ask them if there is any room in their group. The other half of the ppl I reach out to, ask me what area is my focus in. Right now, my focus is in the area which has a empty desk. Although Ive been asking anyone and everyone about where they work, whats different about it, etc... Im more or less indifferent between most of what I hear. I am equally interested in FIG, CHR, M&A, and Media/Telecom. Im trying to find something which makes one more interesting than the other, but lets face it, if theres a new sub-group at GS covering Feminine Hygiene Products, Im not going to forgo submitting myself for consideration because it doesnt interest me as much as the Fin Sponsors group.

M&A is usually the elite group at most banks (feel free to correct me if you think otherwise). I like FIG because it's more global and the skills can be applied to all banks/financial insts. TMT is fast moving / high growth related. I also like CHR because it's something that I can use. Mining/O&G/Power would be good as well as they are always growing/in-demand.

It would be great if you get to cover feminine hygiene products - think of all the ops that you will have to work with models and 'test subjects'!

M&A and Lev Fin. are product groups and you get really good modeling experience and work plenty of hours, especially in M&A

I think the OP got coverage and product reversed.

Thanks so far for the replies. How did I get product/industry reversed?

I've heard Debt Capital Markets is similar to LevFin, just high grade. Any truth to that?

In general, product groups will be more modeling intensive, focus on one product (debt, equity, M&A, LevFin, etc.), but will span all industries needing work w/ that product.

Industry groups will give you a more broad exposure to all the various products, are usually much less modeling intensive, and focus on only one industry (Tech, Industrials, Healthcare, Consumer / Retail, etc.).

This usually holds true, although at GS, for example, the industry groups usually do their own modeling and are thus more highly coveted.

The answer is bank specific, as nystateofmind mentioned. (As an aside, it is also a good answer for why I want to work for XYZ bank.) But I would say that an industry group places you right in the middle in terms of modeling experience.

In general: M&A and Lev Fin are probably the 2 groups that model more than industry. ECM is almost no modeling. DCM, at least at my bank, doesn't include very much modeling.

In re: to industry group modeling, experience will vary substantially by industry, e.g. Covering Biotech companies you won't be looking at debt financing as often

anyone know if any of the Canadian banks follow the same system as Goldman, meaning they have the product groups inside their industry groups?

I believe in GS they don't have product groups, so it'd just be the TMT M&A team handling the M&A origination and execution. Can't say for sure though.

At my firm, we have a clear separation between industry and product. Industry groups, for instance healthcare, manage the relationship, source ideas, and are the liasion between the bank and clients. We pitch every corporate and investment banking product. When we pull together slides or are on a particularly product-intensive pitch, we invite the product groups to present their capabilities more extensively. However, we decide what to pitch and have the general idea of what our clients want/need. The product groups at my firm are included whenever we need the more product-intensive knowledge on the pitch. Finally, they are the ones who execute the deal and take it through, while we basically just source.

Oh, and if we make money, it's credited equally to both the groups.

TL;DR: Industry - origination, product - execution

I think the answer depends on a few things:

If there is an industry group that really interests you and you know you want to become an expert in it, go for it. Some industry groups have tweaked valuation models and it would be beneficial to become familiar with these. The good news is that you are by no means locked into a particular industry (in terms of exit ops), you can still do anything after your two years are up. My personal belief is it would be best to start out as a generalist because you will learn a lot more and at age 22 you probably have no clue what you want to do.

As for product groups, I do M&A and I wouldn't have it any other way (hey, that rhymes). Again what it really boils down to is what interests you.

What matters most in the end is that you do an amazing job regardless of which group you are in and impress your seniors. If you do this, you will have many options available to you.

what about capital markets vs. m&a/advisory?