Why M&A?

I have an interview coming up (tomorrow) where the interviewers have stressed, "Know which groups that you most want to work in and why."

I know I want to work in M&A... I'm not sure if my reasons are "interview-friendly". So, I'm curious, what are some good interview answers for "Why M&A?"?

Thanks guys!

Why Work in a Mergers & Acquisitions Group?

Generally speaking, M&A is a very attractive area to be in if you are a more technically minded person. If your passion lies in a particular sector, M&A may not be for you and if you are very interested in the equity or debt market specifically M&A will not give you much exposure.

However, if you want a generalist experience while developing a strong technical skill set, M&A is a great group to start your career in. Some of our users shared their thoughts below.

@dosk17" shared their rationale for M&A:

dosk17 - Retired Investment Banker:
  • More modeling/technical skills gained (people will debate this one but generally true vs ECM groups for example).
  • More interesting/more complex deals compared to capital markets teams. Buyside, sellside, LBOs, divestitures, etc. etc. all wildly different. Just make sure you don't end up in a group that only does generic auctions.
  • Learn a lot about the negotiation process, managing egos, bringing buyer and seller to terms (obviously you won't do any of this as an Analyst, but you get to observe a lot).

User @Valk" offered some typical reasons that they hear from candidates:

Valk:
  • Exposure to a variety of sectors/industries (i.e. you work with various industry teams)
  • Every deal is unique (vs. equity or debt deals which are more standardized) and you can see a wide variety of transactions from different perspectives (strategic vs financial sponsor, buyside vs sellside, company deal vs. asset deal, hostile vs friendly approach etc.)
  • Nature of the work, on average, is more technical/model intensive (e.g. modelling various deal structures and complex tax scenarios) vs. industry (e.g. doing industry outlook slides, trading comps etc). or ECM/DCM (term sheets, market outlook slides etc)
  • The intangible experiences can be very interesting/fun - you usually deal with the CEO/Board in M&A deals, witnessing intense negotiations between counterparties, exposure to LOTS of egos

Disney Disciple - Investment Banking Analyst:
I'd add that you are working on more execution based deals - IE a mandate has been given to the bank so you are spending less of your time focusing on pitches that have no hope of going anywhere.

Takeaways and Sample "Why M&A?" Answer

All of the above reasons are good ones to include when constructing an interview type answer for "Why M&A?" You should also touch on how you like the group culture and members of the group that you have spoken with in person and on the phone. You should not mention exits opps as a reason for why you want to work in M&A or develop the technical skill set.

Example "Why M&A?" Answer

I am attracted to the M&A group at XYZ bank as I am interested in generalist experience of the group as well as the execution oriented nature of the team. Additionally, after completing my equity research internship last summer, I realized that I wanted to develop a more quantitative skills set so I would love to be in a group that I could develop and apply modeling skills. Also, after spending a few hours visiting the M&A floor I felt like a really connected with the analyst class and the collegial nature of the team. All of these factors have really led me to want to spend my summer in M&A.

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Perhaps you could say what your reasons are and then the experienced ones here can opine on whether they are interview unfriendly and to what extent (in addition to providing the usual "good reasons" i guess)

"God takes care of old folks and fools, while the Devil takes care of makin all the rules", P.E. 1998
 

-More modeling/technical skills gained (people will debate this one but generally true vs ECM groups for example).

-More interesting/more complex deals compared to capital markets teams. Such as the one that explains why I'm awake at 4:30 AM currently. Buyside, sellside, LBOs, divestitures, etc. etc. all wildly different. Just make sure you don't end up in a group that only does generic auctions.

-Learn a lot about the negotiation process, managing egos, bringing buyer and seller to terms (obviously you won't do any of this as an Analyst, but you get to observe a lot).

 

The only risk to being in M&A is that you get stuck in an M&A group that only takes the lead on sellside processes. Some M&A groups will give you more modeling experience (in terms of % of time spent doing models vs. pitching), and in terms of being extremely proficient at creating models, you'll be good. In terms of how useful that ultimately becomes if you're looking for PE jobs, it really only helps if you've got a 3 hour modeling test, and even then some of the sponsors kids will outpace you (the M&A group at my former bank didn't touch LBO's other than generic strategic alternative LBO analysis).

Every group has their pros and cons. It's just a matter of if you want to be in a product group that allows you to build a specific skillset (albeit a highly sought after one), or you want to learn a wide variety of skillsets.

 

Dosk and GameTheory, excellent points - thanks.

GameTheory, do you think working in sponsors will pigeonhole an analyst into that specific industry? I understand that it's a good foundation for PE; but on the chance that a candidate does not break into PE following a sponsors stint, are there other options available to him? (It seems so specialized...)

Also, I realize that the deal-flow in sponsors/levfin is weak right now. I've always been interested in these groups, but it seems to be a bad time to get into them. As this position is for summer 08 (hopefully leading to FT 09), is it still a good idea to pursue sponsors or levfin as 2nd/3rd choices, hoping that the deal-flow will pick back up by either the summer or 2009?

 

Yes, I would argue that sponsors work is more specialized than M&A, although I saw kids place at hedge funds and corporate development in addition to private equity.

Deal flow for 2008 and beyond is impossible to tell at this point. Any reason why you wouldn't want to go to a solid industry group? Groups that are able to work on many products and silos generally allow for their analysts to complete a good amount of deals in 2 or 3 years.

 

I think one of the primary reasons that I'm averse to industry groups is that I'm not entirely sure in which industries I'm interested, and I'd hate to pigeonhole myself (even if for just two years) into an industry that I won't like. I come from a very generic background and have never had in-depth exposure to any particular industry (I feel that the only one to which I might be able to relate would be Consumer/Retail...).

At this point, I feel that I'm lacking experience to be really inclined towards one industry versus another. I'd rather get a broad exposure across different industries to get a better overall idea about each industry.

Maybe I'm wrong... has anybody else naively joined an industry group, without much prior knowledge? What are your experiences?

 

its not even M&A all the time.. 2011 is going to open the floodgates on IPOs and that is nothing like M&A.. that acronym describes a very narrow set of tactics around making a merger happen. It's a silly question to ask an analyst wannabe

 

Do a search on average answers, but no one can help you because the best answers are the most personal/subjective. Talk about the culture, how great the bank is ect...but that all we can help you with.

Make sure you know what deals they were most recently on and know specifics about each deal. Be able to talk about them for at least a minute or two.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 

Because I want to fit in!

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

nauprillion why don't you go rob a bank. Just like Sales or Asset Management 1. if you get lucky you make a lot 2. you are in control of your bonus 3. you won't be doing boring tasks 4. you'll definitely make the front page

I know this might piss you off but you must be one of those college freshmen who's still too naive to understand the threat of risk and the value of exit ops. No one can explain why M&A to you if you don't understand these.

 
IB2001:
nauprillion why don't you go rob a bank. Just like Sales or Asset Management 1. if you get lucky you make a lot 2. you are in control of your bonus 3. you won't be doing boring tasks 4. you'll definitely make the front page

I know this might piss you off but you must be one of those college freshmen who's still too naive to understand the threat of risk and the value of exit ops. No one can explain why M&A to you if you don't understand these.

GOLD

GS, BX. Will work for prestige.
 
IB2001:
nauprillion why don't you go rob a bank. Just like Sales or Asset Management 1. if you get lucky you make a lot 2. you are in control of your bonus 3. you won't be doing boring tasks 4. you'll definitely make the front page

I know this might piss you off but you must be one of those college freshmen who's still too naive to understand the threat of risk and the value of exit ops. No one can explain why M&A to you if you don't understand these.

S&T and AM are indeed riskier. You are making a valid case but if exit opps mean so much to you, why do you even bother going into banking in the first place. Yes, other employers value applicants with IB experience.... and yes, you are most probably going to get a PE position if you do well... but surely you can break into PE going a different path (if that's your aim).

No, you didn't piss me off. I appreciate your input.

 

all of you making valid points. i have a question however. how do you convince the MD that you wanna do "M&A" over ECM/DCM or any other industry group(MD was MD of FIG)? "exit opps" and "pay" is not something the MD wants to hear.

so please help me with this one guys.

GS, BX. Will work for prestige.
 
bsmonkey:
all of you making valid points. i have a question however. how do you convince the MD that you wanna do "M&A" over ECM/DCM or any other industry group(MD was MD of FIG)? "exit opps" and "pay" is not something the MD wants to hear.

so please help me with this one guys.

ECM/DCM should be an easy one, however if I were you i would tell the industry banker id like to work in an industry group

You say industry group because you like managing/building relationships, learning in depth about an industry

You say product group because you like "Doing Deals" thrill of doing deal, gratification at working really hard at something and having it close, strategy of negotiation, positioning, etc

you say M&A>ECM/DCM because lets face it doing a sell-side/buy side M&A is a lot more interesting than a co-managed follow on or L+4% senior 5-year notes

 

I believe that appart from talking about your passion for m&a etc, you should mention if you find the people in m&a exciting to work with i.e. If they are smart, ambitious and you believe they will challenge you in a way that allows you to develop and so on....

 

I believe that appart from talking about your passion for m&a etc, you should mention if you find the people in m&a exciting to work with i.e. If they are smart, ambitious and you believe they will challenge you in a way that allows you to develop and so on....

 
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