Feel Like I Got Conned - Small No-Name Boutique
Hi everyone,
So I'm specifically looking for input/feedback here from people who work at "no-name" small boutiques. When I say no-name, I'm referring to firms with less than 10-12 people, MDs do not come from BB or solid MMs etc.
Anyways, I took this position about 6 months ago and we are currently working on a few, very small deals. Most of our clients are sub $1mm EBITDA, with one hovering around $3mm EBITDA. So I've been kind of getting annoyed at the work I've been asked to do, such as creating buyers list with 500-1000 names, searching for emails etc. I've done a little CIM/teaser/financial modeling but the modeling is about as basic as it comes. I left a solid job in a related industry (think FP&A, CB) for this and honestly am beginning to question my move. The work just seems so shitty.... is this typical of small no-name boutiques?
It's honestly so shitty that I'm worried about actually being able to pull off a lateral to a more reputable boutique / MM.
So what kind of work do you all do at your no-name boutiques? Are these 500-1000 name buyers list the norm? What about deal flow? I'm specifically looking for input from people who typically work on sub $30mm transaction value. Apologies if this reads like shit, I'm on my phone
I like how you created this account just to post this rant.
This is an unfortunate situation. I'm not trying to offend you, but how much due diligence did you really do on this firm, in terms of deal flow, reputation in the market, differentiation, position requirements, etc.?
No-name boutique is all relative. Many small boutiques do things well within a certain geography or sector/industry vertical, even if they work on sub-$50mm deals. Therefore, they may be unknown to the general masses, but known and respected locally or nationwide for a certain expertise.
500-1000 is a huge buyer list that resembles the type of approach a shop like HW takes. To contact that many groups for a deal of this size indicates that your shop doesn't put much thought into fit or develop a sound thesis. In other words, it's more of a throwing darts while blindfolded approach. It also requires a ridiculous amount of time, which is typically not available for smaller firms that do not have built in operating leverage (people, processes, etc.).
There are plenty of shops that work on deals in the $20mm-$100mm range that run sound processes and undertake the same approach as you would find at a MM shop (Blair, Baird, HL, HW) for smaller deals. Most will conduct decent DD, develop a detailed operating model that links to a variable lbo model (necessary for this strata of the market), prepare a CIM in PPT or Word, etc.
They're not necessarily going to reach out to all 500 to 1,000 of those potential buyers. When I was at a "no-name" boutique the issue always was the our clients were too small to attract the interest of F500 companies, but big enough to where we needed a legitimate company to enter the bidding process to get any type of respectable multiple.
So, we would put together 500 to 1,000 names from industry trade show websites, whittle that down to around 100 to 150 based on our (my) ability to find contact info, and then reach out to 75 to 100 of those based on MD comments. It's freaking brutal process and uses up a lot of time.
I started my career off at a similar "no-name" boutique. Your work sounds very typical of a "no-name" boutique. Take a look at my lateraling guide. The move itself is rather straightforward. You're not screwed if you try to make the jump.
Some comments to address your complaints:
-Client size: What did you expect here? $1MM in EBITDA is probably the average of what "no-name" boutiques do. These are going to be small, family-owned businesses with no financial acumen. There will be a lot of hand-holding through the process, and honestly, I find these transactions much more difficult than larger ones.
-Modeling: You are reading too much WSO. There is a lot more to IB than modeling. No business is sold because of a model. The market pays what the market pays. No one cares what your DCF says. If someone is not willing to pay that, you either lower your asking price or don't sell. Modeling is only used so that if shit hits the fan, such as if your client accuses you of screwing them over and not seeking the highest possible price and sues, you have something to point back to and for a sanity check. Read my lateraling guide. I mention how to address this lack of modeling while lateraling.
-Buyers lists: You're doing these lists because your MDs are probably not very tech savvy. There are many firms that you can outsource this too. My "no-name" boutique used some guy from Pakistan on Upwork. I think we paid 25 cents per name or something like that. If I were you, I would put together a coherent argument for why your MDs should start outsourcing this.
-Deal flow: Again, I am not sure what you expected here. If a "no-name" boutique has an MD or two from a BB, they will get modest deal flow simply because they have an existing book of business. The "no-name" boutique that I was at was run by ex-operating guys with no IB experience. This meant that they had to win business through referrals, trade shows, etc. As a result, the deal flow was rather weak. We had four MDs and closed two deals a year (I was only there for one year before lateraling).
EDIT: I mean this in the most professional way possible, but you need to change your attitude. You left a job in another industry because you wanted FO IB experience. Maybe you had your hopes too high, but you're getting solid experience that will allow you to lateral to larger banks should you choose to do so. I've been in your position, and it sucks, but if your attitude is that your bank is conning you, you risk getting fired. Maybe I'm different, but I'll take a year at a "no-name" boutique for the chance to move to a larger bank than staying in FP&A which would never have given me the opportunity to get into IB.
It's not personal. The MD is just giving you his opinion. What he is basically saying is that if you stick around at this boutique, you have a much higher chance of making MD one day than at a BB. Stick it out for six months to a year and then lateral. Good luck. Feel free to PM me if you want to bounce some ideas off me or need any help as you go through the lateraling process.
I totally disagree with this regarding your MD just giving his opinion. I worked at a small boutique with ~15 bankers. Most of the senior team did have both BB and operating experience and focused industry experience, and I joined post-BB so it's not exactly analogous. What I did see was bankers who were honest with their clients and potential investors/buyers. We worked in a few specific vertical markets, and our reputation was closely guarded, which I believe is highly important.
What concerns me here is that you believe your MD is dishonest, and he is selling you the dream of making more than you would at GS, etc. That likely won't ever happen. If he is dishonest to your potential clients, he is going to be dishonest with you. Take everything he says with a massive grain of salt.
That said, you can definitely leverage this experience to find something better as the above poster talks about.