With the exception of Financial Sponsors Group, how sophisticated are your clients?
When running a deal process (BB M&A group), I feel like >80% of Q&A and client/investor calls is spent on explaining basic stuff - even though many of our clients have ex-bankers on their teams.
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I think most of our clients or partners are excellent within their own area of expertise. But not outside of it. Even basic deal processes are unknown to most of them and they need, as you mentioned, a lot of hand holding through it.
Was working with a major Infra investor and although they are experts in their area..the team seriously lacked overall understanding of simple Econ concepts. Won't specify for obvious reasons but damn, 1st year UGs would understand those concepts much faster (if they didn't know that already). Bottom line: There's A LOT of mediocrity in IB and high Finance in general.
Post makes no sense. Infrastructure is mostly regulated which is not a simple Econ concept (simple Econ would be any free market business which is the opposite of regulated)
Reg assets are not simple but Rf / fwd curves and CRP are simple enough for these guys...
Analyst at a MM credit fund and I would say some of our portcos are fairly unsophisticated. We had a portco management team that simply did not understand that covenants are legally binding / enforceable and tried to just talk us out of exercising our rights like a frat bro asking his bookie for more time.
The larger firms we work with (especially ones that used to be or still are public) are much more sophisticated and easier to deal with.
Isn't that just trying to solve the debt overhang problem??
After my first few deals, I quickly learned that nobody actually reads the stuff that we share thoroughly. Q&As are often 90-95% filled with questions that can be answered just by reading the materials we provided. Makes our job easier though.
Yeah was going to say this. It seems like most of the teams just choose to not know rather than they couldn't know. I mean if you hire a Sell side advisor who will answer the same question every time you ask it then why not ask it.
Honestly this is a reason why FIG is such an interesting coverage. Every single client knows every single industry specific metric, capital adequacy ratio etc
Compared to something like Consumer / Retail where companies can legit not know what cash flow is
Was going to say the sam. FIG clients are usually the most knowledgeable and therefore go through every little thing... hence why the group is always tough
Very true. Perhaps the worst group to be in in terms of dealing with clients. PE clients of Financial Sponsor Groups just don't give af about what bankers say - they have their own strategy, model and DD. Hence minimal challenge. FIG clients on the other hand tend to challenge everything you say and try to show you that they're smarter lol
I interned at a local boutique, and my MD told me that a bunch of the stuff the client gave him was totally wrong.
wow!
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