Investment Banking is Broken

I just left IB and went entrepreneurship way, so this is a bit of a rant post and a throwaway account, but felt like I need to share.

With all do respect to hard-working individuals out there - investment banking industry is broken and absolutely worthless. The advisory side is the most useless, pathetic and ego-driven things in the business world, over.

The Materials

Where do I start. Creation of those meaningless memorandums, pitchbooks, bake-off presentations, company and industry profiles was the one most laughable thing I have ever done in my work.
Sell-side info memo? Oh, you mean we are putting bunch of bullshit on 50 pages, make it pretty and send around the world to people who either won't look at it or spend 15 sec skimming through? Fuck it, sign me up

The presentations, decks, materials, whatever you call it in M&A are beyond my logical thinking. Why in the name of God would you do a ten-page product overview section with bunch of screenshots and retarded texts, like "seamless login process"? Who reads that? And those pitchbooks? This is a mf joke, which investor even looks at it?

Materials, the thing juniors slave away and spend so much time on - are 99% useless, deleted, not looked at. This is the harsh truth. The only thing that matters from the creation perspective is modelling - advanced operating models are actually useful for the buyer and provide at least SOME value (given all the assumptions are probably bullshit anyways)

Do you know how deals are being made? By talking, by high-level numbers, by synergies, by adding actual value. What value add for the biotech company is the sleazy banker with his stupid industry deck?

The Ego

Everyone has the ego. Interns have ego, cause they work in a big fancy firm. Analysts have ego due to spending nights on meaningless documents and thinking they are big swinging dicks. Associates have ego, cause they think they can manage juniors now, but in reality just kiss their superiors asses. VPs have ego thinking they are almost MDs, while they still work nights. MDs have ego, cause they believe they are financial Gods, but in reality they are kissing clients asses, skipping kids birthday due to another useless video call and lying to everyone around.

The Chaos

It's beyond me why IB is so poorly managed. Literally every single MD I worked with has been a terrible manager. No time management skills. No respect to employees. Zero logical thinking. I know everyone is busy. I know they are doing billion dollar deals and we are just slaving away over Excel and PowerPoint, but for the love of God it's JUST BANKING. I have friends in biotech, field oil, doind business functions in military, government and NOWHERE is as bad as in banking. This is just laughable. Oil engineers can split work and manage time, but two analysts cannot work on the same model? Give me a break.

Now don't get me wrong - IB is needed. They are matchmakers, connecting investors and companies together. But the industry from the inside - is a fucking joke. Better management skills and this would be a 1000% better job than it's now.

 

Yes, sorry probably ranting too much - I meant that most of the work is useless, ego-driven and absolutely not needed. Decks no one looks at, industry slides just to prove a client you can copy stuff from reports, etc.

The actual IB value is in knowing investors and connecting them to buyers. But not in the meaningless pretty slides.

 

You say your going down the entrepreneurial route, what are you looking to do?

I used to work in trading, a bit more intellectually stimulating i think but even less actual value being added.

And yea of course banking is broken, there honestly should be some way of dismantling it. With all the disfunction and overpaid monkeys there really should be some way of eating that value

 
Controversial

Dude, finance stopped “adding value” years ago. This shit is about hanging out in beautiful offices and collecting big-ass pay checks.

I’m other words, get over yourself. If you want to “change the world”, go be an “entrepreneur” and design some app or some dumb shit. This is all just a big fucking game. Enjoy it.

 

That's not all of it.

IB is a sales job and the fundamental middleman, but it isn't going away for a pretty simple reason.

It feeds off human psychology. Specifically the biggest that fuels IB is the egos and elitism that exists within business. Doing a deal by buying a company listed for sale on a database is well....boring. Doing a deal that involves lots of meetings and conferences at Goldman Sachs with Partners in very expensive suits makes you feel like you're very, very, important and prestigious.

 

Not a big follower of these threads but "change the world" does not mean create an app/useless startup. Creating a technology that wipes your ass for you, while it could be a unicorn valuation due to undisciplined vc investing, doesn't change the world or shift the curve.

If you want to change the world, agreed, study/focus in an industry/science and commit to building a product/service through focused study. Google changed the world and was born out of Stanford PHDs in search technology. We have yet to see another Google in 20 years notwithstanding increased VC spending in tech sector.

 

Oh yeah, I made a typo = I sucked at my job Classic IB mentality, glorify pretty pages and surgical attention to details, but don't think for a second that this whole deck could be a short email and the company doesn't give a shit about your 'potential strategic suggestions', because it's simply never gonna happen.

 

Absolutely disagree. You create a useless M&A pitchbook and crank 5 industry pages. What for? Why the fuck would you do it? Just to prove a company you know your market? They know it 10000x better than you, and know very well that you just pulled the data from the industry reports.

99% of presentation work in m&a is just recreation of existing data and making it pretty. Tell me this isn't fucked up.

 
Most Helpful

Like members of a cult, most of the people on WSO are in too deep to admit the massive flaws in their industry and that they spend countless hours working on, as you said, completely meaningless bullshit. The more you try to disabuse them of their delusions, the more ardently they will defend them.

I, however, enjoyed your rant and wish you great success in the future.

 
icantdothisanymore:
Absolutely disagree. You create a useless M&A pitchbook and crank 5 industry pages. What for? Why the fuck would you do it? Just to prove a company you know your market? They know it 10000x better than you, and know very well that you just pulled the data from the industry reports.

99% of presentation work in m&a is just recreation of existing data and making it pretty. Tell me this isn't fucked up.

It's sales. You're convincing someone to see your side of it. Assume everyone has the same information, but the way you piece it together to tell your side of the story (namely, why someone should buy your product), is how you create a relationship. It's not rocket science, because it isn't rocket science. But the detail is heavily emphasized, because the presentation of the story matters greatly for fostering that affinity for your service.

 

While I don't agree with all of what you've said, both pitchbooks and IMs are completely useless and a waste of time, and you realize this when you're on the buyside and you simply skip to the financials section. Everything else is shuffling images around and thinking of 600 ways (including trying to come up with new visual components to mix things up) to emphasize the same investment highlights over and over again. Gigantic waste of everyone's time. Pitches and IMs should be 10 pages maximum, the Executive Summary is usually all that's needed.

 
CRE:
iBankedUp:
Pitchdecks are not just an IB thing. Everyone in business uses them.

Real estate brokers use them. They are equally as trash-able.

I think the funny thing is, you guys have expectations for work that just aren't realistic. When I was in college, I thought work with the right job/career, would be like Suits everyday, just kicking ass and taking names. But work can't actually be shown on tv because there's no action. If you're not ok with that, then maybe someone needs to take your spot.

 

HEY, my Neighborhood Highlights on downtown Portland, ME are EXACTLY what buyers need in order to pull the trigger on that boutique 139 unit property named after some poem by Henry Wadsworth Longfellow!.... yeah you're right. We're full of sh!t...

You eat what you kill.
 
CRE:
iBankedUp:
Pitchdecks are not just an IB thing. Everyone in business uses them.

Real estate brokers use them. They are equally as trash-able.

To be fair, most real estate broker pitch books I've seen are like 5-10 pages, with a lot of that being meaningful info like rent rolls or expense data. I used to be an IB analyst - those were 40 page books full of random, meaningless league tables and fluff. It's the difference between 50% of the page count being meaningful, and 5%.

 

This post has some merit, but a transaction process needs materials. Clients needs something to present with, underwriters need something to work off, bankers need something to win a mandate with. And someone has to make these.

Decks are “useless” until a banker is presenting to a client and the deck is shit or someone passes on a deal because a CIM is lackluster or not coherent. And end of the day, perception matters. Things have a “feel” and “look”. Compare a top banks decks to a small, local boutique. Tell me the heft of the pages, gloss, color coordination, etc doesn’t give you an impression.

And what exactly should junior people do? If your opinion is correct, analyst and associates should be canned, not given higher level work. Junior staff does the grunt work because finance is largely an apprenticeship.

Little mistakes also cause people to wonder if there are mistakes elsewhere. And when a decimal point determines millions of dollars of value either way, yeah, precision is key.

EDIT - OP, best of luck. Life is about doing what you want. Plenty of good paying jobs and no need to be miserable either. I do think opinions change over time. I remember meticulously preparing signature pages for a partner and obviously being annoyed. Years later you realize how much time someone doing that shit for you saves you when you run around doing other things.

That useless deck you make could play a part in winning a mandate or selling the firms story. You won’t see it now, but when your page flipping with clients and someone else makes your deck, then you’ll see it.

 
dsch:
<span class=keyword_link><a href=/company/trilantic-north-america>TNA</a></span>:
And end of the day, perception matters. Things have a “feel” and “look”. Compare a top banks decks to a small, local boutique. Tell me the heft of the pages, gloss, color coordination, etc doesn’t give you an impression.

The tasteful thickness of it. My God, it even has a watermark!

Omg, thank you. I love everything about Pat Bateman. This is pure gold.

 

This is actually what goes through clients' heads though... appearances matter more than content to a lot of people

 

I see your point, but in my opinion the main dealbreaker is exactly this type of thought - 'decks were in banking since forever, we use them to impress clients with our fancy graphs and that's how it's going to be'

Why? Just tell me objectively, which client gives a shit about some made up industry page? Or those 17 company profiles you send as potential acquisition targets (which usually make zero sense for the buyer)?

Let's say you're 'exploring strategic add-ons' for Disney. You make a 5-page profile on Netflix. What for? Do you really think Disney people don't know Netflix? They know it ten times better than you ever will. Why spend a night on creating a useless material? Why not just bring it up in discussion? Or do one rough page with stuff that really adds value (some high levels numbers, creative syngery ideas, etc)?

Same goes with those weird deadlines. How in earth is it possible that an Analyst has to work over xmas? What could possibly happen if the work is submitted a bit later? Nothing, it's not a fucking open-heart surgery, just a few powerpoint pages. Client's won't care. No one works over Christmas. It's just those sleazy MDs trying to prove the client how diligent and hardworking they are, throwing their own people under the bus. There is zero self-respect and confidence in banking.

My point is banking is not innovating at all. Same old weird ego-driven mentality and showing-off to impress clients (?) who usually couldn't care less.

 

Everything you said here is 100% truth. The clients/corporates NEVER work over important holidays. They barely even check emails. I used to laugh when the banks would send me crap over Christmas, new years, etc. Was such a joke. Some douchebag completely manufactured a timeline and we're like "why"

We would go to management presentations and the clueless bankers would go over their stupid decks. As soon as they got to the useless fluff (about 95% of the material) the EVP or CFO would cut them off and say "we dont need to give through all of this." They would basically takeover.

The funny thing is when the CFO did takeover, the overly rehearsed bankers would pull back and defer to management. Was such a joke. The banks job was to basically put together a pointless deck, set up a data room, and try to hide material, adverse information from buyer (but in a legal way).

Someone basically already hit the nail on the head: it is this way because it has always been this way. Things are done certain ways more out of a sense of tradition than anything else.

 

It's true in the Bulge Bracket.

What you said is NOT necessarily true in MM or lower MM. Those markets are significantly more diverse so an IB that knows the space, has connections, and can perform industry research to matchmake clients who may not necessarily be familiar with each other due to being in different geographic markets or product verticals can be a significant value add.

That's especially true once you start getting into areas like PE owned firms, founder-operated growth companies, and ones like that who are expanding rapidly but don't yet have a fully built out corporate development function.

 

Although not in the IB world, there are some parallels. Vividly remember from 15 yrs ago a large estate planning case (which resulted in a 30M life insurance policy). The rep, my rep, went in with his "pitch book". This guy is a CFA type (actually has passed a few parts) and put together a bound thick document discussing the history of taxation, rates, loop holes, effect on client's overall estate, lost opportunity cost, etc.) He was meeting with client and client's tax team. I told him going in there was no way they would read or remotely care about any of this crap. Keep it high level, etc. Of course he didn't listen and didn't get the sale. We went back a year later (they still hadn't done anything) and focused on what their pain points were. No pitch book. No prepared material at all. Just a conversation ( which I led because the rep isn't that type). Spent the whole time talking about them, not about what we can do for them (nobody cares about that in any level of selling - too many sales guys in every industry make it about them instead of the client - never understood that). And like it usually works regardless of sale size, they told us their concerns, goals, what they needed to move forward, etc. Ultimately got the case and a fat 6 figure commission (the rep- he should have split it with me but whatever). I did OK too.

Consultative selling is the goal. Even more important with larger, more complex scenarios like IB. The whole pitch book thing is kind of crazy. Let's throw a bunch of stuff at them, regardless of their issues, and see what sticks. That's purely a numbers game and produces very low conversion rates. Consultative selling is about problem solving and vastly moves the percentages in your direction. Wish the banking world would realize that. They'd actually have greater success with less manpower.

 

I read posts like this and wonder where it’s all coming from. So many different experiences in this industry, but all I can say is I do not feel remotely the same about our firm and our culture. Sure the pitchbooks are overdone, a lot of the material is clearly filler and for looks, but that’s part of the gig. Where I am, some MD’s get that and don’t ask for all the nonsense.

I do feel like making those books is a valuable skill for someone who plans to spend a career in business, it’s embarassing to see some decks put together by people who don’t have the same attention to detail. At the end of the day, as an entrepreneur, you’re trying to get credibility and build a brand so having a crisp investor presentation can help.

 
finbrah:
I do feel like making those books is a valuable skill for someone who plans to spend a career in business, it’s embarassing to see some decks put together by people who don’t have the same attention to detail. At the end of the day, as an entrepreneur, you’re trying to get credibility and build a brand so having a crisp investor presentation can help.

Those slide decks are very far from a crisp presentation. Unless your business is slide decks, it’s not a particularly useful skill.

Commercial Real Estate Developer
 

So much hate for profiles - but most clients don’t know most of the companies and actually ask for it as follow up if you don’t put it in there. I actually had a client ask me yesterday afternoon to make / send him profile on 8-10 fairly sizeable public companies cause not everyone in his company knows what they do.

The magic is that profiles should be minimal work. Most BBs have India team that’ll make it for you in a day or two. Then you can just price update the stuff and check management team and refresh for next 2-3 years. Not sure why the heartburn.

 

Idk man I’m a VP and our $35bn client asked for profiles on bunch of public companies because they are just not as familiar. I’ll help them figure out what these companies are because I’m actually tight with them over the years from deals that signed and didn’t sign, but without breaking some analyst back on a Saturday night. And this is def not the first time over the years some client asked for profiles during the meeting or just as follow up. It is what it is

 

While true, the most laughable part about this post is the assumption that the "entrepreneurship way" or those friends in other industries have it any differently (Hint: Your friends are lying). Substitute IB for any other career of choice in your rant and every single point applies without distinction. Congrats on finally realizing that the world of work is a dumpster fire full of BS. Considering it took you 20+ years of life on this planet to figure it out, I imagine you have a rather long and bumpy road ahead.

On a more inviting note, I welcome you to a world of truth and cynicism. A world where we don't lie to ourselves that the grass is always greener and one where we sleep at night knowing that the garbage we produce at work just pays the bills.

"So this is a Harvard bar, huh? I thought there'd be equations and shit on the wall."

 

Exactly, even the most “innovative” tech firms have teams spending countless hours churning information to decks that are constantly overlooked. For whatever reason, there’s just a lot of importance placed on reaffirming beliefs in most business functions; while, using data/modeling to get to this is interesting, translating it into decks isn’t

 

I largely disagree with this. There is a difference between pragmatism/practicality/efficiency and doing what’s been done in the past simply because it was what was done in the past.

Anyone that can take that and innovate to become more efficient and add more value while having the depth of understanding and foresight to know what is truly necessary and not fluff will always beat out those who don’t.

That is true for any industry and any company. What complicates this whole dynamic is that this tone needs to be set by those higher up in the food chain. The levels below where this stops becoming the case is where your job will suck.