Learning Curve as 2nd Year Analyst
I am currently working as an investment banking analyst at a BB and 6 months after starting the job, I feel the learning curve flattens very quickly. I don't learn much from making another pitch book and even in the live deal, I feel the work I do isn't particularly exciting. Since most people say it's important to finish the 2-year analyst program, I am just curious what can you pick up in your second year that you haven't in the first year?
Create an office challenge to see how many admins you can hookup with. FYI, the old crusty ones only count as half a point. The time while fly brotha
I guess you are trying to be funny, but I don't think this is at all funny. It's disgusting. Shame on you.
It's honestly shocking when I hear analysts say this. After only six months (1-2 months of which were spent in 'training') you barely know how to do anything. At best you can make charts, go through filings, make profiles, and ideally know how to set-up the pre-made model templates.
How many full sell-side processes have you done? How many buy-side ones? IPOs?
Agree if you are only doing pitch work by updating industry slides, making profiles, spreading comps, etc. then your learning curve is going to taper off quickly. That said if I dropped you into the middle of an auction process right now you would likely be useless in terms of understanding next steps, and being to function independently without very clear guidelines.
You need to get on live processes because that is where you begin to see significant deviations from your standard models, have to start working with more detailed/less refined company financials than high level public filings, etc.
Just to add a bit to what Quaneaser is saying, there is a great deal about dealmaking you can't possibly yet know. As an analyst, you have to start by mastering useful technical skills before you get involved more heavily in what I'm going to call 'process-based knowledge'. It's unlikely after 6 months that you're a total master of financial modelling, are the company's ace on PowerPoint, and know the ins and outs of all the data sources you may need. There is always another level of knowledge you can add on top of your existing skills (VBA for Excel or SQL for database queries, for instance).
Even if you're great at all those things, there are depths to financial modelling you almost certainly haven't encountered yet. Financials can get a lot more complicated than what you're likely to have seen thus far, and they can also get a lot less structured. If you were to move to a mid-market PE fund, a venture fund, a growth equity firm, or a corporate development role at start-up, you might be shocked how unstructured the data of your target universe is.
I'd bet both my nuts you couldn't list the majority of the documents I'd want to see in a data room, which means you wouldn't know to ask about them in initial diligence calls, which means you'd be wasting my time. The reason I'm talking mostly about earlier-stage or mid-market funds is because the guys who seem to want to pull the ripcord on banking in the first few months tend to have more of a sales-bent to themselves. And in any of the types of funds I mentioned, you'll have to help with sourcing. But you have to be able to do that intelligently, and part of that is understanding the full diligence process.
Once you're familiar with the process for various types of deals (acquisitions aren't the same as divestitures, which are different from capital raises, which are separate from IPOs, etc.), you can start to get more deeply involved with the legal aspects of negotiating terms in an SPA or APA. I find this part of the process to be a gigantic ball ache, but some people seem to enjoy it. It's mostly sitting on the phone or in the office with the lawyers for FUCKING hours and hours as you work line-by-line through documents no one else will ever read, so you have to. In any case, if you leave too early, you'll miss at least part of that tutelage. In my experience, you only really get trained once, so you should make the most of it.
Hey BrotherBear, where can I learn more about all that you are talking about? Can I read a book to get up to speed on the process? I read Rosenbaum to understand how to do financial models but can't say it taught me alot about processes.
If you dropped me in the middle of a process right now, I would shit my pants.
Thanks.
As ElGranMono says, it's something you learn on the job. Every deal is a little different than every other deal. That's why your deal experience is so important. I never ask anyone technical questions. You have to pass a modeling test before speaking to me anyway, but I wouldn't ask even if that weren't the case. I want to know exactly what you did on the deals you list on your deal sheet. That's the knowledge and experience you have that someone else doesn't. Besides your personality, it's just about the only differentiating factor an analyst/associate can bring to the table.
I have never run an IPO process, for instance. I've just never had the opportunity. That's a useful skill I lack. If someone gave me the chance to be part of an IPO process, I'd be pretty excited because it's a new thing to learn. Cross-border deals are another area where there is always something new to learn. I did M&A out of Europe for several years, and you learn a great deal every time you do a new deal in a different country. There are some surprisingly different ways of doing business in other countries, and you sort of have to pick that up on the fly.
On large deals where my firm has to pay major fees, I used to request an analyst from our lead advisor to work with me everyday. On the corporate side, a lot of corp dev teams are really lean, and I'm lazy as fuck, so I want an assistant to make changes to the model in real time and take notes in my meetings because I get bored and stop concentrating. For them, it works out great because they work far fewer hours for me than they would at the bank and they actually get to come to real meetings. If you spot a deal where the firm you're advising has no juniors on their corp dev team, you could suggest it to your MD as a way of helping the deal along while being his eyes and ears on the ground.
I don't know why more banks don't do that. If I'm paying $10M or more in fees, my fees are paying for the entire NY analyst class for the year, so I should get an analyst dedicated to my deal full-time. I don't want half a dozen guys doing a little bit each for a couple hours a day. That's bullshit. And I don't need 5 MDs showing up to meetings just to kiss my boss's ass. That doesn't add value and it doesn't move a deal forward. They just show up to make sure they get some credit for the deal when bonuses come around.
Anyway, I digress. The point is that M&A is an apprenticeship business. It matters who you work with and what you work on. You pick up pieces of knowledge along the way. If you get the chance to work for a boss who teaches you and gives you opportunities to learn something new, stay with that boss until they can't teach you or offer you any more opportunities. That's the nature of an apprenticeship model. You learn a subset of your boss's knowledge. If they don't know anything or aren't willing to teach you, you need to move on.
If an investor called about the deal you are working on, could you talk about why whatever it is you are selling is a good investment? Have you even picked your head up enough to see the big picture about why you are working on anything?
I doubt you have the industry depth or skills to really understand how your specific live deal or whatever you think is important really matches up in the industry and could sell it to somebody that has spent years trying to pick apart little things in whatever sell side process you are pitching to the market.
Get real. You know absolutely nothing beyond the basics. Start by reading 10Ks and understand the legal stuff and language used in the filings so that you can really understand why companies say the things they do. Go read the transcripts of competitors and all of the companies in the space and understand who is doing what and why. Find the PE port cos that might fit for clients and start to develop an understanding of where the industry is in its life cycle so that when somebody with actual industry knowledge asks you something you don't just shit your pants and stammer.
Wow, before reading these comments I would have generally agreed with the OP that there is not much to learn after the 2nd year... but these comments added some nuances to my view
It comes down to what skills you want to pick up and that you are trying to learn. Other posters are absolutely right that Finance is a sector based on apprenticeship and that you are a far way away from learning everything about M&A. However, if your goal is to be an investor I would largely argue that you are better served by jumping ship.
Banking is still sellside and while there is still lots you can learn (as other posters mentioned), your 2nd year is going to be all about you doing iterations of what you have already done and you will get worked and tasked on that basis. The bank's job is not 100% to care about your skill development, they trained you in the basics and now there is a period of time where they are going to reap the benefits of what you have learned. I found in my 2nd year that lots of what I did was iterations of what was already done before and while I did learn new things on each deal, there were definitely diminishing returns (but that is probably due to the fact that starting in IBD is like drinking water through a fire hose.) Any investing knowledge I picked up is stuff I had to learn on the side that is tangential to my job (because bankers are not in the business of telling PE funds or strategic investors the best investments to make.)
Basically my argument is that if you want to go to PE, all else equal, you will probably become a better PE guy by spending more time in PE and apprenticing yourself there and getting "deal reps" from a PE perspective. If your goal is to go to a specific-type of HF, you are probably better served apprenticing yourself there and getting more reps of what that HF does.
That is assuming that the culture, learning opportunities, apprenticeship/mentorship, etc. is equivalent between your sellside bank and your buyside opp. However, I am kind of skeptical that that is the case because generally PE funds don't want to take IBD analysts 1 year out as they understand the value of taking analysts who have done the full 2 year program and because they are a well-oiled recruiting machine. This makes me surmise that your PE fund is probably not "equal" but I have seen instances where that has happened.