LevFin and M&A IRL seem very different from what I read on WSO
Not sure if it is bank specific but I have worked at two banks - dealt with M&A team directly in both and LevFin in 1 of them.
It feels to me these guys are technical but not the technical we read on WSO or BIWS (i.e. modeling, using excel without mouse, etc., building weird models).
LevFin
- These guys at my bank never do model from scratch. There is a sophisticated template but it was built a decade ago and the team just copy and paste whatever revenue, EBITDA and capex provided by lender then input financing assumptions and done. Bank cases or downside cases are just tweaking the revenue and EBITDA margin down without much deep dive
- The juniors are paper churners that process all CDD/FDD reports quickly and summarize + reformat into a credit memo for risk to review
- VPs or above are like lawyers. Reviewing facility agreement and financing grid all day plus politicking internally with risk to get things they like passed through and things they don't like that were pushed by sector / FSG rejected.
M&A
- I can't stress how irrelevant these guys are. They do M&A but it is nothing tangentially comparable to what I see here
- Juniors are doing VDR, Q&A consolidation, NDA and EL processing. Basically, janitorial work that they called "execution". Literally no one outside IBD and buyside will give a fuck you are good at managing a Dropbox or categorizing 400 questions into different sections. But yea most of us are gunning buyside anyway so who cares. At least PEs do these themselves and they value anyone who can do this type of work
- Seniors are pseudo lawyers. SPA SHA discussion daily. The lawyers come up with key issue list then we discuss for 10 turns and 40 hours externally and 100 hours internally. Done, deal closed after many trivial terms were agreed and we all felt we did something
I understand the merits of these - legal work is important and probably more important than why EBITDA margin is 22% instead of 21.5%. But how come what WSO described is very different from what I am seeing.
And why is there so many duplicative positions? I know VP/D negotiate SPA SHAs. But lawyers drafted the issue list already. Why would we still need bankers who can do the negotiations? Can't we get a more commercially minded lawyer that do that as well? I guess this is why M&A and LevFin occasionally have bankers coming from big law but i just don't understand why would people rely on a banker who has no law credentials to discuss legal terms when there is a team of lawyers with decades of experience on M&A and could probably opine commercially if consulted.
Based on previous WSO threads, here's a detailed breakdown of the differences between LevFin and M&A roles in real life, as well as some insights into why these roles might differ from what is often described on WSO or BIWS:
LevFin (Leveraged Finance)
Modeling:
Junior Roles:
Senior Roles:
M&A (Mergers & Acquisitions)
Perceived Relevance:
Junior Roles:
Senior Roles:
Differences from WSO Descriptions
Technical Skills:
Role of Lawyers:
Why the Differences?
Bank-Specific Practices:
Legal and Commercial Expertise:
Duplication of Roles:
In summary, while the descriptions on WSO and BIWS provide a general overview, the actual roles in LevFin and M&A can vary widely depending on the bank and specific team practices. The involvement of both bankers and lawyers ensures a comprehensive approach to deal execution, covering both legal and commercial aspects.
Sources: Private Debt/Direct Lending/Private Credit - What are the differences? Best firms with WLB, Q&A: Non-Bank Commercial Lending, WSO, It Is Time To Talk, Differentiation Between Origination and Underwriting In Lender Vocabulary, This seemingly false notion (?) about M&A
Bump
First, WSO's target market is basically pre-career professionals. Or, in other words, people who don't know what the jobs actually are.
Second, because most people on here don't actually know anything about the actual jobs themselves, they tend to hyperfocus on the little they can get taught in school. Which is effectively just modeling.
Third, you are being a little unfair to LevFin and M&A. While I do agree that you are directionally right, and do far more agree with what you said than disagree, you are also exaggerating a little bit. This is a small point but some people who read what you said may take it a little more literally than it should be taken
Obviously going to vary group by group and individual by individual, but vast majority of people I know in BB coverage (vast majority of banking spots) got 99% of their modeling exposure from peak frameworks and deal process exposure from listening to the MD yell on conference calls
I worked in a coverage group that did our M&A work within the group so we did actually grind out excel models and would also do the normal coverage positioning and market analysis.
Bit more work but it was the best of both worlds.
Yeah this is why coverage is superior. Plus you build an actual knowledge base in your sector where you can actually add value on the buy side if you’re good.
My experience with LevFin is they are lazy with updating PPT but have to deal with a bunch of other process BS that coverage juniors don't typically deal with
TBH ECM might be the worst in my experience
Was in top 2 levfin group, time was wasted on dealing with internal procedural work, etc credit risk...
My brother in Christ what else do you wanna deal with in LevFin if not credit risk
Was at in a coverage team at a BB where supposedly levfin « holds the pen on the model ». Turns out we built the business plan, set the assumptions, downside cases, credit cases, risks and mitigants, etc. Then we would send this to levfin who would just plug our numbers in their template and check if the FCF can service the debt. That’s it.
Similar experience in my first year in LevFin. Although i think its grossly dependent on group and the bank itself.
Our template is pretty modular and often times we would build onto it or just start from scratch depending on the preferences of your deal lead (pain in the ass)
Yeah Levfin is surprisingly exactly as you said it is. Lots of politicking, back and forth, and trying to get things through risk. If you are a balance sheet bank where you will hold MM debt, then it’s even more rigorous of analysis while weighing in on how the regulators see your Banks low quality names. I think it’s interesting in that sense though and is a good gateway to PC.
You can get good experience from both, they are a good way to round out transaction experience and skillsets from different angles, especially reps with docs. Even the politicking, getting through risk / committees etc., are good experience I would argue. If you just want modeling reps for a buyside gig, I guess an M&A group that holds pen makes sense.
That said, personally would not choose to build a career in either.
May I ask why and which group do you prefer?
When I joined, we had an associate from the M&A execution team tell us about her role. Exactly as you described. She said the lawyers do the docs and the bankers “put in the numbers”
My first question:
“Say I’m a good lawyer who has a little bit of commercial sense, why do I need an M&A banker, the lawyer can take the numbers and put them into the doc themselves”
She didn’t have an answer to that…
The true answer (presumably she wasn’t senior enough to understand this) is that the lawyers understand the docs but they don’t fully understand the commercial and corporate and financial consequences of arranging a transaction or doing something a certain way. So the M&A banker adds the value by proposing the structure which is best for the client (because the banker knows the business and the transaction’s commercial nature) and asks the lawyer to execute. Hence the stereotype that the bankers call lawyers for the paperwork (not fully true, there are some lawyers that are savvy - but not always so you need the M&A guys to carry).
For LevFin, kind of yes. But this is what investing is funnily about. 1) the model is irrelevant for credit because you don’t need to derive future valuations, just need to understand cashflow dynamics (which is different to building an LBO or DCF). 2) whether in credit or PE, the seniors know intuitively whether a deal makes sense from a financial point (it’s fairly quick to figure out what the price of the business is and what you can sell it for in a few years). The issue is understanding the risks to the business plan, that is always hidden in the rosy DD reports and nobody will be direct about it. So that’s why lev fin guys are DD paper machines, that’s the most important part. And it translates very well to the buy side too.
People also forget that at least the coverage senior bankers are also big information brokers. If you are a major company you can prolly have an in house that can do all the M&A work but a smaller company can’t justify that cost. A good senior will know all the buyers and sellers, up to date valuations, what are the investment themes, etc.
on the lev fin side, they know all the bank deals and what the market will be for your debt.
IMO this is a big part of the job as well as just executing a deal well.
Super dependent across banks but directionally this is a pretty solid irl overview. Good skills to be learned in both; with any type of transaction there are banalities, paper pushing, and grunt work process items.
Senior LevFin bankers need to equally sharp on the credit especially in situations where the front office is seeking to take a large amount of underwriting risk and or the credit is hairy. The real internal decisions are made before committee, often with the senior banker, LevFin group head, and senior credit officer.
In other words, they don't have an associate on hand to spit out what EBITDA was from 5 yrs ago so they better have their shit together when they are getting grilled by their boss and the heads of risk.
Are you trying to say the 50 page pitch decks that coverage groups put together which fall flat 90% of the time isn’t monkey labor? Investment banking is kind of a joke as far as how deep our analyses go. No matter what group you’re in, you will find shit work in every single group.
Think about banking teams in terms of idea teams and execution teams.
Execution teams (M&A Exec, ECM, Lev Fin, some DCM) manage a process that has already been decided on. We are buying X, we want to IPO etc. The job of the bank is to manage the process to perfection. As a Junior you are part of the machine so things tend to be standardised as much as possible. Template models etc.
Ideas teams (Coverage, "Solutions", etc) need to drum up business and have ideas about what clients should do. "Hey we think these 3 companies are undervalued and could be a roll up strategy" or "We think we issuing (new structure) could free up Capital..". In these teams things are more novel and less standard which means more custom modeling. If your seniors are enlightened you may even be able to contribute an idea (shock).
Obviously you get execution teams that can be more creative and coverage teams that just go through the motions.
And what did you do at those 2 banks? did you feel like the work in your team was more special and stimulating?
I am in LevFin and I agree it can feel like crap work at times. That said, it takes a certain level of experience and "smarts" to manage a process well (and I don't think you see all the time spend on grids or going through issues list on credit agreements etc - where again it's nothing crazy, but you cannot trust an external "commercially minded" lawyer do protect the bank). Coverage cannot do levfin by itself; they can do M&A.
Sure if you're in a coverage team you perhaps become more knowledgeable on a specific sector (and I doubt how true this is for the average Analyst jumping ship less than 2 years in) but I like to think it's the same shit job regardless of team. I admit I may lack modelling experience (which again, I doubt many of the 2y in and out analysts in coverage build anyway) but that's an easy fix with a few reps. They're in the business of copy-pasting (superficial take)
I look at what the coverage teams do and I'm not sure if they are in a much better place (but this might be my outside-in view). An intern of ours rotated out to coms ibd because "levFin was not high feeNAns" - buddy, go process kyc and make piecharts for operational benchmarking for the next 6 months - super sophisticated right?
Above is a bit of a sour take - guess I feel attacked. I agree with the hot take but think it's all shit regardless
I guess I am trying to sound a bit provoking to get more LevFin and M&A bros to come and share their experience.
To be honest, while I think the work is duplicating, I actually think the work is good. Just occasionally I wonder why these teams hire people with a purely banking background fresh after undergrad rather than poaching lawyers who did 1-2 years in biglaw and join as senior associate.
I am in a sector team and I hate my life of originating things, doing tons of meaningless pitches, data mining and formatting or spending day and night doing random models that eventually gets too bulky and one simple mistake by anyone who touched the model could take hours to check and fix.
I want to be a lifetime banker but modeling and wine and dine / golfing at MD level are what I hate the most. Hence I really want to know if you can just be a process or documentation person and be a lifetime MD in LevFin or M&A
I am now a VP and a lot of the pitches are ambulance chasing or free client services. Being pimped by client for their troll request that leads to all nighters doing BS modeling or 50 pages of data mining sucks. Even if I can outsource some of them to analyst or associate it is still pain in the less. And MD/D unleash their anger on you after losing the mandate or receiving 0 BO after spending 8 months of the deal.
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