M&A or Coverage Banking?
Wanted to hear people's perspectives on whether or not it may be more optimal to be in an industry sector coverage group over doing M&A? From what I understand, sector coverage groups focus on M&A and capital market coverage and can work on modeling but usually is less technical than M&A. Meanwhile people in M&A work on very technical modeling and cover many sectors, but can have longer hours and deal with more demanding personalities from the mid and senior levels.
If you're at a good shop, would there be benefits to taking a sector coverage group instead?
A point to note is that generally only the very large banks are broken up like this. I'm at good MM bank (deals at the higher end of the MM space) where I am sector focused and I work on M&A, private cap raises, IPOs, de-spac, some deals requiring technical modeling and others not so much. Outside of BB and EB it is very bank dependent on how things work.
It all depends on your preferences and how strong is your bank in each team.
If you're passionate about one industry and you enjoy doing deep analysis not only of financials but also of market trends and dynamics, products, competitors, then coverage is your place.
On the otherwise if what you enjoy the most is the transaction itself, the different complexities, the accounting, and the structuring of deals, and you care less about all the rest, then I would say that M&A will be your place.
I started my career in a Healthcare coverage group, but then I realized that I had no interest at all in the industry, and I hated spending hours drafting the product, services, and market sections of CIMs and Management presentations, and what I actually enjoyed was the valuation and the pro-forma analysis, so in my second year I managed to lateral to the M&A group. Overall, I work more less the same number of hours, in most weeks I work a few hours less than the Healthcare coverage team, but depending on the stage of the deal sometimes I have really bad weeks (+100h), I usually have like 8 or 10 of these weeks per year.
Also, I don't know about other banks, but at my BB most pitches are led by coverage teams, and M&A and LevFin teams get less involved.
- prospect in IB - Gen
do you only have to write CIMs in the coverage group and not the M&A group? Is this representative of all the BBs
It’s always a hard choice because there are pros and cons to each. My bank is one of the only big firms that still do all the M&A in our coverage teams and I love having the exposure to coverage while still being able to focus 2/3 of my time doing M&A.
It's not that complicated: the optimal group is whichever group you're most interested in.
If you want to be industry agnostic, pick a product group. If you want to focus on an industry you love, do coverage. The strength of the group/bank will be a bigger factor for how technical your experience is.
M&A is the best group let’s be honest. You remain industry agnostic, get all of the glory with modeling and technical skills and have the best chance to lateral to PE if that’s what you want.
If all of that is what's important then sure it could be a great fit. Going to PE from a top sponsors group or coverage group for the investment industry you want to focus on can also be great options (e.g. TMT->Tech PE)
If you want industry agnostic, solid Levfin and sponsors groups can work. Some banks have integrated M&A into coverage in which case again, pick whatever you're most interested in.
All I'm saying is M&A isn't necessarily a holy grail. The reality is you're going to get great technical experience at any top group. If you bottom bucket and hate the IB experience your PE exit will suffer.
Not everyone wants to be industry agnostic. I would kill myself if I had to work for long non industrials or O&G. That’s why I joined a TMT group
Go with M&A Group if
1. Bank-specific: You're at BAML where the M&A group (and FSG/LevFin) has a much better rep than coverage groups. For exits at least
2. Exits: You don't have sector preference. Note: buyout PE places a premium on M&A experience, while GE/VC would prefer industry knowledge.
3. Experience: you love modeling and structuring. You'll likely just be brought on by coverage groups to execute.
Go with Coverage Group if
1. Bank-specific: It's GS/Barclays where M&A is done in coverage.
2. Exits: You know the sector you want to exit to (ex. TMT -> Growth Equity or C&R -> L Catterton)
3. Experience: you want to gain sector knowledge. Work on IPOs and debt raises, in addition to M&A deals. Mix of pitches and live deals.
Really comes down to your goals and preferences. I'd recommend coverage if you want to be a career banker, but could go either way if exits is the main focus depending on the above. People on WSO glamorize technicals and modeling, but nothing is fun when you're up at 3am doing it. Personally would rather spend time on pages, which allows me to think bigger picture about the theses behind a deal, industry, or macro situations. My group does everything in-house, so it's a great balance (good balanced experience, suboptimal WLB).
Obviously it depends on the person but I think most would benefit from 1-2 years in M&A and learning how to model and running a deal process (buyers lists, VDR management etc.) well then going to coverage if they want. Most first year analysts (and many 2nd years) in coverage in my experience don't even know the content of what they are working on beyond what they are told to do and checking numbers so analysts on an M&A team really aren't missing out on much in terms of industry knowledge anyways. This is more of a moot point if your modeling is done in-house by the coverage team (i.e. FIG, P&U, REGL etc.).
IMO, the clear best answer is a coverage group that does M&A internally.
I’m at a MM coverage group but we do the full deal process and deal type skews heavily to M&A, so I’ve had plenty of M&A/modeling exposure and don’t feel l missed out on anything vs being in an M&A group.
I also feel like there’s a lot of value (that people often overlook) in getting really deep in an industry, thinking through a company’s growth levers in a CIM, etc. i have a friend at a BB in the M&A group and he just models a ton but I would say is missing some of the business intuition I have picked up.
As much as everyone on here hyped up M&A exits to PE, business intuition / industry knowledge was huge for me in PE interviews. It’s really helpful to be able to talk about a company or industry you understand really well, and that’s going to be a huge part of any associate PE role.
I wouldn’t want to be in a coverage group that doesn’t do M&A internally, but I would say the coverage groups that do M&A internally are the best middle ground
I came here to say this. The coverage group that holds the pen will generally be heavier on the workload but creates a much better, well-rounded experience. Very helpful from an interview standpoint but also especially important if you are looking to stick around in banking. The best bankers at the senior level understand the complete picture, which is difficult if you have only one of industry knowledge or modeling know-how.
Agreed - a coverage groups that only builds ppt slides is not as good of an experience, definitely ask in interviews / networking if the coverage team has in-house M&A
Unde necessitatibus vel rerum dolore aut qui. Ipsum architecto sit fugiat dolorem. Qui quae tempore qui sit quia quos. Distinctio dolores itaque similique facilis.
Ut quis et nam voluptatibus facilis aut rem dolorem. Non quam sed voluptates rerum excepturi officia praesentium.
Pariatur reiciendis sed consequuntur et. Vel inventore nisi quam earum natus error. Est et animi sit nihil quos ipsa. Est omnis qui rerum iste quae quia natus officiis. Aliquam modi consequuntur aut architecto veniam ut ut. Molestiae repellendus et blanditiis consectetur qui ab esse.
Suscipit id veniam perspiciatis nesciunt est. Sed mollitia repellat placeat ut itaque molestiae dolores. Tenetur consequuntur autem delectus aliquid. Et mollitia numquam nihil est aperiam illum sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...