What makes an investment bank successful?
What makes an investment bank successful? Why are some banks better/stronger/more profitable than others? If it comes down to relationships and big clients, does that mean that its success stems from a history of MD's and management that is good at building relationships? Is luck a large factor? What makes a bank attract more employees that are better at executing/ building relationships than another bank's employees?
-- Background: I will be interning at a bb this summer, and I know I shouldn't be concerned much about the above yet, as I will be doing mostly grunt work. But I hope to remain in the industry and I'd like to start thinking early of the goals/drivers/priorities of senior management.
Brief Summary on what I have learned: I think it really all depends on what the bank focuses on. From a MM M&A perspective, generating strong deal flow is the most important sign. For an investment bank to do so, they must be able to win sell side advisory mandates, help financial sponsors sell their various portfolio companies, and retain quality employees to continue the formerly mentioned.
Luck comes into play, as ultimately, there are a number of reasons a seller will choose a specific bank to work with. Factors include how likable the team is, quality of pitch materials, industry expertise within the sellers niche (e.g. man, TMT, industrials, etc.), and the anticipated valuation the IB claims they can get for the seller. If they shoot too high relative to the other IBs, the seller may not believe them. If they shoot too low, the seller may think the bank is inexperienced within that industry and doesn't fully understand the intrinsic value of their company. As everyone in banking likes to say, the valuation process is as much an art as it is a science. I think the key takeaway is that there is no magic formula for success, and the factors listed above most likely apply in the same manner to that of a BB.
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