Saw some posts lately about working in product vs. coverage groups for IB. Would love to hear different bankers perspectives on which area they work in, and what they both like and don't like about working in that area.
Thanks in advance.
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Hello! So i'll get this started for you although there is probably already good content on the site regarding this topic so i'd for sure recommend you take a look through.
First it's important to remember that different banks structure themselves differently. BofA for example has their product and coverage teams seperately (there are some coverage teams that do their own modeling for special types of companies - read: some E&P, FIG, REGAL areas). However, some firms like GS have small product teams but by and large will have most of the modeling / process work occur in the coverage team. In my opinion this is the best model as you get exposure to the modeling and the industry side of every project you're involved with.
Thtat being said, if you find yourself at a place where the product and coverage teams are divorced you need to evaluate what you are looking for. If you want to get a really good understanding of a certain industry / if you are interested in being in banking long term I think that coverage teams are great. However, if you want to get a really good understanding of modeling, deal processes, and some kind of "product" (whether that be vaguely defined M&A, leverage finance, etc) - then product is the way to go.
For me, I figured that I could learn an industry down the line - didn't need to spend two years harping on that - I wanted to get as much deal exposure as possible and so an M&A group made the most sense to me.
Very insightful, thanks.
But do you find that the general perception is that coverage is more "interesting?"
Also, why is coverage better for long-term banking? Is it because it's more about developing relationships?
So in the scenario where coverage vs. product are fully divorced - I think that which is more interesting is really based on what your interests are. I don't really think you can make a generalization on the topic because its all different. For me, I found product more interesting becuase I found myself to be a bit of a deal junkie, and the volume of deals is hirer and you get more exposure to the deal process. I think at the analyst level the work done by product teams is more interesting as at my former bank, the coverage analysts did a lot of bs industry pages, stock price over time charts, comps files / pages, etc etc - which I find terrible boring.
In terms of long term - yeah, product bankers have relationships too - but the coverage seniors often hold more of the relationships etc. To get more detailed on my previous comment, if you wanna do banking long term what i'd actually recommend is do product to start (get an understanding of the technicals / of the deal process) and then go to coverage as an associate or VP to start understanding one industry / gain relationships.
Your post really only applies to M&A as a product and it being done in house or through an outsourced M&A group, which is an important consideration if you’re evaluating different banks.
M&A is a bit different from other product groups, and I think less relevant to OPs point as compared to the standard product groups - ECM, DCM, LevFin and then the smaller groups like acquisition finance, ratings (if there is a group in house), liability management, etc.
It really depends on your interests and personality. Generally the product groups work on a higher volume of transactions and are much faster paced. They may cover multiple industries and have multiple “live deals” happening at a time, as compared with coverage where an analyst might only close a few transactions in a year. The coverage groups tend to be slower paced but dive a lot deeper into a given transaction, and as you’re working across multiple products, it is a much broader experience.
M&A fits somewhere in between, as the transaction timelines are still drawn out / same pace broadly as a coverage group, but less broad experience since you’re only working on M&A. Because you’re working on the financial modeling, it’s impossible to not pick up on any industry expertise as an M&A analyst (the ways models are built, line items, etc are simply different across different sectors). A DCM analyst on the other hand might cover the media sector for 2 years, and apart from knowing the different players in the sector, hasn’t really built up any media expertise.
Product groups tend to be much more structured in terms of hours, workflow, timings, etc, and you see a lot more people stay on post-analyst for a combination of reasons 1) Better work/life balance and 2) Less attractive exit opportunities. Hours can get bad during particularly busy times, but I don't think I can ever recall our DCM analyst working past about 10am (they get in earlier, around 8), and they seemed to have pretty set hours, with extremely limited weekend work. The set-up for most product groups is more of a trading setup, open floor plan and no offices for senior people, so your interaction is much more involved with your team vs. IB. On the positive side this means less time waiting around for comments from your MD and probably a much stronger relationship within the team, and on the negative side it's more difficult to slack off / show up late / be doing things on the computer non work related when your screen is literally right in front of everyone.
At least at a junior level, I don't think you see any meaningful difference in pay across groups, i.e. the analyst / associate in ECM makes just about the same as the TMT analyst in coverage. The biggest downside of these product groups is that the work can be extremely repetitive, and after a few months of doing it you have learned all there is to learn at a junior level. That's the biggest reason I've seen people leave / move from product to coverage.
At the good LevFin shops (BoA/CS) your experience will be more like M&A, but agree for the rest. Source : analyst in Levfin at one of these two shops.
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