Inv Banking 101: The Typical Deal Process
Was wondering if any of you thoroughbred investment bankers could enlighten the rest of us aspiring bankers about the typical deal process from start to finish (for a buy-side and sell-side deal). What are the key points/events we should know about going into a full-time interview for banking, especially with a summer banking internship on our resumes? What is the typical length, approach, strategy? I am aware that some deals, for example, on the sell-side are driven entirely by the buyer and the full process is much shorter than a deal that is otherwise not. A lot of the time, the seller puts together a teaser for potential buyers and then eventually a management presentation in an attempt to get the potential buyer further intrigued and thinking about the business. If initial interest is there, the potential buyer must pitch the acquisition to its board and see if it is in the best interest of the buyer's shareholders (in the case of a public company). Do negotiations about the price and structure of the deal carry forth after a potential buyer is on board and what exactly does this entail? Would love some more insight on the entire process.
Also, a few more questions if someone has the chance to answer:
- How is the analyst's role different for a buy-side vs. sell-side deal? Are sell-side models mostly built off templates and buy-side models customized for the deal at hand because there is much less interaction with the seller, and thus, less knowledge of the company? I would think it depends on the deal and not necessarily the lack of information?
- Why is a sell-side process typically easier than a buy-side? Is it because there is more competition from buyers on a sell-side and not as many options on a buy-side? Just heard this a lot and wanted to get a clear explanation.
Hoping this sparks an interesting discussion and further questions by others...
As a newbie, I'd like to know too!
AMT
A typical deal/sell side process steps - Correct? (Originally Posted: 01/16/2018)
Appreciate that this has been asked a number of times. Also appreciate that it is not a exhaustic list or process - it depends on firm, region
Would this be an accurate depiction of a pitch + sell side process
Banks/Advisors Overview - Credentials o Relevant transactions worked on – tombstones Business overview – slides about potential client o Business model – business overview o Product overview/service line o Key differentiators o Competitive positioning - market overview o Financial performance o Graphical illustration of Financial key metrics – CAGR of revenue o Businesses M&A history Market slides - Demonstrate knowledge about your clients market Valuation /model – how much you could sell it for (don’t want to over promise, but don’t want to under state the value when aiming to win work) o Comparable companies, precedent transactions Potential buyers Process letter – of how it would work
On the valuation model for a pitch, I assume you would always do comparable comps and precedent tx, but for the model would this essentially be an operating model e.g. integrated 3 statements with projected financials + DCF?
Sell side Once an engagement letter is signed – signed with client Preparation phase, phase 1, phase 2 , signing (6 months total)
3 months – compiling buyers list- contacting buyers Sending NDA – to potential buyers Preparing initial marketing material Teaser/IM – back and forth with management
3 months Phase 1- Collect non binding offers
Phase 2 Invite to mgmt. pres Site visits/data room – deal with follow up requests/qna/calls Collect binding offers
Signing Select one to go into exclusivity with – receive detailed DD list Finalisation of purchase agreement – legal agreements and signing
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