Career Bankers: Coverage vs M&A

Just had some random questions regarding differences in work between coverage bankers and M&A proudct bankers for career bankers (VP-MD levels):

1) Is it harder to move up the ladder in coverage or M&A? How many MDs are in M&A groups at BBs?

2) Do MDs in the M&A group travel a lot less than coverage MDs since they don't really pitch? (Or do they actually pitch a lot?) How do the hours differ in the two groups as you move up?

3) Do coverage bankers form much better relationships with clients? How do M&A bankers build relationships and make themselves valuable at the MD level?

4) I'm guessing Analysts to VPs do most of the execution work (modeling, handling data rooms, etc) so what do MDs in M&A really do day to day?

5) Do coverage MDs make more than M&A MDs since they bring in the clients/deals for the firm? If so, at what level do coverage bankers start making more? (Seems that analysts in m&a make more than their colleagues in coverage).

6) Coverage MDs exit all the time to corporate development and similar opportunities in their sector. How do exit opps look for senior M&A bankers?

7) Overall, if you want to be a career banker, do you choose to start in coverage or m&a?

Thanks in advance for the help!

 
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buylmt:
Just had some random questions regarding differences in work between coverage bankers and M&A proudct bankers for career bankers (VP-MD levels):

1) Is it harder to move up the ladder in coverage or M&A? How many MDs are in M&A groups at BBs?

2) Do MDs in the M&A group travel a lot less than coverage MDs since they don't really pitch? (Or do they actually pitch a lot?) How do the hours differ in the two groups as you move up?

3) Do coverage bankers form much better relationships with clients? How do M&A bankers build relationships and make themselves valuable at the MD level?

4) I'm guessing Analysts to VPs do most of the execution work (modeling, handling data rooms, etc) so what do MDs in M&A really do day to day?

5) Do coverage MDs make more than M&A MDs since they bring in the clients/deals for the firm? If so, at what level do coverage bankers start making more? (Seems that analysts in m&a make more than their colleagues in coverage).

6) Coverage MDs exit all the time to corporate development and similar opportunities in their sector. How do exit opps look for senior M&A bankers?

7) Overall, if you want to be a career banker, do you choose to start in coverage or m&a?

Thanks in advance for the help!

I'll take a stab at some of these, important to note it is hard to generalize.

1) Depends on your personality but I think in general it might be easier to move up as an M&A MD. Mainly your role is to have all encompassing knowledge of the M&A process and a multitude of transaction types (public to public, spin-offs, morris trusts, JVs, minority sales, etc.). You get this by having exposure to all of these as you work your way up through the ranks. Because most of the relationships are formed at the coverage level (though not ALL of them, the best M&A MDs have relationships too), there tends to be more opportunity for younger bankers to be M&A MDs (not uncommon to see mid-30's M&A MDs who have come up through the Associate-VP-Dir ranks).

2) Travel just as much since you are basically tag teaming with the coverage MDs to all the various meetings

3) Maybe initially, but you'll never have an MD who is purely execution. The ones who last are building relationships alongside the coverage MDs by supplementing the coverage MD's sector knowledge with their transactional knowledge

4) M&A MD's drive the process at the senior level with negotiating, approving model assumptions and directing information flow. In reality there are a lot of coverage MDs who do not want to do execution - they would rather their M&A counterparts handle that

5) Potentially - Bringing in deals (originating) is by far the greatest value-add. Perhaps the best way to put it is that comp is more variable among coverage MDs since some years will be up and some will be down. Execution M&A MDs who are not fronting the relationships will always have a lot of transactions to execute on (assuming their coverage partners are good) but their upside will be capped since they didn't originate them

6) Don't really have a view - but again, the best M&A MDs have relationships and will have similar opportunities. However, transformational mergers or transactions aren't happening every year at most corporates so their skill set is a little less valued in-house

7) Depends on the person - I think there is enough outlined above to start thinking of a framework for making a decision that best fits you

 

I'd just like to toss this out as food for thought. I work with a number of MD's whom ran coverage groups at BB firms in the 80's and 90's. As such, they all got pretty significant M&A experience. They're of the opinion that once you've gotten exposure to one type of M&A transaction (i.e. spin-off, split-off, morris trust, etc.) you can advise on any other transaction of that type.

However, uniformly, they're of the opinion that M&A really isn't that fucking hard. Prior to the late 1980's corporate finance was really an apprenticeship business where bankers were expected to do everything (i.e. rating agency presentations, road shows, analyzing which financings people should do, etc.). M&A deals were still getting done then....bankers just figured it out. Obviously, winning business has become much more competitive and having competency in a particular transaction type is a marketable advantage, but banking is still by and large a relationship business and that will likely trump any "expertise" in something that can be ultimately learned from a text book.

 

I don’t really think it is. The volume of M&A and capital markets transactions have resulted in BB banks operating more like factories with the execution process being standardized and handled by a group different from that responsible for the relationship.

Either way, an “apprenticeship” model would imply that a young banker is learning from an old banker. The way staffing works these days, junior bankers are on multiple projects with multiple levels between them and the really senior guy ultimately limiting their ability to really interact and learn. Obviously, most juniors and even mid-level bankers these days have never experienced the traditional model so can’t speak to its relative merits.

You could argue that boutiques are bringing the apprenticeship model back to some extent but even most of them are focused on volume with the most senior bankers passing the execution off to a VP/Director as opposed to an execution MD.

 

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