Corporate Development - What do they do?
Corporate development (CD) involves M&A, divestitures, investments, and incubation of businesses. Here's @harvardgrad08" with some insight into the daily activities of someone in CD.
- Idea generation/ deal sourcing (usually in conjunction with the strategy team)
- Lead valuation analyses
- Participate in structuring and negotiating deals
- Due diligence
- Help prepare term sheets and definitive agreements
- Help organize post-close activities
- ad-hoc projects for our CEO, CFO, senior leadership team, and board.
What exactly do the above functions entail? Below are summaries of what @HashtagCorpDev" said regarding M&A, financing, forecasting, and ad hoc reports from @HashtagCorpDev".
- M&A: One of two core responsibilities of CD at their company is to drive and manage the acquisition function of our company. Here's what that involves:
- Sourcing of deals
- Internal presentations to management/BOD
- Due diligence
- Acquisition integration
- Post-closing forecasting (until FP&A has a handle on it)
- Financing: Provide financing for all of the acquisitions, development programs, and corporate initiatives (e.g. stock buyback programs). A few examples of financing they've done are including (but not limited to) project loans, term loans, high-yield notes, margin loans, an IPO, and multiple working capital revolvers.
- Forecasting: Because their company has a limited FP&A program, forecasting is mainly done by CD. @HashtagCorpDev" was responsible for providing forecasts for all of the company's operating units. This is something, they noted, that is exclusive to smaller companies but helpful in cultivating relationships with all of the major players at operating units (ops management, marketing, accounting, etc).
- Ad Hoc Reports: Their company produces a fair amount of ad hoc reports for management, the board, investor relations, and in some rare cases, activist investors.
There is definitely much to learn when going through this process (restructuring ideas, tax efficient strategies, capital funding requirements for growth projects, etc.). I've had to perform multiple deep dives for our operating units (easily my most despised corporate term). I've also thrown together some presentations for IR to help explain an acquisition target's main operating metrics and drivers of value.
Corporate Development vs Corporate Strategy
I'm considering both corporate strategy and corp dev. If you had to tell me right now to take one and go, which would it be?
First, what's the difference between the two? Corporate strategy groups are like an internal consulting group, they advise senior leadership on various strategic initiatives. Corporate development, covered extensively here, is best described as an internal M&A team.
Pay and lifestyle in corp dev are similar to corporate strategy, so let's look at the career opportunities each presents and judge them accordingly.
Corporate development has an extremely low turnover, and most of its career prospects are internal. Promotions within corp dev is the standard career progression, although promotions function slower than the typical job. Climbing the ladder up to the CFO position is a fairly standard career track for a corp dev analyst. To expedite the promotion process, one can lateral to other companies into more senior roles.
Corporate strategy, on the other hand,
Here's a summary of the differences in exit opportunities from @industry_to_consulting".
Corporate dev: end up highly paid specialists within the company, maybe move up the corporate CFO ladder or lateral into IB/PE/VC
Corporate strategy: 2-3 year stints in strategy --> leadership position running a region, business, or function
In terms of overall career maneuverability, it really depends on what types of roles you're looking to secure in the future.
Breaking Into Corporate Development
If you're an undergrad, slow your because directly earning a position in CD requires a good deal of elbow grease. Understand that there's rarely on-campus recruiting/networking sessions, meaning you're out in the wild when it comes to finding a position. Some firms do recruit for corporate development roles on-campus, but those firms are few and far between. They typically don't hire interns as it takes 4-6 months to acclimate to corporate, so your best bet is to find a company with programs to train you upon graduation. Here's @HashtagCorpDev" on how to land a job in CD out of undergrad.
The best place to find Corp Dev job postings is probably going to be LinkedIn with Indeed a distant second. Headhunters often times have Corp Dev jobs too. I've seen a ton of Sr. Financial Analyst postings pop-up recently (the usual entry point for Corp Dev), so I would search for jobs with that title and go from there. If you have friends in banking, you can ask them about companies they've worked with in the past and if they thought that there was a good Corp Dev function there.
Most senior analysts in CD are recruited out of banking or an MBA. Transitioning from investment banking to CD is common because the roles are somewhat similar, the pay is still above average (although not nearly as good as investment banking altogether), and the lifestyle is far better. Groups with plenty of deal experience offer good exit opps into CD. Additionally, doing coverage is a great stepping stone into a CD role within the same sector you covered in IB. The best way to go about securing jobs with CD groups is to browse the web for job postings (often times F500 companies post openings online).
MBA recruiting in CD is stressed on M7 to top 10 business schools. There are, of course, people who break in below that point, but if you want to break into CD out of business school you will be at a huge advantage going to a top 10 b-school.
What of the skillset required to get into corporate development? How can you set yourself up for success on the job? To begin with, very strong excel and powerpoint skills are necessary. It helps to be proficient with Bloomberg and Capital IQ. Obviously, technical modeling is a must. Beyond that, here's @HashtagCorpDev" on a soft skill that is absolutely necessary to success in corp dev.
Communication skills are of utmost importance in Corp Dev. One interacts with so many individuals across various diverse functions, all with different lexicons and levels of expertise. Being able to effectively understand and translate information from all of these different units is an invaluable skill, as information often gets lost or misconstrued on its way from an operating unit to management. I very often get asked by management what this-or-that means when they receive info or data from a unit.
Corporate Development Pay, Lifestyle/Hours, and Exit Opps
Entering senior analysts can expect to earn around $100k. Mid-level managers make a little above $200k considering bonuses and stock options. Senior managers are above $200k base with significant bonuses and stock options.
The lifestyle in Corp Dev is highly desirable. 40-60 hour weeks, barely any weekend work, good pay, you can't go wrong. Even when you work on the weekends, it's often not the mindless grind that it is in banking. Here's @HashtagCorpDev" on why weekend work depends on management, and why he doesn't mind most weekends spent working.
I find most weekend work is deal related (which is exciting and I'm completely fine with) or BOD meeting related (bleh). I believe the amount of weekend work completely depends on which type of manager you have, as I've had some that simply can't turn off the work switch in their head and assume that you're on the same page at all times. I personally find that weekend work that requires coordination is a waste as it takes a lot longer to complete something with your team when everybody is scattered and you're better off just working a long Monday to complete the task (unless the deliverables are due Monday, in which case you better crack that whip).
Due to low stress and a solid lifestyle, not many leave corp dev for other gigs. As a result, promotions occur at a slower pace than banking.Certainly, promotion opportunities are there, otherwise, people would leave for other industries. However, it means that you likely won't receive a promotion every three years unless you're willing to move companies when necessary.
Breaking into private equity,, a hedge fund, etc is quite difficult coming out of corp dev since those financial institutions much prefer to recruit from bankers and MBA grads. It's possible, however, with extensive networking. Here's @HashtagCorpDev" on the advantage corp dev offers in regards to networking.
The key to making your desired exit from Corp Dev to another type of role is significantly dependent on your ability to network. My work in Corp Dev has had me intimately engaged with multiple banks (IB and commercial), PE shops, activist HFs, and institutional investors. I frequently communicate with these parties, not only from a business sense but on a personal level. Depending on your ability to impress and cultivate relationships with others in a business setting, it should be relatively easy to leverage those relationships into new roles, should you
so desire to bail on Corp Dev. You will also need to have a good story as to why you want to make the jump.
Corp Dev vs Investment Banking
Many investment bankers switch into corp dev after a year or two as an analyst. Why is that?
First of all, the skillsets required and the work itself are similar enough that it's not a very difficult adjustment. Corp dev groups tend to be quite picky while recruiting, choosing mainly from investment bankers and MBA grads because it takes a few months to learn the ropes for newbies.
The most significant factor that makes CD so appealing is in the lifestyle. While the work is similar enough to investment banking, you only put in 40-60 hours a week in CD. Some groups will put in more and some groups will put in less, but that's the average. During deal weeks, expect to put in as much as 80 hours, but certainly no higher than that.
So, despite taking a fairly significant pay cut (senior analysts, who typically have experience and/or an MBA make around $100k first year), CD is a very appealing route because of its similarities to IB and lifestyle.
To get an idea of how the work in CD is similar and different to investment banking, here's @Sil".
Like you said, there is no typical day. I generally get in the office around 7:30 AM. I have a few recurring assignments that I need to work on. They include managing our pipeline, creating presentations for weekly M&A working group and corp dev meetings, and updating valuation models as new financials come in. One key difference between the day-to-day in IB vs. that in corp dev is that in corp dev, we spend a lot of time on internal presentations and calls. We require CEO approval for all M&A transactions and board approval for all M&A transactions over a certain dollar threshold. We also provide process updates to our CEO and board on M&A transactions. As you can probably imagine, this results in us preparing a large amount of internal presentations. We also have many internal calls, whether they are for M&A working groups, due diligence processes, or some other function.
Other than the work mentioned above, corp dev involves many tasks similar to IB including valuation, managing data rooms (for divestitures and asset sales), managing trackers (e.g. DD trackers, pipeline trackers), a lot of PowerPoint andwork, etc.
The Corp Dev Interview
Corporate development interviews, while they vary a ton by company in structure, are typically familiar to the interviews that most candidates have experienced. Since the job is functionally similar to investment banking, the interviews are fairly similar, the main difference is that you now have experience. Here's what a typical corp dev interview looks like when coming out of investment banking.
- Background questions
Tell me a little about yourself?
Why did you choose investment banking out of undergrad?
Why make the switch to corp dev
These questions should be relatively easy for you. If you broke into IB in the first place, the first two questions should be a breeze. If you have a passion/interest in corp dev, that one should be easy too.
- Walk through prior projects and deals
Here's @exlurker" on how to talk about your deal experience beyond the surface level.
walk through prior projects / deal experience. This is high-level, talking about the story behind your deal, some of the problems the client faced along the way and the eventual outcome. It is better to talk about projects that had a strategic angle instead of only talking about deals you closed. In corp dev, you can imagine a lot of deals die in the diligence stage (lucky if you can get that far), so there is a lot of emphasis on understanding the big picture and what metrics are important when thinking about strategic fit of a deal (since that is what your job will consist of)
- modelling questions, with questions around accretion / dilution,
With some IB experience under your belt, you should be able to answer these questions competently. The WSO Investment Banking Interview Guide is incredibly useful in preparing for the technical questions that will get thrown at you in CD interviews. / , synergies, ROI / break-even, etc.
- Industry discussion
More than anything, this is a conversation about the industry you're interviewing for. They want to get insight into how well you know their industry and company.
Here's @exlurker" on the number of interview rounds as well as how to stand out from the crowd.
My interview was 4 rounds - VP, Juniors, SVP, and then once with the whole team (CEO, CFO were also there). Interviews become less about technicals as you progress through the rounds as i am sure you would expect. Where you shine is how well you can communicate your understanding about the industry and what questions you ask.
Breaking into corp dev after an MBA is a different story than breaking in after IB. Here's @pmc2ghy on how he impressed in interviews.
- I showed that I really had a passion for the industry and I was well informed as to overall trends/companies and not just siloed into a specific company/area.
- I explained how my pre-MBA experience (client engagement, large projects, some contract negotiations, working in multiple business areas) transferred over to working in a CS/CD role, and that this experience gave me a strong holistic view of the industry.
- I spoke the language of the industry extremely well, which of course I should be able to do, and which the interviewers appreciated.
- I did very well in my first couple finance and accounting classes, and even have a TA offer for intro finance in my 2nd year, which gave the interviewers confidence that I was interested in finance and a quick study. Clearly, this is less important if you have some type of finance/consulting/banking background.
The Coveted VP Position
$500-800k working 40-60 hours a week
Sound nice? That's what life looks like for a vice president in corp dev, which, by the way, is effectively the highest position in CD groups (while EVP and SVP roles are higher, these positions are typically officers at the company, they're not exclusive to CD). So, how do you get there?
There are a lot of roads that lead to VP. Some might lateral from investment banking associate to CD manager, and then get promoted to manager, director, and VP. Some might pay their dues IB, transition to CD as a senior analyst, and then transfer companies to higher roles for quicker promotions until they reach VP. Some might utilize a prestigious MBA, secure a position as director in CD, then reach VP. Point is, there are many ways to reach VP in corp dev and there is no widely accepted path like there is for private equity. Because of low turnover and slow promotions, odds are you'll have to transfer at least once in your career to climb the ladder.
Read More About A Career In Corporate Development On WSO
- Compensation Structure At The Mid-Management Level In Corporate Development / Strategy / Finance
- Anyone Actually Like Their Corporate Development Job? (Post -IB)
- Corporate Development Deal Flow
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I'm a recent undergrad who is fortunate to have the opportunity to start off working in a tech company in their Corporate Strategy and Development group. The issue is that Corp Strat and Dev are fairly separated and I have to choose to work with one of the teams. We're not a huge big name tech company, but we did 10+ deals last year and are fairly active in the M&A space for context.
If you had to pick from one of the two, which would you pick and why? I've met people from both teams and have gotten along much better with everyone on the strategy side. I've also heard more people push me towards strategy as they say it will keep more doors open down the road vs dev which is really just going to be utilizing a banking skillset. So I guess I'm leaning towards strat, but would love to hear opinions and comments.