don't think coverage groups are worth it

Currently an analyst at a solid coverage group at Citi / CS / BAML. I have been very annoyed at my experience. It seems as if we just create profiles, do comps and make charts. I have been fortunate to been on a couple of M&A deals too and our role has been limited. 

It seems as the skills that are considered important at the junior level in finance (modelling, managing data rooms, buyer outreach etc.) are all done in M&A groups. Headhunters also look down upon coverage group kids and it is much more difficult to practise for modelling tests if you don't do it in your day to day role. While M&A analysts get to model everyday, we are making pie charts. 

Think GS classics / EBs provide a much better experience in banking.

Comments (42)

  • Analyst 1 in IB - Gen
Oct 26, 2021 - 12:09pm

Why do you care so much what headhunters or PE firms think? Your best banking "experience" is the one you don't burnout in. Just enjoy the lighter work and save as much as you can. Stop chasing lies about the next "best role"

  • Analyst 2 in IB - Cov
Oct 26, 2021 - 12:23pm

Headhunters are the gatekeepers to PE funds and Hedge funds. If you are interested in these opportunities, it is imperative to go through them. 

Furthermore, I disagree with your point. I don't think the hours are better. It's just that it is spent on things like making pie charts or trading updates vs technical work which drive a deal

  • Intern in PE - LBOs
Oct 26, 2021 - 12:21pm

I'm going to BAML's coverage group next summer and reading this is scary. I did my past internship at a middle market IB where I was getting tons of modelling experience and turned down their offer. Seems frightening to think that now I'll just be making charts and producing comps 100 hours a week

  • Analyst 2 in IB - Cov
Oct 26, 2021 - 12:24pm

Not at BAML but heard it is particularly bad there. Everything "interesting" and modelling-related goes to M&A.

  • Intern in IB-M&A
Oct 26, 2021 - 2:20pm

Why did you leave the MM if you were having such a quality experience?

  • Intern in PE - LBOs
Oct 26, 2021 - 3:04pm

Pretty much for buy-side opportunities. I was actually hesitant on accepting BAML's offer because I knew that the M&A group does all acc/dil, but I spoke to some people and thought that it had good exits in VC/GE, even if the PE firms didn't show interest. Another component was that I would have an easier time lateralling to other banks if I didn't like my time at BAML. Also, my modelling experience at the MM was largely due to my mentor spending several hours with me every week and giving me some of his work to take first stab at, which might have not been there when I joined the next summer. So I was just trying to be more risk averse and have some good exits available.

  • Associate 2 in IB - Cov
Oct 26, 2021 - 2:27pm

In all honesty, modeling is extremely easy and requires little critical thought.  If you can spin that you did extensive modeling in your internship and were able to leverage that into at least being somewhat involved at your BB, you will be golden.  You are in a much better spot for recruiting being at BAML than at a MM.  You just have to spin your story.  

Oct 26, 2021 - 12:27pm

Yes and no. It can be argued that anyone can become a model monkey after building the same or slightly different version of a model 2 - 3 times. It's not rocket science and there's not really a lot of value add. Meanwhile, if you're actually interested in your coverage sector, the industry knowledge you'll gain over a few years will differentiate you from the model monkeys if you go to a sector-specialized fund, like a tech or healthcare fund.

  • Analyst 2 in IB - Cov
Oct 26, 2021 - 12:40pm

At the junior level, PE funds usually use associates for modelling. Being a "model monkey" is important for them as there are complex scenarios. Nobody is gaining meaningful industry exposure as an analyst. 

Sure, from a career banking standpoint your points are valid. Most people use IBD as a stepping stone and M&A groups provide the skills you need much more than coverage. Also, even for career bankers, I have directors and VPs in my group who have closed 2 deals. They don't know how to execute AT ALL. It is important even as a career banker to be able to execute (which I don't know how you learn to do closing 2 deals as a director)

Most Helpful
Oct 26, 2021 - 12:49pm

"Nobody is gaining meaningful industry exposure as an analyst."

That's why I said if you have an interest in your coverage sector. Implied in that statement is the assumption that you will go beyond just doing tasks, and actually actively seek to build out your knowledge of the sector. Just an observation, but your understanding of value is somewhat misguided. Being able to run models on the buyside is par for the course; it's a pre-requisite. Nobody will think twice about it even if you are a model master. On the contrary, if you can demonstrate a developed or advanced understanding of your sector, that is certainly not par for the course or expected of you, and will eventually get you noticed by your buyside senior associates and VPs. These types of things demonstrate interest and advanced professional development, and are the type of differentiators that stand out when it comes time for promotions or letters of recommendation for business school.

  • Intern in PE - LBOs
Oct 26, 2021 - 12:48pm

That's true, but as an analyst I would appreciate getting a well rounded experience more than just being good at one component of banking. I think IB would be more attractive at the junior level if banks focused on ensuring that the juniors are learning through wide variety of experiences. First time I took accounting, I wondered whether the statements will ever become intuitive and through lot of practice they did (I can think of any item now and know exactly what impact it would make overall, and it wasn't even because of the accounting classes, but different perspectives in higher level finance classes). Similar is the case for board games like chess, competitive sports, etc. You could be good at integrations in calculus, but not be able to set up the integral because it is not intuitive to you. I think IB is similar and 2-3 varied models might make you good, but they probably wouldn't make you feel as confident as what an ideal banker in my mind should be.

Oct 26, 2021 - 1:54pm

It's true that if you only look at it from the lens of what will help you get you the best PE offer with the least amount of work on your end, M&A is a better option than coverage. To be blunt, the group pays you well to support their seniors and to learn the job of a coverage banker. If you're not actually interested in learning the job you signed up for and are payed 6 figures to do, people will go out of their way to give you the shitty work and make your life more difficult. That being said, if you put in two good years and then move to a client, it's a win for everyone.

If you're actually interested in learning the job, you will get a more well rounded experience in coverage assuming you're on a team with a meaningful amount of dealflow. As far as modeling, you'll get a lot of experience running/building operating models from IPOs and high yield processes (to a slightly lesser extent). For more complex/less standardized models or smaller deals, coverage is more likely to take the pen on M&A processes. Same goes for merger math for pitches. If you've proven yourself and ask to take the pen on any process, generally the M&A associate or whatever will be more than happy just to check it and can share prior examples to work off of. Obviously you'll have to do both that and the CIM or whatever you're working on, and that conversation will go very poorly if you're always complaining about the coverage role.

More importantly, coverage will teach you how to position a business, tell the story and learn the industry in and out (at least from a financial perspective). I have no idea why you'd want to be the one managing the data room or coordinating NDAs in a large process, but if you volunteer for it, no one will stop you.

  • 3
  • Analyst 2 in IB - Cov
Oct 26, 2021 - 12:29pm

At a junior level I tend to agree.  But at the Director level+ I see them as drivers of the industry.  they are part of the captains/crews that turn the large corporate ships and move industries.   I don't think it is a bad thing to be in a coverage group, especially a good one, but I think there are definitely times where skills will be under utilized, but that does not mean that you can't learn them or don't need to know them for the job. 

  • Analyst 2 in IB - Cov
Oct 26, 2021 - 12:42pm

Fair but some mid level bankers in my group have not even closed a single deal because they spent all the time pitching. And even on deals they closed, they worked on things that weren't critical to the outcome. M&A allows you to focus on building a skillset which allows you to execute. 

  • VP in IB - Gen
Oct 26, 2021 - 12:55pm

We have an M&A group but they're mostly limited to modelling, anything buyer or DD related flows through coverage.  I spent my junior years in Canada and over there even though my bank had an M&A team, it was often a coverage analyst running the model.  They were just there to add extra resources when a deal went live.

  • Intern in IB - Cov
Oct 26, 2021 - 1:01pm

After 3 years in this role I've come to conclude that you guys are all just retarded. Stop generalizing and universalizing experiences, recruitment is ridiculously situational you CANNOT average it across the board.

>muh headhunters

shut up you goofy ass clown ass pussy

Oct 26, 2021 - 1:53pm

What a cry baby. You can't learn to model because you don't do it every day? Lol what?

If you're a coverage i banking analyst at one of the listed bulge brackets and you don't break into PE, it's not because you started in coverage.

It's because you're too stupid to pass the modeling tests or your personality is too unlike-able for people to want to spend long hours working with you.

  • Analyst 2 in IB - Cov
Oct 26, 2021 - 2:24pm

How do you become as good of a modeller as people in M&A groups though if they do it everyday? through just training courses on weekends?

  • Associate 2 in IB - Cov
Oct 26, 2021 - 2:31pm

Pay attention during the modeling discussions, spend time reviewing the models on your assignments, etc.  It may seem daunting coming from the outside, but in reality modeling is one of the easiest aspects of IB.  It is mostly just linking numbers and playing with assumptions.  Anyway that has a desire to learn it can even if they do not have ownership of the model.

Oct 27, 2021 - 4:19pm

Modeling is not difficult. You just need to do it a few times. Plus modeling for a PE model test is different than an everyday model you do in IB. Acing a PE model test just comes down to practice. Find practice PE model tests to do, and make sure you always time yourself.

Oct 26, 2021 - 2:09pm

As long as it's not FIG coverage (which will silo you) I wouldn't worry about it too much. "Managing data rooms" is probably the most boring task in finance if not life, so lacking exposure to that should be seen as upside.

  • Analyst 1 in IB - Cov
Oct 29, 2021 - 1:24pm

Why is FIG silo's verses other coverage groups?

Oct 30, 2021 - 4:15am

You are learning FIG modelling skills (i.e. balance sheet / capital / RWAs / RBC) rather than EBITDA / cashflow / leveraged finance-type modelling skills. Obviously FIG is a broad universe and there are some EBITDA businesses in there (wealth management and so on), but the balance-sheet heavy end of banking and insurance is a bit esoteric.

  • Intern in IB - Cov
Oct 27, 2021 - 10:59am

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