Feel Like I Got Conned - Small No-Name Boutique
Hi everyone,
So I'm specifically looking for input/feedback here from people who work at "no-name" small boutiques. When I say no-name, I'm referring to firms with less than 10-12 people, MDs do not come from BB or solid MMs etc.
Anyways, I took this position about 6 months ago and we are currently working on a few, very small deals. Most of our clients are sub $1mm EBITDA, with one hovering around $3mm EBITDA. So I've been kind of getting annoyed at the work I've been asked to do, such as creating buyers list with 500-1000 names, searching for emails etc. I've done a little CIM/teaser/financial modeling but the modeling is about as basic as it comes. I left a solid job in a related industry (think FP&A, CB) for this and honestly am beginning to question my move. The work just seems so shitty.... is this typical of small no-name boutiques?
It's honestly so shitty that I'm worried about actually being able to pull off a lateral to a more reputable boutique / MM.
So what kind of work do you all do at your no-name boutiques? Are these 500-1000 name buyers list the norm? What about deal flow? I'm specifically looking for input from people who typically work on sub $30mm transaction value. Apologies if this reads like shit, I'm on my phone
I like how you created this account just to post this rant.
does your firm have equity research or compliance for that matter? or is it just a few bankers?
trying to judge what type of firm it is.
Just M&A and capital raising, no ER. We do have compliance and are FINRA licensed
This is an unfortunate situation. I'm not trying to offend you, but how much due diligence did you really do on this firm, in terms of deal flow, reputation in the market, differentiation, position requirements, etc.?
No-name boutique is all relative. Many small boutiques do things well within a certain geography or sector/industry vertical, even if they work on sub-$50mm deals. Therefore, they may be unknown to the general masses, but known and respected locally or nationwide for a certain expertise.
500-1000 is a huge buyer list that resembles the type of approach a shop like HW takes. To contact that many groups for a deal of this size indicates that your shop doesn't put much thought into fit or develop a sound thesis. In other words, it's more of a throwing darts while blindfolded approach. It also requires a ridiculous amount of time, which is typically not available for smaller firms that do not have built in operating leverage (people, processes, etc.).
There are plenty of shops that work on deals in the $20mm-$100mm range that run sound processes and undertake the same approach as you would find at a MM shop (Blair, Baird, HL, HW) for smaller deals. Most will conduct decent DD, develop a detailed operating model that links to a variable lbo model (necessary for this strata of the market), prepare a CIM in PPT or Word, etc.
They're not necessarily going to reach out to all 500 to 1,000 of those potential buyers. When I was at a "no-name" boutique the issue always was the our clients were too small to attract the interest of F500 companies, but big enough to where we needed a legitimate company to enter the bidding process to get any type of respectable multiple.
So, we would put together 500 to 1,000 names from industry trade show websites, whittle that down to around 100 to 150 based on our (my) ability to find contact info, and then reach out to 75 to 100 of those based on MD comments. It's freaking brutal process and uses up a lot of time.
Yeah, see my firms just sends out an email blast to those 1000 firms and doesn't look into the names at all. It's almost like the approach many take to network into IB - send out 1000s of emails and play the numbers game.....
Not enough DD on my part, firm didn't list much on its website and the banker played it off like "people either know me or they don't - you won't find anything on the internet on me and that's on purpose"...again sounds like a con and my ONLY MD lies constantly on calls
I started my career off at a similar "no-name" boutique. Your work sounds very typical of a "no-name" boutique. Take a look at my lateraling guide. The move itself is rather straightforward. You're not screwed if you try to make the jump.
Some comments to address your complaints:
-Client size: What did you expect here? $1MM in EBITDA is probably the average of what "no-name" boutiques do. These are going to be small, family-owned businesses with no financial acumen. There will be a lot of hand-holding through the process, and honestly, I find these transactions much more difficult than larger ones.
-Modeling: You are reading too much WSO. There is a lot more to IB than modeling. No business is sold because of a model. The market pays what the market pays. No one cares what your DCF says. If someone is not willing to pay that, you either lower your asking price or don't sell. Modeling is only used so that if shit hits the fan, such as if your client accuses you of screwing them over and not seeking the highest possible price and sues, you have something to point back to and for a sanity check. Read my lateraling guide. I mention how to address this lack of modeling while lateraling.
-Buyers lists: You're doing these lists because your MDs are probably not very tech savvy. There are many firms that you can outsource this too. My "no-name" boutique used some guy from Pakistan on Upwork. I think we paid 25 cents per name or something like that. If I were you, I would put together a coherent argument for why your MDs should start outsourcing this.
-Deal flow: Again, I am not sure what you expected here. If a "no-name" boutique has an MD or two from a BB, they will get modest deal flow simply because they have an existing book of business. The "no-name" boutique that I was at was run by ex-operating guys with no IB experience. This meant that they had to win business through referrals, trade shows, etc. As a result, the deal flow was rather weak. We had four MDs and closed two deals a year (I was only there for one year before lateraling).
EDIT: I mean this in the most professional way possible, but you need to change your attitude. You left a job in another industry because you wanted FO IB experience. Maybe you had your hopes too high, but you're getting solid experience that will allow you to lateral to larger banks should you choose to do so. I've been in your position, and it sucks, but if your attitude is that your bank is conning you, you risk getting fired. Maybe I'm different, but I'll take a year at a "no-name" boutique for the chance to move to a larger bank than staying in FP&A which would never have given me the opportunity to get into IB.
Appreciate the response and I do agree with you. It's good to hear that others have had the same experience at similar shops. My sole MD was also an operator at a large company. When I say conned I guess I'm more referring to how much my boss bullshits and just outright lies on his networking calls with PE firms or telling me how I'm going to make more $ here than at JPM/GS/MS....just puts a bad taste in my mouth
It's not personal. The MD is just giving you his opinion. What he is basically saying is that if you stick around at this boutique, you have a much higher chance of making MD one day than at a BB. Stick it out for six months to a year and then lateral. Good luck. Feel free to PM me if you want to bounce some ideas off me or need any help as you go through the lateraling process.
I have a close friend in a similar situation at a no name boutique. I get the feeling that a lot of the comparison to BBs (or any other financial institution), at least partially, is some form of insecurity or resentment on behalf of the MDs that trickles down to the juniors. It is an odd/instant need to justify the differences or existence of the firm. I suppose the same can be said about the reverse. Personally, I have a lot of respect for those who start up small shops, find a niche and make a business out of it. I never really understood the need to compare. In the end, it all supports the broader market so I find it interesting.
It is a bit of an "eye-roll" type situation when he/they start talking about compensation structures and comparisons to other firms. It is a weird flex that no one actually cares that much about. I have heard all about percentages of deals, "waterfall" pay structures, blah blah blah. So I know where you are coming from and it appears to exist elsewhere. At least you have the ability to see it through a filtered lens.
Like another poster mentioned, soak up whatever you can and make the move when you feel the time is right. I know its hard to convince ourselves of this now but when you look back at your career you will laugh about a year or two inbetweener gig that helped get you where you wanted to be.
$1mm EBITDA is bordering on business brokerage levels though. One of the better "no-name" shops in our town has a $3mm floor. It's hard to tell the market that your $1mm EBITDA business is an asset with going concern value above and beyond its book value unless there is a growth story attached to it.
I think you undervalue some of the modeling importance. Obviously the market decides for itself, but a tight, clean process sets appropriate expectations with sellers at the beginning and improves the likelihood of closing and maintaining purchase terms through model book delivery at MPs. If you can't run an lbo model but have a high volume of sponsors (including fund-less, add-ons, etc.) in the mix, the perception of value is going to be off, which may result in a seller backing out of a deal.
Fair enough. Perhaps I should have worded my modeling snippet better. I think that frequently these expectations in the process are driven from an MD's experience, not necessarily the model.
Your comment kind of hits at what I was trying to get across: I feel like this is borderline business brokerage that is hyped up to be traditional IB... which is a big part of the reason that I felt "conned" and the whole 500-1000 buyers list didn't help my brokerage-feel thought
Is $1mm really business brokerage level? I'm currently an intern and we constantly raise money for firms with negative EBITDA.
do you specialize in a specific industry?
Nope; MD will pretty much take anything thrown his way
yup, sounds like a shitty no-namer to me. have they sponsored you for the series exams? how is pay?
http://aswathdamodaran.blogspot.com/2016/09/keystone-kop-valuations-laz…
Read this and you'll realize that financial modeling is indeed an art, not science.
I work at a "micro-boutique." We do a little bit bigger deals, but we focus on a very niche industry. My MD's are all former bankers or corp dev folks who are pretty well-connected, so the deal flow is good. I've really liked the experience so far, and given how small the company is, I've been able to take on a lot of responsibility.
Just FYI, a lot of what you describe isn't just normal for small boutiques but IB in general. Maybe you won't be putting together 500 names for a buyer list, but I was at a MM bank and definitely remember working through a few iterations of buyer lists that topped 200. FWIW I don't think I touched an operating model for the first 6 months. I'm in PE now and still get requests from the partners to look up so and so's email or phone number. It's just the nature of being the junior guy to get a lot of the miscellaneous tasks.
I am currently at a small boutique shop that most people wouldn't know. We certainly get bigger deals than what you are seeing and have created a pretty solid footprint so far. However, that's not to say we do not see some clients in the lower EBITDA range (sub $3mm). As an analyst it seems that I have had a pretty great experience so far comparatively. I have created teaser, CIMS, ran financial models on both live deals and for pitches, been to our pitches, and reach out to potential clients. Maybe my experience isn't the norm....
In terms of the buyers list, that is ridiculous. We keep ours between 50-200 depending on the deal. When you send out blasts to 500-1000 people, it makes your firm look foolish because they can't take time to widdle down the list to viable buyer candidates.
Well SmallBoutique911 I got offered to work at a "boutique investment bank" last summer that had a banner on their website "NOT A BUSINESS BROKER" so I guess count your blessings
What's up man. I work at a no-name boutique as well. I do a lot of comps and industry research as well as make pitch decks. I've been here for almost 3 months and I've only done like 2 DCF's and no lbo models what so ever (we don't really do M&A). I make the buyer's lists like you do. Don't worry about the EBITDA my firm has raised money for companies with negative EBITDA.
I work in a no name IB boutique with a focus on debt (raising and advisory). Our company was founded by someone who had been an MD in a few larger banks, with later recruitment largely from the Big Four (such as myself) and a few from other banks.
We have carved out a niche in a a few areas and that provides a steady pipeline of transactions. My work, having had 3 years of Big Four behind me so not quite 1st year graduate analyst, involves the entire deal process. This means I do the financial modelling (very detailed and complex project finance models), I put together the investor presentations, I help find investors and sell the projects to them, then administer the due diligence process and finally do documentation and close. So I get all around experience on the transaction. We've had people come in for interviews from some very top BBs and we've found they just don't get the same level of exposure there.
Experience wise I think I'm doing great, I'm learning so much and getting exposure to everything. I am on the phone/emails to fund managers and CEOs/CFOs almost daily. What isn't so great is compensation: its an owner managed business and they try to squeeze every penny, according to salary surveys I'm barely getting 1st year analyst pay (without the bonus- they're really not big on that where I am) but doing associate level work, tough on the upside I have not really experienced much of those crazy IB hours people talk about.
I think overall it can depend, but smaller shops you get a lot more exposure and hence potentially better experience. Which you can then leverage to get yourself a better paying position later on.
dude - if you truly are doing that level of work for that low a pay, you're getting scammed. 1st YR analyst pay w/o bonus wtf?
The only thing I can say that covers small IB firms is that they are all wildly different. Have heard of others like yours. I personally got very lucky, we have strong deal flow (working on around 3 engagements at any given time) and the organizational structure is very flat, so the client facing work as well as the modeling are pretty well spread out. When I was looking to move to a smaller company I would ask the interviewer how many deals a year they worked on- seems obvious but if they are knocking out 40 deals a year with 20 people it is very likely they have no choice but to give you more responsibilities.
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