How Important is M&A Deal Experience?
I'm a (post-MBA) senior associate in IBD coverage at a large balance sheet bank that does combined corporate and investment banking. Think CIB (like JPM, WFS, Citi, etc). Prefer to leave the specific industry out of the equation but suffice it to say I am not in a very financing heavy group like real estate, P&U, M&T, etc.
My question is around how important is M&A experience if you're considering a career in investment banking?
Reason I ask is because we don't seem to do much of it. From an IB perspective, my role has largely been focused on pitchbook creation for M&A ideas, capital raising decks, IPO positioning (for co-manager or far right positions), internal debt memos, etc.
The large majority of my bank's fees seem to come from IG bonds with an increasing presence in ECM and HY. We have the ability to use the balance sheet to do some creative financings and pitches. We don't do much lead left / lead right financings. Sell side M&A is rather fledgling, and while we do some buyside M&A work, seems more connected to financings than anything else.
Given this is the case, I am wondering where this type of banking activity can lead to from a career perspective. I understand analysts hold M&A and modeling experience (operating models) as the holy grail for buyside exits. I also understand that M&A deal experience is important for corp dev exits. But once you are past that point, how important is this?
I ask this because I'm in a fairly comfortable spot right now, the bank is putting resources int growing its advisory capabilities, and I would like to continue, but it's unclear if I am shooting myself in the foot. Seems like the only experience I am getting is creating powerpoint slides and project mgmt, and I am concerned this isn't a very marketable skillset. That said, I know longevity matters in this career and I don't want to move for the sake of moving.
Curious if other members of the community have faced this same dynamic, and in general what are the consensus views? In general would prefer to hear from the more senior people on this forum.
At a senior level, it is the end all be all. Your value as a banker is your deal experience.
While processes are generally streamlined and broadly similar, each transaction has unique quirks. That tax structuring mechanism you picked up on one deal, or the treatment of a weird quasi convert type employee incentive etc. - these are all pieces of knowledge and experience that you carry forward into your next deals.
At a senior level, its also things like, for example, how did this particular fund think about value for a target in particular a niche sector, or what financing terms could an acquirer get based on your past experience.
I ramble, tired af but I hope the message is clear.
What do your hours typically look like at this level? Will be joining a similar group next year.
Hours are generally better than pure M&A execution because there is more head's up and things generally aren't as last minute in nature
Still junior-ish vs other career bankers (tenored VP).
I think at the end of the day, it depends on what you want to do. If closing M&A transactions is what excites you day in day out, then you should probably have left yesterday. If you are like 90% of the people on WSO, who let's be honest, just want to be comfortably upper middle class and do some interesting work, there are other ways to get there.
Yes, IG credit and balance sheet is not the most sexy thing. But when done in sufficient volume, can more than keep the lights on. These groups also tend to be more steady from what I've seen, which can help with longevity for career bankers. As with most roles, as long as you are good at what you do and can monetize relationships built over your long tenor, no shop would turn you away.
I haven't touched on buy side. Tough for me to comment on where I haven't been. My sense is that at the junior levels, deal experience defines your exit opp. Maybe others can chime in here.
Thanks Rabbit and Walol. You both hit on good points.
To Walol's point around building a sustainable career in IG credit and balance sheet work...understand most of this comes down to monetizing relationships over the long haul. In the short to medium term, it's unclear, as a coverage banker in a group that does capital markets, corporate banking and is trying to do M&A how you actually develop yourself.
With M&A work, it comes down to doing more deals. Getting to know companies, the industrial logic, mastering the overall M&A process and how to build competitive tension. With capital markets, I'm not sure what the key learning points are / core development areas.
Lastly, how does one build an expertise / long term career in a coverage group trying to do all of these things at once? Corporate banking is different than M&A which is different than capital markets.
Apologies for the scattered questions but hopefully this is helpful to other folks in my position as well.
Great questions. I'll take a stab while waiting on a turn to review at 5 PM on Friday, aka the good life.
I did a brief stint in ECM as a junior, albeit more on the equity linked / structured side. The core learning points there are more market linked, things like say pricing, process, investor targeting etc.. It's super interesting to me and helped me develop as a banker. I can talk to clients holistically, at least on a high level.
To your question on expertise. The absolutely best bankers I've worked with, the ones that give their clients top notch advice are the ones that (a) have an area of specialization, whether industry or process (M&A / ECM etc.), and (b) know how leverage the knowledge and expertise of those around them. Pretty much what good leaders anywhere do. At the end of the day, you are basically processing a lot of information and expertise into concise advise.
I agree with what Rabbit said on holistic advice.
I think M&A groups are really good at what they do within their scope, but I would challenge the notion that they know industry verticals better than coverage bankers - because that's not their job. In most instances, they are not the ones out there speaking with clients through the cycle. And in certain sectors (e.g. FIG) where you have specialized capital models thrown into the mix, I've seen instances where the coverage teams are just as involved as the M&A teams (if not more so) in deal execution.
If M&A bankers are valued based on deal experience, then coverage bankers are valued based on deals originated, which tends to correlate strongly with strength of relationships, which in turn correlate with tenure (I.e. you tend not to last if you don't perform). I wouldn't underestimate what you pick up along the way even at the junior levels in your coverage group.
Thanks guys for your responses. I like REI7 concise point that M&A execution might well be the differentiator from a relationship standpoint.
That said, if you're in a coverage group that doesn't do a lot of M&A, how do you differentiate one group from the next?
What aspects of the senior associate / VP experience should one look out for to make sure they're getting the best experience possible? In some ways, I go back and forth over how much to prioritize the (variety of the) deal experience vs. tenure.
Seems like Walol is more on the tenure side of the camp. I tend to agree that learning comes in ways you don't often recognize in the moment, but that said, it's hard for me to (somewhat) blindly "trust" that I'm getting the experience necessary to be a good lifelong banker, especially when we aren't doing M&A. But of course, there are plenty of balance sheet banks on the street, and I would imagine not all of them do that much M&A.
Your post history is interesting (~50% posts about WF) - looks like you’re current or former WF E&P. Weird how you like to say “friends told me…” vs. just owning that you’re in the firm / group.
Depending on the coverage group, M&A execution experience is critical to developing the knowledge and relationships that provide the foundation for delivering value to clients. Engagement with a client over just another IG issuance, for example, is very different from a buyside, spin/carve out, etc. engagement. Also, in certain sectors like FIG, you may rarely utilize M&A resources and therefore have responsibility not only for origination, but for execution as well. But if your industry has dedicated M&A bankers or always gets them involved, then your individual M&A knowledge and experience is not as critical.
If this is actually WF and you want to look into lateraling into a group that has tremendous M&A volume, then feel free to PM.
It is everything. IG debt issuance in a CIB model got bankers paid 10 years ago. Now days the IB in CIB gets paid for ECM, M&A and HY. The C is for flow IG DCM.
If you want a career in IB you need to be able to source and execute M&A. In order to do that you need to have done deals and a lot of them.
If you’re comfortable being a glorified corporate banker (and there’s nothing wrong with that) then stay. But don’t expect the investment banking industry is always going to cut huge bonuses to MDs who ride the BS that’s already out and source no real business. The writing is on the wall M&A is what will be expected going forward.
Thanks VP in IB M&A, can you elaborate on this? I see how your point makes sense on the face of it but for large balance sheet groups that bank public clients where there isn't necessarily a ton of M&A, I don't see how this is the case. I can see how this is the case in middle market firms where this is less flow revenues.
I'm inclined to believe IBs won't be cutting big bonuses to MDs who can't source M&A all that well, but could you please elaborate on any supporting evidence / observations (to the extent you can share)? Would be super helpful.
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