New to learning and loving this industry I don't quite understand the big picture.

We have coverage groups that focus on a specific industry. These groups actively help raise equity, debt and initiate M&A's for companies they cover. This group pitches but doesn't actually structure deals. Product groups cover specific financing vehicles. These groups become experts from the other side of the field.

I do not understand where M&A groups fall in this scheme. Do Research groups focus on more granular details than coverage groups? Financial Sponsors covers PE firms and is a coverage group?

I understand it varies by firm, but I do appreciate your time and patience in helping me and others better understand (and yes I had trouble finding all of this elsewhere on the site...)


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Best Response

Coverage groups (including Sponsors) and M&A represent your traditional "investment banking division." You're essentially right about the types of transaction services a bank typically offers. Depending on what the coverage group is pitching/executing, they will bring in a product group to provide subject matter expertise to a transaction. M&A is a product group in investment banking; equity capital markets (ECM), debt capital markets (DCM), leveraged finance, etc., are housed in capital markets (which is sort of a subset of investment banking). The extent to which members of the coverage group "structure" a deal varies.

On some M&A assignments the coverage analyst might run the model, on others the M&A analyst will. At a higher level, sometimes the coverage MD is the one with the relationship and the idea, and is the one really driving the process, and the M&A MD and others are brought to meetings to make the client feel important. Sometimes its the other way around. Occasionally you'll find a company that bridges multiple industries, or a deal that crosses industries, and you can have three or four different groups involved. That gets really messy.

Research is a separate part of the bank entirely and is walled off from communicating with investment banking. They write research reports on publicly-traded companies, and are occasionally consulted by coverage groups for their input on how a given transaction might be perceived; however, this is called "wall-crossing" the analyst and needs to be supervised by legal/compliance. Generally, the analyst is restricted for some period on writing research reports about the company.

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IB is IB: it's very difficult to break into. Still with a summer analyst role two years in the future and a lot to do before then, I'm thinking the Sponsors group is the way to go, especially with PE or VC as a planned exit.

Thanks for the thorough response and insights "re-ib-ny." You've painted a very clear and interesting picture here

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