Fresh out of an undergrad taking on a full-time Analyst opportunity in a Valuation shop.
Wondering what the exit opportunities are like after 1-2 years? IB? PE? Tips to make the move? Or would going back to school make more sense before making the move.
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Good question, I was in the same boat as you last year. I interned at a large PE firm for the Summer in their valuations group (mostly private investment asset valuations), and leveraged that experience to get an interview from, and eventually secure an offer from a BB investment bank.
I made the move before I left undergrad, but I had a lot of traction from other large PE firms, and deal advisory at Big 4 (M&A, Infra Advisory).
Hope that helps.
Coming from a non-target in Chicago, I've seen a good amount of alumni take this route and lateral into IB. Spoke with an associate at a MM here in the city and said a lot of guys who come on as full time analysts lateral from valuation. Good alternative to banking out of undergrad if you can't find an IB gig right away.
Last year I interned in valuation between undergrad and my MSF. Basically the whole analyst/associate team they had has moved to something else. I'll shed some light on the actual moves I've witnessed from there:
I'm in HY/Distressed AM. While interning in valuation, I basically got to be the analyst on a distressed situation because of the weird dynamic of that team and the bullpen. It was my biggest interest, so when the engagement came, I got tapped. It helped me get hired FT before finishing MSF.
An associate recently left and is now doing a top 20 MBA and trying for PE/VC.
An analyst lateraled after about 18 months to ER at a MM bank in NYC.
A senior associate is now doing CF at a company in NYC.
A senior analyst is now doing CF at a Fortune 50 in the same city.
Another person that interned there and did the same MSF before me started IB in a nearby city after graduation.
A friend of mine that interned at the same time as me started in PWM and lateraled to something more RE related after about 6 months.
Someone else who started the MSF before me but interned there right after me is sticking with valuation. He's starting at big 4 now.
This was a small shop, not a division of any bank or other entity you would know, so I imagine your luck could be a touch better if your shop is bigger/better known. However, a lot of the people I mentioned above are really solid and have talent and work ethic, some of the best in the area based on what I've witnessed. So a lot of these moves is also busting ass.
I worked on a lot of interesting things there. You will get a good foundation in valuation. I would think the banks would have something to say about you not already doing LBO and Merger models at work, but if you can handle valuation modeling, you can pick up the other pieces with ease. The valuation shops were the places that I noticed were actually really technically focused; I liked this. When you are there, get as close to the most relevant transactions and engagements as possible. Bug the MD's in charge of those from day one like I did.
I get the sense the valuation people don't get much love, so I don't suggest staying for a long time. A year or two seems about right. Happy to further discuss what I witnessed there if it may be of help.
Cheers for that. Very detailed answer and really hit on all the points I wanted to know about. That is the sense I get from Val - technical and gritty but you end up acquiring a solid skill set going forward if you chase opportunities.
In terms of technical skills, would you have any suggestions for resources to go over before starting? Slightly worried I may not be up to speed when I start. Thanks again.
You'll probably be fine; I imagine they will train you in everything they want you to do. Funny how low expectations of knowledge are once you actually land the job at the entry level. Anyways:
Regardless of context (barring distress), DCF and comps are your bread and butter. There's actually a wiley book on private firm valuation that gives some added perspective on the private part that you won't get from IB by Pearl/Rosenbaum.
Speaking of that, if you are decent at excel and know all of ch 1-3 of Pearl/Rosenbaum, you're in great shape. Since you plan to lateral, learn the rest of the book while you're at it.
You'll find that valuation is a weird mix of finance and accounting; you'll probably notice many peers will be accountants. Ask them tons of questions about accounting stuff that will help you that they already know well. This is where you are going to be lacking, but that's why they hire both finance and accounting people, so don't worry.
Black-Scholes will probably come up. Stay a bit fresh on option pricing.
Maybe do some looking at goodwill impairment testing. Just a little.
Look into ESOP's in case they do a lot of that. Nothing really complicated.
Basically if you can do 3 statement projections, DCF, and comps and can maneuver word, ppt, and excel quickly, you will be great. The experience will fill in the rest.
Would you be able to talk about your day to day as a valuation intern?
Sure. Stated hours were 8-6. Analysts frequently came in a bit late and stayed closer to 7 or 8 pending workload. I always rolled in early, either first or second, and usually left before most of the analysts. The firm was super top-heavy; bullpen was half full with about 4-5 analysts at one associate at the time. They were hiring a few more as I was there and on the way out. Contrast this to about 9 MD/MP's and 4 VP/Directors. This had implications for workflow.
As an intern, if you didn't actively seek out work from MD's, the analysts would dump the absolute worst, most mind-numbing crap that they didn't want to do. So it was often a mix of building models, industry research, and all sorts of random stuff. What bugged me the most was that the executive assistant found it appropriate to constantly dump her work on me too. Yes, imagine the crap that analysts don't want and then go down a million notches below that and imagine what a secretary can't be bothered to do. Glad to be past that. Now to the good stuff.
Here's a sample of some of the things I got to work on: A loan workout. Best for me given my interests. Also the analysts didn't usually help that division of the business, so I got to do all the real stuff.
Valuation for lot's of ESOP's and divorce cases. The deliverable was often a hundred-page book that included projections, DCF, Comps, industry analysis, option valuation, etc. It was like a pitch book. This meant bullshit like 3 hours of margin formatting page by page wasn't uncommon. I got to experience management interviews in depth because of the partners always recorded them and then recorded his analysis afterwards. We had to transcribe it.
A little bit of sell-side M&A. I mostly did sourcing and comps for that. Actual M&A, not FO's.
Oh yeah, of course FO's came through as well.
Eminent Domain cases. Valuing the business before and after to support a damages claim.
Something that was a new challenge to me then was that we were working with internal unaudited crap financials most of the time, so you had to eyeball everything very closely. I saw entire line items on the wrong side of the balance sheet.
I really didn't like my experience. This had nothing to do with the people; they were all nice. I just hated half the work, and the rest didn't feel right because we had no skin in the game. That's nice for being objective, but I want to be rewarded for objectivity, not disinterested and uninterested. I got a lot out of it though, but I had to be super adamant about getting good work.
I know it's getting long, but it's not like anyone has to read it. I'll finish with a couple of more interesting situations I witnessed:
Forensic accounting case. Redneck siphoned millions and spent it all at longhorns, hooters, and on classic trans ams and smokey and the bandit stuff. I would know, I went through all his transactions line by line.
Divorce case. Dude had a crazy wife and had to call the cops multiple times for domestics. In one of the reports he expressed he really thought she might "do" something. Yikes. He later hired a PI to follow her while she had an affair. The whole report was there with pictures. She met him at a steakhouse and later got pretty affectionate by the car later. Ok whatever... The next afternoon they banged in his car in a walmart parking lot in broad daylight. Classy! Also in the file were cards she made for him on occasions like fathers day and anniversary admitting she sucked as a person. Mildly dark and in colored pencil at the same time.
Dug through the index of the firm's site (nothing you couldn't do right now) for my MD's published papers and ended up discovering some weird communication between i guess a couple MD's or VP's that was clearly them rating escorts by their FB pages in Trinidad in prep for their trip there. Why that's an entire folder on the backend of the site is beyond me.
If you have any specific questions, I could probably hit them more precisely without rambling about all the parts I felt like mentioning.
IB would make a lot of sense. Don't wait 2 years because IB will probably want to haircut your experience, especially if it's 2 years.
In other words if you transfer after 1 year then IB will either give you credit (i.e. bring you in as a rising 2nd year) or worst case, they'll haircut you by one year and have you start like a normal FT hire.
But if you transfer after 2 years then IB will definitely make you eat one year, and worst case they might make you eat two.
Not sure why this got MS. If you already know for sure that you want to lateral to IB, I totally agree with this.
These are the moves I have witnessed at my shop before I left:
2nd year moved to BD at a large cap. 4-5 year moved to Strategy at a mid cap company. 3-4 year moved to IB at an MM. 2nd year moved to strategic finance at a late stage start up. One guy who was quite senior moved to relatively high CF position at a mid cap company.
Honestly, I had an awesome time there. Obviously PE/hedge fund is quite the reach (I've seen people do it though) but if your goal is more corporate stuff or IB then it's a fantastic alternative to traditional IB.
What levels were they transferring to? At the MMs I've been at, if they entertained someone from BV, they would steeply discount them because they have minimal process experience or understanding and usually are not accustomed to producing CIMs with the proper level of depth. That doesn't mean it's a bad thing to move to IB late (I did), but I cannot imagine someone with 3-4 years of BV experience is coming in as an Associate 1/2.
Actually the person did come in as an Associate. However, I apologize it was a small boutique firm but he did have an Associate offer at a well known MM.
Yep, my MM, there were a couple of ex-val guys that made the jump, but they never got full credit for their experience - always at least 1 year of discount. People with only 1 or 2 years experience usually came in as a 1st year, above that might come in as a 2nd / 3rd year.
Really could not see 3-4 years of experience in val coming in as an Associate as the norm unless that team / firm was really desperate, or candidate was a rockstar. Sounds like it can happen based on what balmainmaybegucci wrote, but that should 100% not be anybody's expectations going in when trying to make the jump.
Myself and multiple people at my val shop did this move. Most people leave between 12-24 months in (assuming right out of undergrad). I think every single person had to "restart" as a 1st year analyst in IB but hopefully you're ahead of the other new analysts which could lead to faster progression / promotions, more responsibility earlier on, etc.
Most people either set up indeed alerts (surprisingly effective) for IB jobs and/or reached out to head hunters. I'd also recommend casting your net as wide as possible (be flexible, within reason, around geography, group, size of shop, etc.).
I would really take a lot of what is listed above with a grain of salt. It really depends on what type of valuation analyst you are. For example, I used to work in valuations / pricing at a AM shop and it was pretty much BO. There were no intangible skills gained or things I could really put on my resume that would be transferable to IBD.
I would second this. Valuation is pretty broad, and I don't think my experience was typical. I don't think most shops do half of what we did; they usually just focus on a couple areas. The alternative at some of the bigger shops is that they silo the areas so analysts just focus on one area like fairness opinions anyway.
Update: made the move!
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