Week 3 of IBD Internship: The Pitch
Monday morning started at 9:00 AM. The NYC summer was heating up and the subway humidity was becoming unbearable, so I brought in my suit jackets and a few ties to leave at my desk rather than wear them into the office every day. Kevin sent out an email to the entire intern class requesting a staffing update from each of us to keep tabs on how busy we were and arrange for new assignments. I reported the radio silence that had been my investment banking experience up to this point. The free time left me with the opportunity to finally setup my voicemail box, practice phone conferencing with Abe and Nick, and figure out how to get email notifications of missed calls and voicemails for when I'm away from the desk.
Just as I was getting ready to take an early lunch, I received an email on which I was CCd from the intern sponsor addressed to a managing director, vice president, and second year analyst informing the group that I would be at their disposal in preparation for an upcoming pitch on Thursday and requesting that I reach out to them when my schedule permit. I quickly pulled up the calendar in my Outlook: nothing. My schedule permit, so I shot the team an email - addressed in order of seniority - to prompt a discussion on the pitch and my role in its preparation at their convenience. I waited a few minutes before running out to Subway with a few of the interns to grab a quick lunch and get back to the desk; I had no intention of missing my time to shine.
Ted, a third year analyst in the group, appeared behind me in ninja form as I buried my face in a meatball footlong.
"Hey bud, grab a notebook and pen and let's circle up with Brogan on a shell for this deck."
I released the sandwich from my jaw's vice grip, grabbed the necessary equipment, and prematurely forced down an uncomfortably large meatball before making my way into Brogan's corner office just a few steps from my desk.
Ted entered first, grabbing a spot on the wall by the window allowing me the chair at the end of Brogan's desk. I sat up straight, pen and notebook in my lap, ready to make acquaintances. Brogan wet the tip of his finger before flipping through a Binder freshly disshelved from his organized collection of past decks, PIBs, client documents, internal materials, and whatever else he managed to fit onto the bookshelves covering an entire wall of his office.
"This is the one, Ted. Ask M&A for sector specific quals and go ahead and stick this page right behind it after refreshing," directed Brogan as he continued to flip through yet another Binder before resuming orders, "And let's run with the overlaps page highlighting the regionals. Focus on industry trends in consolidation among the big guys, some research analyst commentary, and follow up with a fire power analysis. Let the intern take a shot at some of the pro forma stuff."
Brogan slid the two pages he'd just pulled into their respective positions in the deck before handing me the newly created shell, "Any questions?"
I scoured the inner recesses of my subconscious for a remotely intelligent question and came up blank. I looked up at Ted for guidance; he shrugged his shoulders and shook his head, "Thanks, Brogan. This'll do it."
Ted walked with me back to my desk after printing himself a copy of the shell. He began to split up the work, "Most of the heavy lifting will already be done by the indusry comps. Pull them off the directory, refresh for yesterday's close, and reoutput the firepower analysis once I upload the shell. For now, start pulling earnings transcripts released post acquisition for the comparables and I'll walk you through making pro forma adjustments on the comps." He paused briefly to make note of the pages I'd be working on. "Thanks, bud. Let me know if you have any questions."
I navigated the directory to the client folder and pulled down the existing comps file, popped in the latest date, and gave it a minute to refresh while making a mental note of the comparable companies to begin searching for any recent M&A activity. There were a smatter of acquisitions made within the client's sector so the next few hours were spent pulling transcripts and commentary from research analysts. I spent some time reading through each document, highlighting deal terms and valuation details, and making educated guesses at how to account for each in a pro forma analysis.
Flipping through each tab in the comps file also proved itself to be a worthwhile endeavor as I made myself familiar with its layout, prior adjustments made by full time analysts to each company, and the outputs used in client decks. The work expanded to fill the empty schedule I had until I could no longer justify it; I sent my analyst an email letting him know I'd finished doing what he asked and was ready to catch as soon as he had a free minute.
In a blaze of glory, two unidentified junior bankers stepped into our midst and carelessly threw their bags onto the remaining cubicles in our section. Their boldness inspired the human being buried inside me.
"Hello children. I'm Jack. That's Peyton. We're second year analysts, and we're both getting the fuck out of here in a couple weeks. Pretend we're not here. We're not."
Peyton chuckled at his comrade's cynicism, took his chair, kicked up his feet, and began playing his voicemails aloud. An outgoing second year analyst can't be bothered to plug in the headset.
The bad cop, bad cop routine left everyone silent and on edge until Jack sat back up on his desk and demanded we announce ourselves and our schools. The Princeton alumnus extended Seamless dinner invitations to the two Princeton undergraduates in our midst and left the rest of us to dry.
A couple hours rolled by and the analysts decided they'd had enough for the day, got up from their seats, swung their bags over their shoulders of preference, gave friendly salutes to the nearest managing director, and headed for the lobby.
Chen and Kayla were immediate bombarded with questions. The mob demanded that any insight be shared with the rest all in the name of fairness. Chen shrugged, "It was nothing really. We just talked about the group, the PE shops they're leaving for, interviewing, stuff like that."
Dissatisfied with their answers, I returned to my eternal wait for a response from Ted. Rather than communicate by text, Ted caught me off guard once again as I perused the latest reads on NBA.com. He showed me where to find the latest deck, pointed out the changes he'd made, and asked to see what I'd found. I walked him through my annotations and my thoughts on the Consensus opinion of each research analyst. He nodded attentively at my annotations and impatiently at my diatribe on analyst commentary so I decided to cut it short.
"Mind if I drive?" he interrupted.
I wondered if there'd been a steering wheel at my desk I'd been completely unaware of thus far before deciding that he must be referring to my keyboard. Upon taking my seat, Ted quickly explained to me how to make pro forma adjustments for each acquisition and project the benchmarks forward all while breezing through Excel making it very difficult for my eyes to keep track of what he was doing and how he was doing it. Figuring I'd just take a look at the work he did afterwards and make sense of it, I nodded in agreement with his adjustments.
"Good. I'll just delete this then and let you take a crack at it." And with that, he was gone.
I reopened the comps file, took a look at the first company's acquisition details, and stared blankly at the computer screen. I now hadn't the slightest idea what to do. I made the appropriate balance sheet adjustments for cash and stock acquisitions, popped in any refinancing details mentioned in the reports, and stared blankly once again at the benchmarks. A couple hours passed and the midnight oil was burning; there were fewer and fewer analysts at their desks with each passing minute until Ted was the only resource I had left. I sheepishly walked over to Ted's cube and admitted I couldn't remember how to do the benchmarks.
Ted raised his eyebrow, "But didn't I just show you how?" He paused, "Nevermind, let's just take baby steps. I want you to take the growth rate of the last annual for EBITDA and D&A, extrapolate another year, and back into EBIT. Just do it on paper for now and we'll discuss in the morning."
I took the walk of shame back to my desk in complete disbelief at how simple the exercise had been and took a mental note to not pay attention to the Excel work until I'd grasped the fundamental concept. On a fresh sheet of printer paper, I neatly wrote out my math, equations and all, and called it a night around 1:00 AM.
Tuesday morning was sluggish. I slouched back into my seat and opened up the newly assigned DCF homework for the same company as our comps and profile homework.
Just before noon, my staffer dropped me a note to meet up with a second year analyst by the name of Charlie to discuss a sell-side M&A project currently in play.
Twenty minutes later seated in a conference room, I was watching Charlie wave his hands in small circular motions as he explained that the project was "currently a sell-side M&A, more likely a refinancing and potential offering." I included this bit in my notes, unsure of what to make of it.
Back at my desk, the emails began to roll in after being added to the working group list. The team was currently preparing for meetings at a nearby country club with interested strategics and financial sponsors looking to be included in the process. In between the brainstorming messages of senior bankers were formal bid letters mostly from sponsors gradually rolling in throughout the day. I opened each letter with wide eyes amazed at what I was seeing: some of the most recognized names in private equity were making bids for this company I'd never even heard of before and I was getting an inside look at the rationale behind each offer.
This learning experience was interrupted by a phone call from Brogan requesting my presence in his office to run through comments on the next turn of the pitch. Ted and I took notes as Brogan made minor comments on the present shell. The door swung open behind us and after it entered an older man dressed in khaki pants, a pastel green polo, and loafers only a managing director would wear into the office on a Tuesday.
He slapped my shoulder with his left hand and carried his golf bag in the right, "How comes the deck boys?"
Brogan and the unnamed MD went back and forth about their golf game as of late, although I had little doubt that Brogan got considerably less field time than the MD. A third-year VP vying for the ultimate promotion, I watched as Brogan straightened up in his chair ever so slightly and shuffled the pages he'd drawn up into plain view, "So, Paul, I was thinking we could structure our qualifications pages with these key transactions given how rapidly consolidation is picking up in this sector." He continued, "I'm providing Leo and our intern with more color on the market summary slide and we should have a draft to you by tonight or tomorrow morning."
Paul nodded, hoisting his clubs back over his shoulder as he prepared to make his exit, "Sounds good, Brogan. I'd like something roughly there to look at in the next few hours while I'm still here." And with that, he was gone.
Brogan watched the door shut behind Paul, sighed, and looked back towards Ted. Ted took a step towards the door, grabbing the markup on the way out, and gave a dismissive salute to Brogan, "We'll get this back to you in a couple hours, boss."
Minutes later with the work split up between us, Ted and I were back at our desks grinding away on the changes. I was tasked with the market summary slide - a simple text formatting exercise - and the recreation of the qualifications page including key transactions neatly arranged across the page in separate company-format boxes each listing the companies involved, transaction size, date, and a brief summary. The qualifications page turned out to be a painfully effective lesson in alignment. With the clock winding down, I had to call Ted to my desk to make some quick executive decisions on font sizing and wording in order to make the page work. Ted fired the revised deck back over to Brogan with minutes to spare on our two hour deadline leaving Brogan with some time to make any last minute comments before deferring to Paul.
In the meantime, Ted went over the hand calculations I did on the comps benchmarking and walked me through the scrubbing he did on some non-recurring restructuring charges he picked up from the 10-k footnotes. He walked through some of the major calculations the comps spreadsheet performed and explained each line of the output tab, how to format for output to PowerPoint decks, and how to easily show and hide each metric that may be requested by a senior banker.
The day flew by. I caught up with Charlie on the latest developments of our deal and he looped me in on the correspondence with our product partners in ECM and Leveraged Finance. They were responsible for helping our deal team prepare for the client for a refinancing and potential public offering in the case that our client decided not to sell. We looked over some of the bids in comparision to the football field Charlie prepared a couple weeks ago: there were far fewer interested strategics than the client had hoped for and the financial sponsor bids were on the lower end of the valuation range. The MD on the deal hoped to solicit better second round bids from the sponsors in a series of meetings scheduled for next week.
I ordered Seamless with Abe and Nick and after an extended dinner in a conference room we spun our wheels on the DCF homework for a couple hours. I took off for home around 10:00 PM to get in some physical activity before calling it a night.
l woke up at 8:30 AM to the sound of my BlackBerry. An email from presentation services appeared in my inbox addressed to myself and Ted with an attached version of our deck cleaned up and formatted to perfection overnight. I admired the work with a strong sense of appreciation given that I was probably next in line to do that PowerPoint work had they not taken on the request. After a quick shower, a pep talk in the mirror, and a short subway ride, I made my way into the office and was greeted by more emails from product groups with slides attached to each for incorporation into a deck Charlie and I were preparing for the investor meetings next week. The rest of the morning was spent skimming the headlines, reading some DealBreaker articles, and snooping through the directory folders of my projects. Brogan signed off on the deck and sent it over to Paul for a final review.
Just before lunch, I witnessed the summoning of Brogan into Paul's office through the glass windows of their offices. Paul picked up his phone, dialed a number, and waited. Brogan picked it up after the first ring. Paul spoke. Brogan listened. Brogan spoke. Paul nodded his head impatiently. Paul spoke. They laughed. The phone call ended. Brogan got up, walked a few doors over into Paul's office, and grabbed Paul's markup. He seemed pleased with himself as he flipped through its pages and made his way back to his desk.
Moments later, my phone rang. I answered. Brogan spoke. I listened. I asked. Brogan answered. I got up from my desk, walked into Brogan's office, and grabbed Paul's markup. "Go ahead and send it to the printers. I want eight bound books for tomorrow's meeting."
The comments took only a minute to incorporate and just another minute later the deck was finally off to the printers. The obsessive compulsive beast inside me yearned to see the perfectly formatted and footnoted books bound and in color: the product of my week's work to be presented to high profile industry executives in just 24 hours. My only wish was that I could be the one to deliver the pitch after becoming so familiar with the presentation the past few days.
Six o' clock rolled around and Kevin stepped into the intern bullpen. "Everyone get up from your chairs, step away from the keyboards, and follow me." Some of the interns laughed. Some of the interns looked into each others' confused eyes for answers that simply did not exist. All of the interns complied. We followed Kevin into the elevator lobby, down to the first floor, down the street, and into a nearby bar with an entire floor reserved for our group.
The waitress read out a list of available drinks on what appeared to be an unlimited bar tab and pointed us to a serving table decorated with plates of burgers, wings, taquitos, shrimp, and various other finger foods to be replenished upon request throughout the night. Kevin pushed drinks into each of our hands; even the reluctant substance abstainers Kayla and Chen joined in on the debauchery. I opted for a draft beer binge intent on falling asleep with a good buzz given work seemed to be done for the day.
The night was off to a strong start. Over the next hour, bankers of all levels began to stroll in: the second year analysts made a prompt entrance followed by the associates. The first year analysts were among the last to arrive, and several VPs and MDs opted to join in and meet the interns.
"They usually don't come to these things, y'know," Erin informed me in between bites of his burger. "They're here to meet you guys, make you feel special and sell you on the group. Come full time and you won't see much of them." I laughed, took a swig of my beer, and digested the information. I watched the head of one of our industry verticals stroll in with the group head and make his way around the bar shaking the hand of each intern. "Take advantage of it, though. Schedule coffee breaks with these guys, pick their brains on their lives and careers. Now's the time to do it while they're still in sell mode."
Caitlin joined us at the corner of the bar and moments later she and Erin were bantering back and forth as if they were family, all comforts taken and the formalities of the office forgotten. Both members of the outgoing second year analyst class, the peers felt at ease speaking to each other as equals. I watched the room regiment itself primarily into analyst and associate classes much like the initiated pledge classes of a fraternity with divisive hazing rituals would do. I asked Caitlin and Erin what their plans were after leaving the group next week. Erin was headed to a reputable middle market private equity shop in California and Erin was headed to a megafund.
"One of the pluses of this group is that you don't have to make too much of an effort at hiding your interviews with the buyside. People here are generally pretty supportive. Just don't go advertising your offers." Caitlin's blackberry vibrated audibly in her pocket. Erin smirked at her. Caitlin's hand reached for the brick, froze mid-air, and returned to its post on her vodka and tonic.
Last to join the mix were the summer associates and new analysts fresh out of their respective training classes for the day. I noted a couple trends: the summer associates skipped the booze and went straight for the networking - all eager to leave strong first textbook impressions on the bankers that would decide their fates at the end of the summer - while the analysts hit the booze hard - all eager to leave strong first impressions on each other and enjoy one of their last nights of freedom. The analysts were much more casual in their introductions than the summer associates who generally spoke to us as if they were a class of intern above my own summer analyst class.
One summer associate in particular, Jamie, left a rather stark impression on me. "Oh, is this the intern corner?! You guys need to get out there and network."
Abe, Nick, and I looked at each other before shrugging the question off. "Well I guess it is now," I answered.
Jamie placed his hand on my shoulder and continued prodding, "Come on, don't be shy guys. In my career and at HBS I've learned that you need to put yourself in front of as many people as possible. It's going to pay dividends for your future." I looked down at my buzzing blackberry and read a notification from presentation services informing me that the pitchbooks I requested earlier were ready for pickup. With that, I excused myself and took the path of least resistance out of the bar. Booze-fueled discussions of bottle service at the Pink Elephant and a strip club in the Lower Eastside were overheard among the second year analysts as they geared up to make an exit of their own.
I flipped through the books to ensure that there weren't any pages missing, dropped them on Paul's desk, and called it a night.
Thursday & Friday
Much like last week, my work load plummeted after hump day. Paul and Brogan were out of pocket for the day as they flew across the country to deliver the pitch, Mink was still waiting to hear back from the client, and Charlie's pipeline was clear as well. I took my time hammering down the fundamental lessons of the DCF homework, took lengthy lunches and dinners, did some light reading, and spent a fair amount of time staring at the walls of my cubicle.
On Friday, I helped Charlie put together a timeline of our sell-side, financing, and public offering processes of the client. Preparation for both a financing and public offering were ongoing despite the fact that we were still trying to sell the company. Charlie told them confidence was pretty low and the MD wanted to cover the more likely outcomes of this project.
The M&A timeline looked like this:
1) Approach potential bidders.
2) Send out teaser materials to interested bidders.
3) Negoatiate and sign Non Disclosure Agreements.
4) Conduct diligence calls and distribute further marketing materials.
5) Solicit first round bids and select second round participants.
6) Hold management presentations and follow-up sessions.
8) Collect second round bids.
9) Review and select finalists.
10) Negotiate transaction contract.
11) Sign and announce.
This took up an hour of my morning. The rest of the day dragged on, every second and minute feeling as pronounced as the last. 5:00 PM rolled around and the office was beginning to empty itself out. Having done virtually nothing the entire day, I quickly cleaned up and reorganized my desk to gear up for the start of my own weekend. I looked around to check the coast was clear before taking a brisk walk towards the elevator lobby. I stepped into an empty elevator and released a sheepish grin in recognition of my newfound freedom as I stepped out.
At the revolving door, the vicious alert of my blackberry pierced through the silence of my compartment and the sanctity of my short-term hopes and dreams. I looked up at the brightly lit sky, nearly cloudless. I looked around at hoardes of office drones suddenly brought back to life, each drone making his way home. Finally, I looked down at my blackberry.
Kevin wrote to inform me that I had been staffed on a blockbuster deal with Andrew, one of the top first year analysts in the group. There were already several hands on the project - our group, M&A, and LevFin - but an additional hand was needed. The email ended with a rhetorical question: "are you available to help out?" I gave the obligatory answer. Kevin let me know that I wouldn't be needed today but that I should expect an email from Andrew on this weekend's itinerary.
I knew what that meant. Later that night, Andrew welcomed me to the team via email and forwarded me the conference call details for 10:00 AM Saturday morning. I was expected to take notes and we were to catch up in the office after the call.
9:45 AM, I found myself back in the cubicle with a cup of coffee in hand and first to dial into the conference call. For the next hour, I took notes as some of the biggest names at my firm went back and forth with the lawyers retained by our client on revisions to the current version of the deck. With the impending buyout already public, the name of the game was investor relations until the deal could be approved.
After the call, Andrew came over to my desk to give me some more background information on the deal. He dropped a tome with at least a few hundred pages inside on every little detail I could ever want to know on the deal process up to this point in time and circled a few sections in the table of contents to which I should pay extra attention.
"The higher-ups have asked us to create a liquidity analysis for the client and comparables. Go ahead and spread the companies out with all short term funding sources available and amounts currently drawn by each." Andrew looked down at his blackberry, "I'll start turning comments in the meantime. We're eventually going to want to output this analysis into the deck."
I spent the next couple hours digging through the latest filings and educating myself on the lifeblood of each company. Short term sources of funding generally included - in addition to cash - revolving credit lines and commercial paper. I pictured the revolvers as large credit cards, but digging deeper into the footnotes I found for some companies that maximum short term funding capacities weren't a simple sum of revolvers and commercial paper. Instead, they sometimes overlapped. Andrew went through the more complicated filings line by line with me until I was comfortable enough to take the lead and finish filling out the spreadsheet, sources commented and all.
I shot Andrew a note for further instruction on formatting and spent my down time with a burger, fries, and milkshake courtesy of Seamless. More instruction than I could have hoped for arrived in a stolen desk chair behind me. Andrew, blackberry in hand and feet up on a nearby confidential document shred bin, began directing, "Alright, pull up the spreadsheet. I'm gonna teach you some of our proprietary formatting shortcuts."
The next hour of my Saturday was spent as Andrew's second pair of hands. I colored, resized, aligned, outlined, bolded, italicized, and bordered over and over again until the liquidity analysis manifested itself as the perfectly formatted table of his dreams. The pressure mounted with each command as it took me twice as long to do what Andrew could easily do himself. Not only did I have to recall how to perform each little step, but one also had to account for that pesky lag in between his vocalized words and the moment in time my brain finished processing exactly what he'd asked. The outcome of my performance review lingered in the back of my head the entire time; a double-edged sword, it fueled my drive to perform but also took energy to suppress.
The backseat armchair driving continued as Andrew told me every word and punctuation mark to insert into my new email draft to the team. "Now's the fun part: iteration."
I learned the hard way what "iteration" truly meant to a junior banker. Iteration meant going back and forth between oftentimes contradictory comments from senior bankers. On a project this large, there was no shortage of senior bankers and certainly no shortage of comments. With the time spent waiting for each round of comments and turning each markup, it was nearly midnight when I made it out of the office.
Naturally, I woke up to the red flash of my blackberry. After a cringe and a quick sigh, I scrolled through each email first checking if any response from me was required: no such thing. Sunday morning began with no expectations of work, a long and hot shower, a sugary breakfast, and half an episode of Breaking Bad.
Building on yesterday's liquidity analysis, the latest intrusion of my inbox and disruption of my Netflix session was a request from an M&A VP for an analysis on the breakout of each company's cash internationally. How much was in the US, how much was abroad, and in what regions?
I dragged myself into the office and began cranking on the exercise. Some of the companies were pretty straightforward: in each of their 10-Ks was a neat breakout of cash by region. The others weren't so forthcoming with this information, so I had to come up with a consistent way of estimating the amounts of cash in each region they conducted business. These companies offered a breakout of revenues by region, so I applied the proportion of regional revenue to the total amount of cash listed in the balance sheet for a series of rough estimates. The VP seemed pleased with my analysis and offered up his thanks.
The fundamental concept behind this analysis, Andrew explained, was the "tax implication of cash repatriation." It turned out that bringing cash back to the states from abroad wasn't as simple as a quick bank transfer from a savings to a checking account.
I forced myself to stick around in case there were any more comments or requests from the team. The VP came back to me an hour later with no comments but a request for LTM EBITDA calculations for each company. Andrew immediately took the lead on this assignment and swiftly laid out a spreadsheet with major line items listed for me to populate. Last Twelve Months meant having to calculate the EBITDA total for the past four quarters. The most direct way to do this was taking the annual EBITDA, adding any quarterly financials released after the past fiscal year, and subtracting the same number of quarters from the beginning of ths fiscal year.
The calculations consisted of operating income, D&A, and stock-based compensation to arrive at EBITDA. I spent the better part of the rest of my day on this exercise which really drilled down the fundamentals into my head. After some basic formatting, I shot an email around with the analysis attached to the team and awaited comments. In place of the VP, the M&A associate staffed on the deal questioned the reasoning behind a couple of my adjustments. In classic intern form, I froze like a deer in the headlights. Andrew came to my rescue, called the associate from my desk, and together we walked through the adjustments in question and specific page references to the reasoning behind each.
It was already midnight by the time we all came to an agreement on the adjustments and signed off on the analysis. The associate sent my analysis around to the MDs on the deal and dismissed me for the night. Just like that, my weekend had disappeared and only a night's sleep separated me from my fourth week on the job.
The very talented author of this post is also the author of our updated Finance Internship Guide. Want to read more of his stories? Order the guide now for 80 pages of extremely detailed day-by-day reports from an actual bulge bracket investment banking intern.
Mod Note: Throwback Thursday, this was originally posted July 2013.