Week 4 of IBD Internship: InitiationSubscribe
The blackberry resumed its usual doom and gloom at 6:00 AM, so I woke up a little earlier than planned to do the load of laundry that I didn’t get a chance to do over the weekend. After a cup of coffee and reading through a few dozen emails, I figured out that the team intended to file the latest deck with the SEC Tuesday morning to hit the market that day. Only minor last minute changes and inclusion of the weekend analyses were on the agenda for today.
In the office at 9:15 AM, about half of the interns had made it to their desk. Two weeks ago, each intern would have been seated and hard at work by 9:00 AM, but by now most of us had learned that the regulars don’t really show up until closer to 10:00 AM and nothing really gets done before noon under normal conditions.
“Long weekend?” Chen asked of me routinely. She made it a point to keep tabs on everyone’s deal activity and progress over the summer. The competitive streak to her seemingly jovial conversation left a bad taste in the mouths of the aware among us.
“Not too bad. I helped out Andrew on a few things but nothing major,” I shot back nonchalantly. Abe and Nick smirked at each other across the row in mutual acknowledgement of Chen’s Monday morning interrogation.
Chen gave me a tight-lipped smile and dove right back into whatever she was doing. I perused the morning headlines as the rest of the interns trickled in over the next half hour. The morning gave me time to reflect on my work over the past few days before a phone conference at noon to preview the week of investor meetings up ahead for the sell-side process I was staffed on with Charlie.
Charlie (Office communicator): Yo, hop on the call a few minutes early and ping me when they get started.
Me (Office communicator): Will do.
I threw on my headset, dialed the firm conference call number, and punched in the code given in the Outlook invite. I was fortunately greeted by silence; usually someone is already on the line and feels the need to ask who just joined every time a new body hops on the call. Having to announce that the intern has graced all conference participants with his presence is uncomfortable enough for me to just get on a few minutes early. The juniors bantered back and forth with the VP as we all waited for the MD and the client CEO so we could begin. The stragglers chimed in twenty minutes later and the MD kicked off the call.
Me (Office communicator): The call’s starting.
Charlie (Office communicator): Thanks. Loop me in.
I’d practiced this before. Select the call, click join, select the conference call, and then accept. Or was it select the call, select the conference call, and then join? After a few button presses, I managed to get Charlie on the call. I leaned back in my chair, a pen and paper to take notes, and mentally patted myself on the back. A minute of silence later, it dawned on me that I’d kicked myself off of the call in the process.
“Who just joined?” an unfamiliar voice asked.
“Uhh, just an intern here, carry on,” I mumbled into the headset.
Laughter erupted from the juniors and Charlie’s roar was at the head of the pack. I shook my head, put my box on mute, and business carried on as usual. The MD went over the when, where, and with who of each upcoming meeting and simultaneously built up some morale since the client was listening, “We’re gonna make a hard push for higher revised bids going into the second round. Thanks, team, for all the hard work.”
As the call was ending, an email came in from Andrew with a scanned copy of the proposed changes to the investor deck and permission to take the lead, a show of faith I imagined to be the epitome of an intern’s career success. I printed out a copy and took advantage of the lack of urgency to spend extra time formatting my liquidity analyses to perfection before exporting them to their PowerPoint slide.
Right on cue, outgoing second year analysts Jack and Peyton rounded the corner arm in arm with another second year analyst sandwiched in between them – Kristen. They seemed particularly happy today, just a little happier than coming into the office at noon would merit.
Abe leaned casually into my cubicle wall with his arms crossed and chin perched up on his forearm, “She isn’t too happy about having to stick around for another year.”
I kicked my feet up on my recycling bin and nodded slowly, only half interested as I maintained focus on my new slide, “Oh yeah… why’s that?”
“Struck out on her private equity interviews. Wants to do something else but nothing lined up. Closest work friends leaving.”
It was interesting to observe veteran analysts’ behavior during this unique time of turnover, but very hard to relate as I was trying my hardest to get a foot in the door while they were rushing to kick the door down so they could leave. Abe had lots of time to relegate these life details to me; his deal teams were so busy that the analysts couldn’t spare time to get him in the loop on some work minus the occasional diligence document or working group list.
Peyton kicked off of his desk and rolled in his chair across the hall into Jack’s cubicle. Jack pulled up a travel itinerary to Thailand and Jack phone conferenced a couple of their analyst friends at another bank. “We really need to figure this out so we can finish making plans, guys.” Peyton paused, “So here’s the deal. We can either take the big boat to Koh Samui and meet up with the girls or take the speedboat tour from Koh Phangan.”
The guys went back and forth for the next half hour over the merits of each seafaring transport as I put the finishing touches on the deck. I inspected a printed copy of the deck twice sanity checking the numbers, eyeballing for proper alignment, and ensuring the integrity of each footnote before uploading to the group directory and swinging over to Andrew’s desk. I dropped the printout on his desk as a deal alert popped up on his desktop and into my inbox.
OPPOSING BIDDER SECURES FINANCING FOR NEW BUYOUT PROPOSAL
Andrew slid the printout back to me, “We definitely have some work coming our way. And they’re probably going to push back on the filing of this deck again.”
The M&A VP on our team sent out phone conference invites to everyone for a couple hours later and asked the junior team to start highlighting areas of the deck affected by the news. A quick page flip showed some changes in wording would be necessary, but Andrew told me not to waste my time since the powers that be were going to take this as an opportunity to completely restructure the deck and create more work. We were on standby until then.
Nick, Abe, and I grabbed a conference room to sit down and enjoy a Korean dinner. Abe delivered his usual report on the coffee meetings he’d had with various bankers at the firm while Nick sat in complete silence. I was feeling pretty tired myself at this point, but nothing some caffeine couldn’t fix and the work was just starting to get interesting; his demeanor seemed a bit off.
Nick glanced over his shoulder at the door to check that it was shut.
“Do you know Kristen, the analyst?”
Abe and I both nodded curiously.
Nick continued, “She’s riding me pretty hard. Chewed me out earlier for not being able to find a few numbers for her earlier. I spent hours looking! Said I need to be more responsible with my time.”
Abe laughed, “Not a big deal, man. Just keep her updated on your status as you’re working next time.”
Nick shook his head in resignation, “It’s not the first time. She always seems so pissed off and never gives straight answers to my question. She’s gonna fuck me over on my midsummer review next week. I can tell.”
I didn’t have any useful advice to offer. My performance had been pretty solid so far but even if it hadn’t, I couldn’t picture the guys I’d worked with so far really making a big deal about it. I reasoned that some analysts make more of a habit out of relying on interns than others.
The call was quick, and despite it being scheduled for their convenience, the MDs weren’t on it and gave all their thoughts to the M&A VP. First priority was a side analysis for the most senior MD to be delivered to his Four Seasons hotel first thing tomorrow morning.
It was a late night. By 3:00 AM, Andrew and I finished formatting our analysis presenting the client against its two major competitors by reviewing trading performance and comps since the buyout offer was made public, research analyst price targets before and after, financial performance and business comparisons, and football fields using different approaches to valuation. Andrew pushed back on changes to the investor deck so we could get some rest before diving back into it headfirst.
Our new deadline was Thursday, and we had several objectives to meet before show time in order to effectively analyze the new proposal. Consensus on the proposal was negative across the board: its rhetoric took focus off of very fundamental financial concepts and its valuation methodology was less than sound. Andrew took on the role of managing analyst in a valiant effort to be more proactive and finally get this thing across the finish line.
While he made edits and drew up revisions and new slides to the deck, I took my time reading through the new buyout proposal and trying to make sense of the sum of the parts analysis used by the activist. A few cubes over, I spotted Kristen hovering over Nick’s shoulder as she dictated word for word an email he was to send out to their deal team, “Please let us know if there are any questions slash comments.” Nick gave me an enthused eyebrow raise without moving his head.
An email came in shortly after lunch with an update on the meetings with prospective buyers this week for Charlie’s deal. In attendance on the private equity shop’s side were two principals, a vice president, and three associates. Representatives from their lenders would also be joining them. The financial sponsor also requested access to the data room for a number of their investment professionals as well as a list of the client’s representatives that would be attending and a copy of the management presentation. No work for me here, but it was interesting to see. Charlie responded with a list of the client’s attendees including the CEO, CFO, a couple executive vice presidents, and the head of strategy and corporate development.
The next few hours brought perfect working conditions: enough to keep me engaged but not so urgent that I felt like I was struggling to swim in the deep end of shark infested waters. Andrew sent me scanned copies of some markup to incorporate into the latest. The casual edits kept me firmly planted at my desk as he sent each markup individually; this usually means the analyst is too busy to wait and consolidate them into one big revision. Charlie copied me on an email to an analyst in our financial sponsors coverage group requesting any pages on our client’s prospective buyers. We were looking for their standard profiles to send to the client which included investment professionals, current portfolio, fund size, and more.
Andrew and I ordered Thai for dinner and took a half hour break in the cafeteria. We discussed college, lifestyle in finance, plans for the future, and sports. He already had an associate position at a middle market private equity firm locked down and ended up being one of the few people I’d ever met who genuinely enjoyed investment banking. To him, investment banking was a team sport and there was a high to be felt any time the ball came his way: it was a true honor and privilege to be the go-to analyst on a deal team.
We broke the huddle and got back to work on the deck. I took on the slide showing P/E multiples before the buyout offer went public and their implications on the client’s and competitors’ market valuations. Andrew collaborated with the M&A VP on a rebuttal to the activist’s use of a sum of the parts analysis and bringing it to life in form of a first draft. He sent me home for the night to rest up for what we hoped to be the home stretch.
I found Nick leaning over his keyboard staring at an email printout on my way into the office. “Long night?” I asked as I stirred my coffee.
He looked back at me and shook his head, “Man, I just can’t win with Kristen.” He slid me the paper, “And she just gave me these questions to answer about the model. Won’t answer my questions and now this. I don’t get it, AM I supposed to answer these immediately or is this just some suggested homework?”
I looked over Kristen’s questions spotting and it really did read like a homework assignment asking such questions as why EBIT versus EBITDA and the nuances of different valuations that would require digging into the model and doing some background research. I shrugged, “I think it looks like something to work on in your spare time…”
He took the paper back, “Then it’s probably the exact opposite. She wants answers immediately and I’m being tested.”
I sat down and started playing catch up from the night before. An email from Charlie’s client CEO came in last night with some prepared answers to questions that would likely be asked at the meetings with potential buyers. They covered topics ranging from growth and increasing scale synergies to the value adding ability the client offered to each private equity shop’s current portfolio. After skimming the document, I opened up the latest investor deck and familiarized myself with its current form and the changes Andrew made. Back in the mix were a few pages the team had initially nixed; I figured they’d probably be removed at least a couple more times before the deck was done with us. Last but not least, I stumbled upon an invitation for drinks tonight at 7:00 PM at a nearby locale, courtesy of our data room provider. The timing was late enough in the day that there might be a good chance of getting some social time in before bedtime.
Lunch time rolled around and I still hadn’t heard from anyone about work, so I met up with a fraternity brother, Alex, interning in the equity Capital Markets Group in the cafeteria. He’d been working nonstop since we got to New York: pure execution work and lots of it.
“So the CEO rolls in fifteen minutes late to the presentation for research analysts and we’re all wondering what his deal is.”
I leaned in, captivated by the prospect of vicarious client interaction.
“He stands up, looks at everyone, and in the thickest Russian accent says, ‘Good company and good people. Any questions?’”
The CEO went on to defer all questions to his cohort and in highlight reel worthy fashion interrupts an analyst’s question to inquire as to the whereabouts of his good friend and executive at our company. Nobody knew, but he assured everyone that he’d specifically requested that someone make sure his friend was invited. All in all, a strong company with great growth prospects headed by a true character.
Alex filled me in on the usual workday on a capital markets floor, the constant rush, and nonexistent downtime. The schedule seemed much more predictable: get in before market hours and get out when work is done for the day without as many surprises. On the downside, there wasn’t as much analytical work and the hours were still pretty tough.
By Mother Nature’s will, work appeared onto my plate just before the data room provider’s bar tab. Andrew needed me to take the lead on a page detailing the client’s big ticket acquisitions, their contributions to the bottom line, and dates of announcement and close. I decide to take a graphical approach and started rounding up high quality images of the companies’ logos before assorting them chronologically. Determining the impact each acquisition had was difficult to determine, so the client CFO sent us some material for clarification. The dates were easily pulled from MergerMarket.
A few hours and couple iterations later on the new slide, Andrew and I were parked in an empty conference room flipping through the latest deck and scrutinizing every last detail as we waited for markup. I’d seen each page at least a dozen times before in my life and truthfully didn’t even know what to look for, so I followed Andrew’s lead. To avoid appearing entirely incompetent, I picked out inconsistent font sizing in the footnotes while he picked out the few nits that actually mattered.
Midnight came around and we still hadn’t heard back. Andrew was cleaning off his desk and shredding old documents for fun while I kicked back in a corner office and looked out at the city lights. He came into my newly claimed office and sighed, “It looks like we’re done for the night. The deck is being pushed to Friday now.”
I crept into the office fifteen minutes late after sleeping through my alarm, but nobody seemed to notice or care. Since late is late, I took a little longer on my walk into the office to make up for my Vitamin D deficiency.
Andrew’s desk was a mess and the guy looked completely exhausted. He stuffed a neck pillow into his drawer and shuffled some papers around until he appeared satisfied with the restructuring of his desk’s clutter. In reality, nothing had changed.
Peyton swung around the corner and caught Andrew out of the corner of his eye before stopping dead in his tracks, “Holy shit, bud. Project Rambo got you down?”
Andrew laughed and shook his head, “Rambo’s been pretty aggressive lately.”
Their pet name for what was truly a very trying deal to be staffed on was amusing, but Peyton’s presence in the office this early in the day was unusual and quite suspect.
Peyton slapped Andrew’s shoulder, “If it makes you feel any better, the big boys are taking Jack and I up to the managing director floor today for lunch.” He seemed especially pleased with himself, “I’m expecting lobster.”
I could see my day’s schedule being filled by the emails coming into Andrew’s inbox. A final conference call on the deck was scheduled for tonight with the lawyers, so they would likely need us to be done with it ahead of time to make a quick turn. In the meantime, the deck needed to be refreshed, we needed to find a newly released industry outlook that had been mentioned earlier on CNBC concerning our client, and some substantial changes to our sum of the parts rebuttal page were to be incorporated. I volunteered to take the lead and received no objections.
The CNBC clip was easy enough to find, and after watching it I took down a description of the research and started digging into our database for it. Twenty minutes went by with no luck, so I fired off a request to our internal research department to see if they could pull the report as soon as possible. Our sum of the parts page needed to include more concise wording, but the basic idea was that a sum of the parts valuation does not work for clients like ours due to the valuation’s lack of conglomerate discount: applying relative valuation multiples of companies focused purely on a single business onto a conglomerate can result in inflated valuations. Overhead, expenditures, and management decisions are not factored in yet which ultimately mitigate the applied valuations of a focused company onto a conglomerate with multiple businesses and types of products.
The research arrived later in the afternoon, and after scanning it for any major upsets I forwarded the report to the team with a short summary of any relevant information they might look for. At market close, I refreshed and exported the Excel outputs.
Andrew was happy with my work, and there were no surprises on the call with the lawyers. Our MD went back and forth with the lawyers on the wording of a few slides, but other than that an amicable discussion was had for all. We wrapped up a few loose ends after the call and headed home around 10:00 PM. The deck went off “to print” with the SEC.
On the home page of the Wall Street Journal, the fruits of our labor reached out to the eyes of readers all over. It was a great start to what was shaping up to hopefully be the last day of my week.
Maybe it was just me, but everyone seemed happier in general and the office gave off a more jubilant vibe, perhaps a symptom of Christmas in July. The second year analysts were all huddled up at Peyton’s desk in the highest energy mood I’d ever seen sentient beings of their rank on the food chain. Today was their last day, and nobody seemed too beat up about it.
I received an automated email informing me that the folder for Charlie’s client had been binned. Compliance followed up with another email removing our viewing permissions. I had my guesses, but decided to make a visit to Charlie’s desk to catch up anyways. Getting face time with as many people as possible a week out from our midsummer reviews didn’t seem like such a bad idea at this point.
“No go. The client wasn’t happy with the bids. They came in and stayed on the lower end of the valuation range, so we’re most likely going to do some capital structure work instead.” Charlie added, “It’s good you’re showing interest though.”
Jack and Peyton came through the bullpen with a mountain of name tags they’d amassed from attended company networking events and recruitment sessions over the course of two years and made it rain all over our desks.
“Hang these up in your cubes and let them be a testament to you all of sheer human willpower and tenacity. What mind can conceive, man can achieve.”
Peyton quipped, “And take our monitors before IT comes for them. And enjoy the mini fridge underneath my desk.”
The second years blasted their farewells to the inboxes of the entire group, from lowly interns to the vice chairman. They made one final lap around the floor. Laughter and applause were heard throughout. Messenger bags in hand, the alumni exited into the lobby, down the elevator, and out for celebratory drinks and reminiscence before embarking on the next adventures their lives.
Over hundreds of dollars of pizza, the war room filled itself with the newly minted second year analyst class and my own. Upon exodus of the second year analysts, it was tradition for the graduating first year analyst class and the summer analysts to convene for a celebratory dinner and connect personally. By next summer, they would be gone and the chosen among us would be in training. The summer after, we’d be on the other side of the table celebrating with our own summer interns. Time seemed to have its way of shuffling but never intrinsically changing in this industry.
We talked about our progress over the summer, joked about some of the VPs and MDs, lauded others, and had a genuinely good time. One of the analysts engaged me in side conversation.
“One week until the midsummer review. How do you think things are going?”
I put down my slice and sized up my experience up to this point, “Pretty well. I’ve learned a lot and I think I’ve done a decent job on my staffings so I’m not too nervous about it.”
He agreed, “I’ve heard some good things. Reviews can be pretty tough. You’re supposed to just roll over and accept what they say. Arguing is easily the worst thing you can do. This far into the summer, it’s tough to recover from a bad review as an intern especially when head count needs are uncertain. Some of you guys are going to be in a pretty tough spot after next week.”
I nodded, took a sip of my drink, and let the information sink in. Before I could respond, Andrew came in and patted me on the back, “Great work this week, man. Looks like we’ve got a break on Project Rambo this weekend. Thanks for all the help and welcome to the team.”
The grace period for interns had officially ended. With the second year analysts gone, it was now up to us to step up to the plate as interim first year analysts for the remainder of the summer. And ready or not, by late next week it would be made perfectly clear to each of us where we stand in the group. Proving my reliability as a junior resource next week was absolutely essential to the outcome of my summer analyst stint.
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 October 2013