What do boutiques do when there are no live deals?

Hey everyone, I've been lurking for a while now but this is my first time posting. Sorry if this is a rookie question or has been answered before, but what do small shops do when they have no live deals? I know the senior bankers would be out looking for clients, but what about analysts and associates? I'm talking about extremely small shops with maybe 10 people or less and very little deal flow. Do they provide other financial services or do they sit idly waiting for something to come up? Thanks!

Comments (54)

Best Response
  • Jack M.T.
  •  Jun 22, 2017

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Jun 22, 2017

This is very helpful and insightful. I'm still undecided on what type of work I want to go into, but it sounds like it can be pretty dull when not working on deals. Do you see a lot of variation in your hours when you don't have something live? Do you plan on staying in what you're doing right now or are you hoping to just use it as a stepping stone? Thank you for your response!

  • Jack M.T.
  •  Jun 22, 2017

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Jun 22, 2017

But were you at least rewarded?

  • Jack M.T.
  •  Jun 23, 2017

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Jun 23, 2017

How did you swing the interactive map? Pretty curious about what you did in a bit more detail.

  • Jack M.T.
  •  Jun 24, 2017

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Jun 26, 2017

don't you find it worth the hassle with the exposure you get to higher-level stuff as a junior at the firm though?

  • Jack M.T.
  •  Jun 26, 2017

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Jul 1, 2017

Sounds like a MM IB. At a small office of an EB and when things are slow there we don't spend time doing stuff like this - definitley work on industry presentations (which btw are great for getting ready for PE interviews). But bullshir data collection assignments / maps are less relevant for large cap coverage.

Aug 11, 2017

Hahah the analyst honey moon phase

Jun 22, 2017

a lot of boutique investment banks have started adding "strategic advisory" to their offerings, so in times of few deals and low cash flow, the bankers can advise clients on how to maximize shareholder value before the impending sale years down the line. It's like management consulting but a lot lesser of a deep dive. it's a way of bringing in clients and have some consistent retainer

  • Jack M.T.
  •  Jun 22, 2017

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Jun 22, 2017

We all know no name boutiques arent the best ways for starting a career in IB. How about a no name boutique with presence in the MM like doing deals a little past lower middle market firms. Even if they have less than 10 its best still to lateral to another MM right?

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Jun 23, 2017

That's pretty much what I said and I agree, it's annoying and not a cash cow but a way of forging a relationship while earning a small amount of money to keep cash flow above 0

Jun 22, 2017

I also work in a no-name boutique (albeit part-time, still at uni) and what's said above is accurate; something is better than nothing. Lots of bitch work too (updating databases is glorified data-entry, ugh kill me) but you also get tonnes of exposure to live deals.

Will leverage this experience to lateral to a better/bigger firm in the future. All about dat hustle.

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Jun 23, 2017

I worked at a small shop (<15 people) in a small-market city before going back to business school. I was five years out of undergrad with zero finance experience, and I only got in because I knew a guy who knew a guy.

My experience was fantastic, and for one reason only: two of the MDs there decided that they would be personally invested in my growth. They took me to pitches, explained their thought process in negotiations, answered lots of questions, and gave me an education far beyond what one would expect from an analyst position. The actual content of what they taught me, and how to think about it, has played a significant role in my career progression.

However, if not for them, and had I spent time with just the other two MDs at the firm, then my two years would have been a total and complete waste, for the reasons stated above. There's no structure to teach you anything, and no time to invest in junior employees, and the people at the top don't have to care if they don't feel like it. If that's the situation you're in, then all you can do is try to teach yourself as much as you can.

Side note: in applying to business schools, or trying to lateral, recruiters/adcoms have a very difficult time valuing your experience if they don't recognize it. They don't have any idea what the actual work is like anyways, but if your resume says "analyst" and "Morgan Stanley," then their reptilian brain stems can recognize patterns and say "oh, we've had some of those before, and they seem to have done okay here." You can end up with excellent experience at a name they don't recognize, and it becomes very difficult to articulate that experience in a way they will appreciate.

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  • Jack M.T.
  •  Jun 23, 2017

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Jun 23, 2017
Jack.M.T.:

I know you're very busy with b-school

Whoops, spit out my coffee.

Jack.M.T.:

but I think most people would appreciate hearing what the two MDs taught you. If you ever have the time to do a write up, I'd be thankful.

Thanks for the thought. I'm out of school and have been working for a few months, so when things calm down a bit later in the summer I'll do an AMA.

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Jun 23, 2017

I started my career off at a small, industry-focused, M&A boutique that had four MDs, two associates, and me. We regularly had one or two part-time interns from a local university. After a year at this firm, I lateraled to a MM IB.

We never pitched for business. All of our MDs were either former operators or corporate development executives and used their network to their advantage. 99% of our clients had EBITDAs of $1-$2M. While our actual deal flow defined as the amount of deals that we close was relatively weak (one to two a year on average), we almost always had one that we were working on. The thing with these small clients is that they almost always are not 100% sure they want to sell, which means that sale process is very drawn out and frequently goes from on to off to on to off to on again. These small clients are also very financially unsophisticated and require a lot of hand holding through the process. This always gave us something deal-related to work on.

One of our MDs always spoke at extremely nichey industry conferences. We rarely got deals from them, but the idea was to be THE investment bank for these industries, so that when the time to sell comes, we can skip the pitch and always win the mandate (I believe this same strategy was actually used be Jefferies's healthcare IB coverage group, but I cannot find anything to verify it). Putting the presentation together for these conferences was a complete nightmare. Imagine putting together a presentation on an industry that almost know one knows of and having an employer who refuses to pay for research. Then, when you find some free research report, the employer always gives you the "can we really trust this?" line.

It looks like some other posters have given some good information on life at a boutique, but I'm happy to answer questions too.

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  • Jack M.T.
  •  Jun 23, 2017

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Jun 23, 2017

You might even be at the same boutique, haha. They brought on another junior guy right after I left.

Jun 23, 2017

When there are no live deals, you start searching for more deals. Not uncommon to do a lot of networking and reaching out and compiling databases for potential acquisitions.

Worked in a 3-person shop once. It was horrible.

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Jun 26, 2017

Pitch.

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Jun 26, 2017

Not sure why there's so many long posts, above poster got it right.

You pitch.

Unless you're at an elite boutique, pitching is what you'll do most of the time. Buddy of mine pitched for 2 years straight and never closed a live deal and his boutique was 20-30 plus people.

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  • Jack M.T.
  •  Jun 27, 2017

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Jun 30, 2017

All my firm does is their own equity research for their stock portfolio and then leaves at 4pm (or reddit news all day for ETF investors). it's either 100 hours or 40, pretty fucked. Pay is street though so it seems odd.

    • 1
Jul 1, 2017

how many people you guys got?

Aug 4, 2017

7 total on my team, 13 in office

Sep 11, 2017

Hiring?

'I'm jacked... JACKED TO THE TITS!!'

Jun 30, 2017

We actually spend a lot of time looking for new deals... it is quite common to have more than one live deal running and still seeking for others to add. At the end of the day, as you won't know which transaction you'll be able to close and which you won't, the point is just getting mandates. That translates naturally to a lot of work of "pre-mandate" analysis, probably with something like a 1:50 conversion rate.

BTW, I tend to agree with Jack.M.T. advise "do not work for a small shop if you can avoid it" but let me be more clear: it is way better to work for a small shop if you want to be part of this world than to join a whatever corporate environment doing anything from marketing to accounting... But one has to be aware of all the limits a small shop (with no name), ranging from limited resources (and access to data) up to not relying in the future on a "pedigree". Which is key for a number of firms. And this is the real downside... because once you are on a path is difficult to jump to another one.

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Jul 1, 2017

I don't know if the buy side is all that attractive? I think it depends on what your objectives are. If it is to make the most money with the least effort then certainly that's the way to go. I am in the process of leaving a BB for a boutique (given its a more senior role and the boutique has an international brand) but I could easily see myself retiring at the firm. I enjoy the politics of working with several different boards and industries, I enjoy the challenge of knowing more about the business environment as a whole (buy side mandates can be constraining). I enjoy the intellectual challenge of structuring (buy side is pretty dull comparatively-a PC could really do your job), the team work of dealing with DD teams (buy side can be quite insular) and as a confirmed bachelor I enjoy the travel. Am I wearing rose--tinted glasses? Or maybe I'm just a narcissist and want to do to my analysts what's been done to me....lol?
Please tell me what you think?

Array
Jul 2, 2017

Well, I am in the process of leaving a no name shop for the buy side (PE) and in my opinion despite the things you actually do aren't that different under an operating point of view, it's simply another world. Transactions are not the ultimate goal but where the game begins.
On top of that - even if I'm just speculating, as I'm serving my notice - the level of understanding of an industry you have to develop is purely non comparable. If I have to close a deal, I need to understand by far and large how the industry works, the trends and what are the competitors doing... but if I have to find a way to pull out value from a company (i.e. generating alpha), I need to be aware of what's going on in the business, how my portfolio company stands respect to the peers and actually find out ways to outperform the others. All this stuff with a multi-year perspective...
Try to think also to the people.... As adviser I care little about who runs the company, what are the executives background and skills... of course I'll learn some stuff to say when pitching around the deal... but I honestly don't give a f... At a PE, you have to think that you'll cope with the management of the portfolio companies for a few years... and it's crucial to understand how they think, in which way you can influence their actions, how they could react to some kind of decisions and so on.
As I said, in my opinion it's simply another world. Of course you might love it or hate it. Another associate at my current firm hates like 99.8% of the people... it would be a nightmare for him a job at a PE!
For sure I can say I am wearing rose-tinted glasses as it looks like a dream coming true... I'm sure when I'll do my AMA in a few months I'll have a bunch of cons to mention!

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Sep 11, 2017
swiss_monkey:

Well, I am in the process of leaving a no name shop for the buy side (PE)...

Interested in your process here... are you networking, reaching out to recruiters, contacting local shops?

Jul 2, 2017
CapeStorm:

If it is to make the most money with the least effort then certainly that's the way to go.

(buy side is pretty dull comparatively-a PC could really do your job)

As for extracting value (alpha) in buy side fund management, you actually have so much research provided to you from the sell side that there really isn't much original thinking that you're doing.

I'm not sure what your experience has been, but it sounds like you have the impression that the buy side is easy.

There's a crucial tenet to all finance: there is no easy money. Easy money exists for short periods of time because of information asymmetry or a misunderstanding of the true underlying risk of a venture, and then it gets competed away. If other money seems easy, then the risk is probably not being priced correctly.

Generating returns in private equity today is harder than it's ever been, and it should be. The days of buying out an under-managed public company and leveraging it to the tits are gone. There are minor returns that can be gained from appropriately designing capital structure, but the only way to generate risk-adjusted return is being on the right side of "analysis asymmetry," where you've determined a growth trajectory for the asset that nobody else has figured out or can achieve.

(Either that, or you can find an asset that nobody else has found and buy it below market rate. But unless you're in growth equity or have a world-beating sourcing model, those opportunities are few and far between.)

The information that gets communicated in a CIM is... fine. It's a starting point. But there's a deep gap between bankers and, say, strategy consultants in assessing the position of a firm and its product offerings in its marketplace and greater environment, and I very rarely find the answers to my questions in a book. I need to have an exceptionally well-developed thesis in order to defend a real value creation opportunity, and the banker's information isn't going to get me there.

Maybe you've seen PE firms that are "dumb money" that basically take what they're given and add some leverage and call it a day. But if that's really their model - source from bankers, participate in auctions, provide money that isn't any greener than anyone else's - then there's no alpha there, and their investors are just taking liquidity risk. I wouldn't confuse that dying model with thinking that working on the buy side is "easy."

    • 4
Jul 2, 2017

And here you've touched on the real issue, the financial services world isn't simply a buy/sell side dichotomy. Actually while you may this PE is the other side of the world, it isnt. There really isn't really much difference between IB and PE because they're still deals based.

See the article from the site mergersandacquisitions on buy vs sell side, which really better describes tge situation as it really is.

As for extracting value (alpha) in buy side fund management, you actually have so much research provided to you from the sell side that there really isn't much original thinking that you're doing.

For me the major difference where buy trumps sell is therelatively flat structures compared with the hierarchy of IB. Of course there are ways around this, that's why I'm leaving IB for a boutique.

Array
Aug 4, 2017

Let's ask Tobin & Co.

Aug 11, 2017
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Sep 10, 2017