Comments (60)

Jun 15, 2010

I am interested as well...

Jun 15, 2010

bump

Jun 15, 2010

lev fin is a product group that does HY debt, leveraged loans, mezzanine debt, etc. it's modeling intensive, long hours and execution based

FS is technically an industry group, but because of all the LBO modeling and the exposure they get to sponsors (PE) they share similar exit ops with M&A and lev fin

Jun 15, 2010
hungry:

lev fin is a product group that does HY debt, leveraged loans, mezzanine debt, etc. it's modeling intensive, long hours and execution based

FS is technically an industry group, but because of all the LBO modeling and the exposure they get to sponsors (PE) they share similar exit ops with M&A and lev fin

Sounds like lev fin is a better group than FS for PE...what about M&A?

Jun 15, 2010

Financial sponsors group is part of leveraged finance.

    • 2
Jun 16, 2010
dipset1011:

Financial sponsors group is part of leveraged finance.

No.

Leveraged Finance at the top shops (BAML/JPM) are seperate groups. Very modeling intensive (LBO, CIM's, credit-analysis etc.). Products include leveraged loans, high-yield bonds, mezzanine debt, and increasingly some restructuring and recapitalization practices are run out of LevFin groups. However, Financial Sponsors is more client-facing (and hence likely more direct interaction with PE shops).

If a shop doesn't have a strong LevFin practice, exit opps from FS > Lev Fin (e.g. CS, although TBF YTD CS LevFin is 3rd). For firms with strong LevFin shops (BAML/JPM), exit opps (in terms of PE) are best bar none.

Jun 16, 2010
ibhopeful532:
dipset1011:

Financial sponsors group is part of leveraged finance.

No.

Leveraged Finance at the top shops (BAML/JPM) are seperate groups. Very modeling intensive (LBO, CIM's, credit-analysis etc.). Products include leveraged loans, high-yield bonds, mezzanine debt, and increasingly some restructuring and recapitalization practices are run out of LevFin groups. However, Financial Sponsors is more client-facing (and hence likely more direct interaction with PE shops).

If a shop doesn't have a strong LevFin practice, exit opps from FS > Lev Fin (e.g. CS, although TBF YTD CS LevFin is 3rd). For firms with strong LevFin shops (BAML/JPM), exit opps (in terms of PE) are best bar none.

What about DB?

Jun 16, 2010
ibhopeful532:
dipset1011:

Financial sponsors group is part of leveraged finance.

No.

Leveraged Finance at the top shops (BAML/JPM) are seperate groups. Very modeling intensive (LBO, CIM's, credit-analysis etc.). Products include leveraged loans, high-yield bonds, mezzanine debt, and increasingly some restructuring and recapitalization practices are run out of LevFin groups. However, Financial Sponsors is more client-facing (and hence likely more direct interaction with PE shops).

If a shop doesn't have a strong LevFin practice, exit opps from FS > Lev Fin (e.g. CS, although TBF YTD CS LevFin is 3rd). For firms with strong LevFin shops (BAML/JPM), exit opps (in terms of PE) are best bar none.

What about DB?

Best Response
Sep 13, 2010
dipset1011:

Financial sponsors group is part of leveraged finance.

This guy, for the most part, has managed to keep his idiotic remarks to a minimum ever since his "Jeffries" episode. Still manages to spit out a real winner every now and then.

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Sep 12, 2010

Is there a difference in working hours between Lev Fin and M&A?
I only did M&A internships so far. But as I mostly enjoy the modelling/excel-based work I reckon Lev Fin would be the better option. However, I found the M&A hours past 12am quite painful on a regular basis. So I wonder whether Lev Fin works less hours as it is more market-oriented?
(I do not mind working long hours and I understand it is all project-driven, but I doubt I could be successful with the M&A working hours on a longer-term basis)

Sep 13, 2010

bump

Sep 13, 2010

hours all depend on your group. no one is going to tell you which offers a better lifestyle.
M&A - HF
FinSponsors - PE
LevFin - Fixed Income?
etc

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"Those who say don't know, and those who know don't say."

Sep 13, 2010

I think it was mentioned before, but it depends on how the groups at your firm is structured - at some firms Sponsors is just a coverage group in which LevFin does the execution, while other firms Sponsors takes care of all sponsor related LevFin, while LevFin Group is responsible for Corporates... imo, best get in a Sponsors group that does the execution...

    • 1
Sep 14, 2010

bump

Sep 29, 2010

To get in to PE, is it better getting into a M&A internship or a financial sponsor internship?

Thanks

Sep 29, 2010

Either one will put you in great standing. If it comes down to having both options, pick the group you like more or find more interesting, unless there's a huge gap in terms of reputation for the two groups at that particular bank (ie, M&A vs. LevFin at BAML).

Sep 29, 2010

From what I've seen, I think Financial Sponsors has the highest P/E hit ratio. I mean think about it --- their sole job is to cover PE firms. Sponsors groups that does a lot of LBO execution (i.e. the bank has a LevFin group that does non-investment grade corporates) have the best shot. The quantity of dealflow is less --- but the depth is far deeper.

Sep 29, 2010

I asked the same question a while back, although I would prefer more input as well.

http://www.wallstreetoasis.com/forums/whats-the-di...

Sep 29, 2010

Thanks, that was useful.

Sep 29, 2010

Is this for a lateral?

Sep 29, 2010

advisory - fresh analyst 2010.

new1987 - thanks. Can I ask how you know this? Sorry to be rude but just want to check sources!

Sep 29, 2010

It depends on the bank. There are some banks where leveraged finance is just "high yield dcm," as new1987 suggests, but for the most part that isn't true.

Leveraged Finance deals with structuring financing for LBOs, dividend recapitalizations, acquisitions and general corporate purposes. It involves analyzing companies' capital structures in depth and looking for efficient ways to execute transactions. The group also typically leads their respective firms' bank commitment efforts. In my opinion, this is the most interesting aspect of investment banking - committing the firms capital to risky m&a/bridge situations. Lev Fin will be at the front of negotiations between the sponsor, lawyers, and the firm's senior management. It's like chess, but with money.

As for the lbo model, new1987 is half right - the income statement will be often put together by the analyst in the coverage group (who will really just be inputting numbers onto a template). Lev fin will then take the model and use it for its own purposes.

Sep 29, 2010

RE: Financial Sponsors and Modeling...

Does anyone here think KKR / Blackstone is going to let a first or second year analyst at a BB put together a model for them, upon which they will make 8-9 figure investments?

The Sponsors themselves (as in the PE firm) will throw together their own model. From that point, the Financial Sponsors/ Leveraged finance group will take it and run with it. The LevFin group needs to absolutely scrutinize the assumptions, covenants etc, and really understand the capital structure because the firm, under the advise of LevFin, will be committing large chunks of money to the loan/bridge financing deal.

At the end of the day, financial sponsors are just for the most part coverage bankers. And things being how they are, most "modeling" (LBO, M&A, DCF, Comps) are just templates you plug and chug into. I guarantee you the vast majority of bankers do not completely understand how everything links together in those templates, and 95% of them couldn't build one.

Sep 29, 2010

Completely dependent on the bank.

At some banks, lev fin is a cap mkts group and sponsors runs all the models.

At some, lev fin runs the models and sponsors just builds relationships and bends over backwards on term sheets.

At some they split the modeling with lev fin covering corporates and sponsors covering sponsor port co's/targets

If you have questions about a specific bank feel free to PM me.

Sep 29, 2010

pretty sure CS and BAML are the only banks where the sponsors group runs the model.

Sep 29, 2010
DoubleBottomLine:

pretty sure CS and BAML are the only banks where the sponsors group runs the model.

I believe the sponsors group does the heavy lifting at Citi, as well.

Sep 29, 2010

100% right in Citi - FEG originates and executes and all modelling is done by FEG not LevFin

Sep 29, 2010

Bump

Sep 29, 2010

id like to know as well

Sep 29, 2010

LevFin is a lot of debt work including corporate loans etc. Sponsors is a coverage group that focuses on Private Equity , Hedge Funds and other 'sponsors'.

Sep 29, 2010

Not the same. totally different groups. do a little research.

Sep 29, 2010

LF and FSG often get lumped together because FSG tends to rely on LF's execution/product capabilities so much. Here's the best way I can break them both down.

FSG is essentially a coverage group for financial buyers. They operate similar to any other industry group. They may bring buyside ideas to sponsors, pitch different exit options with supporting analysis to sponsor owned companies, etc.

Leveraged finance has one hand in the IBD and one hand on the capital markets. They have a good idea through their friends in DCM and the trading desks about how much paper the market will take and what the pricing will have to be to clear the markets. They can give FSG a good idea of what the realistic pricing is for the amount of debt needed to finance an LBO. Sometimes, when there isn't a whole lot of wiggle room, differences in pricing can have a sizable effect.

Leveraged finance also handles the underwriting of the leveraged senior loans and high yield. That includes getting the deal approved by credit internally and preparing the OM/CIM. They will talk to syndicated finance or the HY trading desk about the arranging or distribution. Sometimes, like in JPM, syndicated and leveraged finance are one group, sometimes they are separate.

Depending on the bank, leveraged finance or FSG may do the heavy lifting when it comes to the lbo model. A big difference is that FSG focuses primarily on LBO's and catering to financial buyer clients, while Lev Fin by nature sees LBO's but also handles levered corporate loans, as well.

    • 1
Sep 29, 2010

GameTheory: thanks for the great description.

Sep 29, 2010

Agreed well said Sir.

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Sep 29, 2010
Sep 29, 2010

im a little shaky on this too

Sep 29, 2010

Leveraged Finance handles the underwriting and execution of leveraged loans - whether they be sponsor-backed or corporate. If the bank has Leveraged Finance under the DCM umbrella, you may also be underwriting bonds. Typically you're a liason between the industry groups or Financial Sponsors group and Syndications desk or trading desks. Financial Sponsors are, as you said, an industry coverage group that specializes in private equity clients. Any leveraged buy-out, sponsor backed IPO, or portfolio company transaction (sale, divestiture, acquisition) can warrant the appearance of someone from Sponsors.

I would argue that Sponsors is quieter than Lev Fin right now, but both are pretty dead.

Sep 29, 2010

The post above has the right idea in terms of what lev fin and sponsors do
I would argue on the other hand that lev fin is more slow than sponsors depending on what bank you go to
because lev fin specializes in the execution process (usually) its likely that without deals and transactions being executed, the less activity
sponsors on the other hand still has to cover its private equity clients and model and pitch proposed deals despite that fact that most deals aren't going through. nevertheless, there is still work that needs to be done since sponsors are more client, modeling, and setup focused rather than on the execution side
bottom line: both are still pretty slow but still worth going into if this is what you want to do

Sep 29, 2010

Agreed, I only say Lev Fin may be busier since corporate and strategic deals may still be getting done. All the sponsor groups that I've seen are double staffing analysts on deals, and giving them busy work or pitching deals that will never get done. Pretty brutal work.

Sep 29, 2010

That clarifies things quite a bit. Thanks guys.

Sep 29, 2010

It's 2011 now. Are these two groups dead? Shaky?

Sep 29, 2010

Can't speak for corporate side, but sponsor side was crazy 2H 2010 and apparently the steam has continued into 2011 thus far...

Sep 29, 2010

There has been a ton of HY activity since spring of last year. Sponsors are especially busy as they try to use all of their excess dry powder in order to facilitate future fundraising/prevent investors from pulling their money. Many sponsors are also trying to monetize their current investments so they can return money to their LPs. There's quite a few secondary buyouts happening as a result of the aforementioned drivers, so both sponsors and leveraged finance groups are seeing a lot of activity.

Sep 29, 2010

as you said, lev fin is a product group (leveraged loan and high yield bond financing group) and sponsors is a coverage group covering private equity clients. at some banks, the sponsors group will also handle the lev fin product for sponsor clients (i.e., sponsor led LBOs or financing transactions for sponsor portfolio companies such as recaps, refi's, tack-on financings, etc.) and the lev fin group will do lev fin for corporate clients only (although I think it's more common for lev fin to do all the lev fin work for both corporates and sponsors)

Sep 29, 2010

What is better for a post MBA associate who wants to try to jump in PE at the VP/MD level?

Sep 29, 2010
jc100021:

What is better for a post MBA associate who wants to try to jump in PE at the VP/MD level?

I'd venture neither is great. LevFin is a product group, and while knowledge of the debt capital markets is always useful to a PE shop (some more than others), most firms rely on banks to give them reads on what is happening in the market. The LevFin banker best serves the PE shop by being their banker, not their colleague. That being said, there are a few megafunds that have dedicated capital markets staff (Apollo, Blackstone come to mind) but I believe that staff consists of a few high-up guys.

I would think its tough to be a Sponsor banker at the middle level in general. The guys above you have little motivation to help you rise up, as there is a limited sponsor universe and the guys already at the MD level will want to protect their coverage accounts and the fee generation that they bring. A middle level guy will need to somehow forge his/her own relationships with sponsors, either slowly growing into a co-coverage role with a senior MD, or being the sole coverage officer for a smaller sponsor that eventually grows into a larger fund that frequently enlists the services of an investment bank. Sponsors don't really need bankers aside from accessing funding and getting the occasional M&A advice (which they can go to an M&A banker for).

Sep 29, 2010

I'd say zsurf's got a good read on the situation, though I would say any Associate (IBD) to PE hires are much more opportunistic and definitely less common than Analyst (IBD) -> Associate (PE)... some shops are known to hire BB associates though...

Sep 29, 2010

Thanks for the really detailed answer guys. I specifically said VP/MD level because it seems to me that jumping to PE at the associate level is very difficult, and it is more common for senior bankers to get into PE for life experience reasons. I guess in that respect industry coverage would be better.

Sep 29, 2010

OK I see ya zsurf- good point. At that level, I would think it is most important just to have a beastly network (which you already said).

Sep 29, 2010
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Sep 29, 2010