Why Bank Rankings are Asinine
I frequently see people trying to rank all the investment banks for this or that and have realized how useless that exercise is. I'll explain why below. For context, I work in Corporate Development at a Private Equity-owned firm. We have relationships (in some capacity) with 10 or so investment banking firms. I'll give context how the firm is perceived on WSO, our firm's background with them, and why or why not they would get a piece of any deal. What I want to address in this post is why a MM/Lower Tier BB would out-punch a Top BB and why rankings on this forum are generally dumb. I'll keep it anonymous but Top BB = GS, JPM, MS; MidBB = Barclays, BAML, Citi, CS; LowBB = DB, UBS, Wells,; MM = "Household" names and industry-specific firms
Top BB: they give us great terms on one of our debt lines, the MD stops by regularly for client service (i.e. market updates with no fees), they have a relationship with our owners, have done some work for us in the past, CEO will most likely pick up when the MD calls - i would consider them one of two candidates to get the lead on any fee-generating work we do
Other Top BBs: the other Top BBs don't spend any time on us so we're not spending any time on them - if we were to IPO we might use their bookrunning capabilities
MidBB: debt terms suck and they margin call us frequently, our CFO wants terminate the line with them because of this, we aren't eager to return calls from their investment banking coverage team because of this - they're unlikely to get any deal fees from us
MidBB: good debt terms, as our CFO puts it "they don't know up from down", we still return phone calls from their coverage team because of the good debt terms (they don't put much time in the relationship anyhow) - low on the totem pole to get any deal fees
MidBB: we have a lending relationship with them, the coverage team has brought us some of the bigger sell side deals, our CEO will most likely pick up when the MD calls - they would be in the running to get some fees from us
MidBB: give us great debt terms, very strong relationship with our owners, very active in bringing us sell side deals - one of two firms to get the lead on any work we do
LowBB: good debt terms but the coverage relationship is non-existent (not sure why) i'd imagine there could be a good relationship if they tried - no meaningful chance of fees
LowBB: average debt terms, surprising amount of sell side deals brought to us, our CEO always picks up the calls from the MD, very active in deal flow in the past 12 months, stops by regularly for client service - would put them in strong contention for deal fees (would also imagine they're on the other side of the table if we don't hire them)
LowBB: average debt terms, when i am in a pinch for market data for board materials they come up in the clutch (but that doesn't mean anything), they try but fail at getting facetime with our c-suite - not likely to get deal fees
MM: they get great deal flow behind their MD, HOWEVER, we hired them for some work and myself and a c-suite level executive had a terrible experience with their deal team, we've both communicated to other executives at my firm that we think they're clowns - i won't kid myself, i'm not important enough to cut them out of a deal so they're still in solid contention to get deal fees (but if they did get hired i'd make sure that all data gets shared with them on Fridays at 6:00PM and we expect a new model on Monday at 8:00AM)
Other MM: there are other more industry-specific players that would get hired if we venture down into smaller deal sizes, these are mainly shops run by former industry execs (zero to no investment banking experience) with connections to get a deal done, they coast on their names/industry expertise - highly likely to be involved in bolt-ons (highly unlikely to be involved in deals of larger size)
This is just one guy's experience in one subsector of a fragmented industry. I hope you all can see why ranking firms are asinine now.
nobody cares, the rankings are for analysts who want to break into pe.
kkr/blackstone/carlyle dont care that you like a certain MM, too bad.
my post never professed an esteem of any specific MM. in fact, i expressed a disdain for a specific MM.
kkr/blackstone/carlyle wouldn't care for your lack of attention to detail.
next.
Not sure I completely get the point of this post - wouldn't this mostly line up alongside the generally accepted WSO firm rankings? AKA your post basically disproves its own argument?
For instance, top BB is 1 out of your top 2 clients, which is to be expected. And because that top BB is doing business with you, the other top BB's are not even going to bother. This means that you can't attest to the quality of the other 2 top BB's. So 1/3 top BB's is confirmed to be at the top of its game, and 2/3 you have no info on, but we can assume they would be on the top of their game. So that's a 100% score.
You mention the other top client is a Mid BB that sounds like it's in a good competition with the top BB. That's nice, but 2/4 of the mid-BB's have comments like "debt terms suck", "low on the totem pole to get fees". So Mid BB's get a 50% score.
Now let's go to the Low BB's. Only one out of three of them has a meaningful chance of fees. That's a 33% score.
And MM's? One of them is comprised of clowns, according to you, so that's a zero score for that one. The other one doesn't seem like it's too good but does have some activity so we can make that half a point for its score. So zero plus half over 2 gives us a 25% score.
Do you see the trend here? The firms, on average, had decreasing quality scores as we moved down from top BB's to middle markets. You honestly fucked up your argument with your own data and that's just a mistake that I could not scroll by without calling out. I am very bored right now so apologies in advance for this unnecessary level of scrutiny - I do appreciate the perspective you gave in the post.
What leads you to assume 2/3 top BBs that provide no financing to us and do not bother to cover us in any capacity are on top of their game? Is it because WSO rankings lead you to think they are on top of their game?
Not meant to be snarky (i would accept a lot of rationales as to why they, or MidBBs, don't lend to us or cover us), but assigning a 100% score to the top BBs skews the presentation of the data. If you assign a 33% score to the top BBs, it looks much more evenly spread than typical WSO ranking would lead you to believe.
Well, why wouldn't they be? The people who I know at those banks are sharp, smart and as accomplished as anyone else. Now those other 2 top BB's might not be as strong in your industry, which might just explain what's going on here. But as an overall heuristic, it's roughly accurate to have GS/JPM/MS as "top" tier and to assume that they are at the top of their game.
I agree that it's stupid to rely on the rankings as anything more than a starting point to get a feel for the IB landscape. And I also acknowledge that an MM or Lower Tier BB most definitely could beat out a "top" BB or boutique on any given deal. But on average, in the long-run, the top BB's will get more of the biggest IPO's and M&A mandates. In that sense, the rankings do make sense.
Also having more information about the company you work for would help (ie. is it among biggest 5 in vertical?), but I definitely understand why you wouldn't want to put it out there (I wouldn't either.)
Excellent
Yeah these rankings are so boring to me too. Nobody gives a fuck or even talks about it, like at all, in the real world. Sure, Goldman might “rank” at the top of everyone’s list, but are you going to bet against BMO on a mining divestiture mandate? Probably not. It’s usually those weirdo/hardo kids from NYU or SMU that take this shit way to seriously and literally find their self worth from their firm prestige. In an ideal world, we would speak granularity about the experience of bankers at similar industry/product groups or, even better, specific MDs. I know in my sector, M&A and fees league tables for the top 5 have literally tracked exactly with where 4 specific MDs have worked. For Example, UBS’ energy group was balling a while ago and Citi’s was relatively weak. After Trauber joined Citi, they are arguably the best shop in the game and league tables show it. UBS’ deal flow is significantly worse than it used to be (I think they will bounce back). Thanks for your posts and insights.
The. truth.
SBed. informative post
I agree with a lot of the thought process in this post and think it has a lot of great insights. However, I don't think the buckets are necessary accurate. For example:
"Top BB: they give us great terms on one of our debt lines, the MD stops by regularly for client service (i.e. market updates with no fees), they have a relationship with our owners, have done some work for us in the past, CEO will most likely pick up when the MD calls - i would consider them one of two candidates to get the lead on any fee-generating work we do"
These are the considerations that are important, but I have BBs and MMs that fill this role at times. I also have Top BBs that can sometimes be a pain in the ass to work with and will give really bad debt terms. Some MM banks are hungry for business and are willing to be a little looser - it's pretty important to work with those guys as well to build a strong bank group where you won't get bullied around by a few key players.
Yeah - don't really understand this. Pretty good way to guarantee bad work product? Unless you are intentionally doing that so everyone else sees and you don't have to work with them again?
Also - RIP that 22 year old analyst who will be grinding all weekend only to get torn apart
I appreciated the time OP put into the post but this sentence ruined it for me. When you do this, the MD is forced to forward one more email. The analysts / associates get a well-deserved weekend blown up (at best) or miss a life event that they'll never forgive themselves for missing in a matter of years when they have a shred of life perspective.
OP needs a reality check. You're not the client. Your owner is the client.
Also title is misleading. Should read
"What Junior CorpDev VP Thinks About Each Bank that Got Stuck Doing His PE Owner a Favor"
Can you get a bit more specific about why the members of the MM deal team were "clowns"?
Regardless of your experience or perspective, admission to toying with work streams and timing of deliverables to your advisor is an embarrassment. Intentionally jamming someone's weekend?
Disinterested in hiring the mid-market platform on future deals? Fine. Intentionally ruining someone's weekend? Get over yourself.
Sorry that the IBD lateral failed
Appreciate the discussion here. What I find interesting is that ability to provide financing (i.e. debt) seems critical here. Any idea how an EB would be viewed from your position given they don't do financing?
The argument is that they’re “less biased” and wont just tell you what you want to hear so they can provide financing.
Also sometimes they’re just better. The comp structure for an MD at a boutique is GENERALLY more favorable than at a BB
You're a fucking dickhead for intentionally ruining anyone's weekend.
I hate glittering generalities, it shows shortsightedness. To say something doesn't matter only because it doesn't pertain to you is one of the greatest follies of the human race. Bank rankings ar important to the right audience.
Bank rankings are important to business owners because they can choose a bank based on the bank's strengths and weaknesses in regards to the company's offering. Some groups have great M&A precense, while others are excellent clearing houses for debt products. A business owner will pick one bank over another based upon these factors.
Bank rankings are also important to VPs and Managing Directors because they are in revenue generating roles. Reputation and ranking are paramount in this business when it comes to landing big clients.
Where bank rankings really don't matter is for people like the OP; ie. analysts and associates who are not in revenue generating roles. What is more important to them is the reputation of the managing director and VPs they are working under. The MDs and VPs are the ones who control your destiny at the bank and control how much or little you enjoy your life.
After reading this, I don't feel as guilty anymore having created 50 question diligence lists for the PE-backed company to work on.
Excepturi delectus qui non suscipit rem dolores. Quam quod amet ducimus voluptates dolorem minus maiores.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Magni aut omnis reprehenderit quos sit repudiandae et. Placeat occaecati eos nostrum. Non repellendus cumque qui est.
Neque in ut est corporis enim aut. Omnis placeat quo perspiciatis et cumque. Reiciendis beatae quia id sint a rem voluptatem. Quia qui quam voluptatem facere veritatis quibusdam beatae provident. Tenetur dolorum aut ut velit qui quia.
Mollitia ab eos voluptas facilis. Fugiat velit laboriosam occaecati architecto omnis qui. Qui ipsum nostrum pariatur facilis quae neque. Exercitationem nemo officia rem sapiente accusamus facilis voluptates fugiat.