Comments (25)

 
Nov 17, 2020 - 7:52am

What you put in that one line is fairly difficult IRL. It doesn't matter whether you are in IBD, VC, in a talent agency or else.

You need to be able to sell, understand the outcome of a complex deal based on limited information, you need to know the right people/network, and also be able to pull the right strings while a lot of others are trying to hold you back or badmouth your deal.

A very young colleague or someone who has never done this before.. wouldn't be able to pull this off. Just think about how many people in your industry in another company would take your call and actually help out. you need a lot of people you can trust and rely on.

 

 

 

  • 2
 
  • Associate 2 in IB-M&A
Nov 17, 2020 - 1:25pm

Being bought or buying another company is one of the most important days of a company and CEO's life. If you as an MD focus on one sector, there are only so many companies open to that at any given time. That limits deals, and you also have 15 competitors chasing the same transactions.

 
  • Associate 2 in IB-M&A
Nov 17, 2020 - 3:46pm

You can't cast too wide of a net. No one wants to do a deal with the guy covering 100 companies across all sectors and meeting with you once a year when you have someone proactively meeting with you, expert on the space, and covers 30 clients but is a full-service broker and holds your debt, handles business management trades, and is also on the M&A side.

Sales ability and grit more so than creativity bring success in IB and PE. No one is re inventing the wheel with M&A, but convincing CEOs that now is the right time and you are the right team to handle is is the art. Additionally, you lose most things in banking so you have to be able to meet with clients just to close a few deals a year.

 
Nov 18, 2020 - 7:16am

Developing the level of trust with a large volume of clients is no easy feat. They are often entrusting you with one of the most significant moments in their org/their lives and you need to curate that sense of trust with each and everyone of them all while other people are vying for the exact same thing with the exact same client. And while cultivating that relationship with current clients (including coming up with deal ideas/structures etc) you also need to go out and vie for new business and start from ground zero often times in order to keep your pipeline fresh and full. All of this put together does not make for an easy role and not everyone is cut out both resiliently or EQ-wise to accomplish all that

  • 1
 
Most Helpful
Nov 18, 2020 - 11:12am

My $0.01 below, apologies for the ramble - I am on an incredibly riveting DD/process call and have been coming back to this every few minutes for the last hour+. This turned into a total stream of consciousness reply.

 

It's difficult to source/close deals because the people running those deals typically only trust those who have done it before. It's a chicken and egg and a momentum thing. You don't hire the 19 year old mechanic, or the apprentice watchmaker to repair your Ferrari F40 and your Patek Philippe, so why would you pick a banker who hasn't done XYZ deals to run your process? 

 

Same effect on the buy-side. If your firm/fund has a reputation for making being acquisitive, exiting actively, and returning money to LPs... you're gonna fucking print. People will just bring you deals, and some will be the type of quality that allow you to become a rainmaker. LPs will call you and ask when you're going for Fund n+1. High-quality bankers who are in the flow (see anecdote below) will bring you opportunities first. If you're at a firm who only ever goes around kicking tires, produces goose-eggs, can't point to any good exits/momentum.. you will struggle to get anything done (and you better 'update that LinkedIn profile').

 

One of my old banking MD's is well known in his sector to the point where I'll regularly meet sectoral folks in other countries and continents who say "Oh, you worked for/know MD - Great guy, I have a lot of time for him, blah blah blah". He did several large (relatively speaking, of course) M&A deals in that sector in quick succession at a series of banks. He is genuinely a good banker, had a irrefutable track record for M&A advisory, was a good guy to have on your side of the table and a good MD to me. Those factors combined would make me comfortable in giving him business down the road if that opportunity ever presents.

 

At the PortCo/PubCo level, there are several groups in one of my sectors who have built successful companies and exited them with great success. Any time anybody from these groups is seeding a new venture or seeking financing for a new acquisition, people fucking throw themselves at them until the book is 10x oversubbed. They could be pitching literal manure, but investors/financiers would flock to them because of the track record. Personally, I hate dealing with these guys, because they're always pretentious and act as if WE should be impressing them for the right to give THEM our money. I'll take a punt on their latest SPAC/RTO/PennyStock or whatever in my PA though - Usually prints.

 

As you say, the rolodex is important, but the actionable rolodex doesn't exist without the track record. My anecdote above illustrates that - If I worked for MD and he hadn't done the deals he did, and I hadn't met random senior folks who spoke highly of him, I probably wouldn't speak so highly of him. You can build a rolodex without doing good deals, and you can do deals without having a good rolodex, but you need both to become a "rainmaker" as you put it. 

 

Final thought: There's an element of "right place, right time" to this as well (although I still think it's really up to the individual to put themselves in a position for success). If you're a junior and a complete stud at a shit bank/fund with no deal flow, you won't ever become a rainmaker. Another anecdote: A colleague of mine has been on all the recent exits that team has had over the last 4/5 years, and another colleague (who has been around for the same amount time) has been on 0. One isn't objectively a better associate/grinder than the other, they just got staffed on deals that panned out. One got tapped for VP and the other is 'updating the linkedin' getting active in the job market. Such is life.

 
Nov 18, 2020 - 4:55pm

 

mm66

This is great shit, and exactly what I was looking for.

Cheers. My original post was my subjective $0.01 and so is this response - take it all with a grain of salt. Your mileage may vary.

My $0.01 below, apologies for the ramble 

All good. I like to write long essay emails; unfortunately, I've known only a handful with the mental stamina to keep-up. 

It's not always great practice if you can avoid it - It was drilled into me early on in my PE life that you gotta distill the essay into 2 bullet points for the Senior Partners, cause sometimes they only read the first line of the e-mail.

 

You don't hire the 19 year old mechanic, or the apprentice watchmaker to repair your Ferrari F40 and your Patek Philippe, so why would you pick a banker who hasn't done XYZ deals to run your process? 

But you do hire the freshly-green plumber who says he can fix your home's pipes in a jiff. 

Not always. I'd rather go for the guy my dad / friend / etc. has been using for years, if that exists.

Same effect on the buy-side. If your firm/fund has a reputation for making being acquisitive, exiting actively, and returning money to LPs... you're gonna fucking print. People will just bring you deals, and some will be the type of quality that allow you to become a rainmaker. LPs will call you and ask when you're going for Fund n+1. High-quality bankers who are in the flow (see anecdote below) will bring you opportunities first. If you're at a firm who only ever goes around kicking tires, produces goose-eggs, can't point to any good exits/momentum.. you will struggle to get anything done (and you better 'update that LinkedIn profile').

Two things:

1). Are LPs ever worth the hassle?

2). What would be the IB equivalent (passive deal flow) for the LM/LMM?

1) Yes (Depending on who you ask), but they are a necessary evil cause they give you that sweet, sweet capital. But they can be an absolute hassle, especially if you fuck up. LPACs are also a necessary evil that I don't love. Fundraising is also not fun. Co-Investor reporting is tedious.

2) I guess the IB equivalent for a shitty/dying PE fund might be a microboutique that only gets business because they're cheap or they're a rubber stamp for some shitty deal or fairness or something. Or its on an underperforming team who only ever pitches for shit and never does anything. There could be other analogies but those two come immediately to mind.

 

At the PortCo/PubCo level, there are several groups in one of my sectors who have built successful companies and exited them with great success. Any time anybody from these groups is seeding a new venture or seeking financing for a new acquisition, people fucking throw themselves at them until the book is 10x oversubbed. They could be pitching literal manure, but investors/financiers would flock to them because of the track record. Personally, I hate dealing with these guys, because they're always pretentious and act as if WE should be impressing them for the right to give THEM our money. I'll take a punt on their latest SPAC/RTO/PennyStock or whatever in my PA though - Usually prints.

Are there any other pitfalls to being a massive dickhead -- so long as you're still printing money? 

I.e does financial motive always prevail?

Cynically, I think YES, for the most part. If you print it, "they" will fucking come. Whether or not "they" are strong and prestigious investors/institutions, or represent sustainable funding sources, depends on how much of a dickhead you are. Everyone has a limit. If you're riding around rolling coal in a giant truck that runs on Orca Whale Oil and Indigenous Orphan Tears, flashing your unshaven dick out the window at preschoolers, Pension/Endowment money won't flow to you. Retail trader money still might.

 

As you say, the rolodex is important, but the actionable rolodex doesn't exist without the track record. My anecdote above illustrates that - If I worked for MD and he hadn't done the deals he did, and I hadn't met random senior folks who spoke highly of him, I probably wouldn't speak so highly of him. You can build a rolodex without doing good deals, and you can do deals without having a good rolodex, but you need both to become a "rainmaker" as you put it. 

How likely are you to collaborate with a cold contact -- who has the requisite track record?

If unlikely, what sort of "add-ons" or actions would warm you up (besides a common connection)?

Quite likely. Depends on the deal, the circumstances, etc. If Random Guy A shows me the exact same deal as Former Colleague B, and their respective firms bring basically the same benefits, I'd go with my contact. I would never go with my contact if Random Guy A was objectively better suited for the mandate. 

"rainmaker" as you put it. 

The term is pretentious. I've been hearing it a lot recently, and I don't want to spoil the magic by asking what it actually implies. 

I posted the OP to get a feel for what's going through people's heads when they drink that kool-aid; as well, how to reverse engineer that recipe and find the underlying pattern that makes it "click" in people's heads. More of a marketing/sales question, than an operations/execution one.

Wasn't trying to imply its pretentious or get @ you for it. Rainmaker is pretty common jargon in my experience and I use it

Final thought: There's an element of "right place, right time" to this as well (although I still think it's really up to the individual to put themselves in a position for success). If you're a junior and a complete stud at a shit bank/fund with no deal flow, you won't ever become a rainmaker. Another anecdote: A colleague of mine has been on all the recent exits that team has had over the last 4/5 years, and another colleague (who has been around for the same amount time) has been on 0. One isn't objectively a better associate/grinder than the other, they just got staffed on deals that panned out. One got tapped for VP and the other is 'updating the linkedin' getting active in the job market. Such is life.

Yeah; gotta make your own luck.

 

Closing questions, if you have the time:

 

1). What's your favourite exit strategy for a roll-up?

Assumption: there are no strategic buyers large enough.

 

2). If you had to lead a team composed of only one type of person for a 10-year period, which would you choose?:

  • a. Loyal, capable, decent connections, no name recognition
  • b. Cutthroat, ruthlessly gets-shit-done, burgeoning rolodex, brand name

Assumption: your one and only priority is to get the task at-hand finished as quickly, efficiently, and confidently as possible.

 

3). You're a small fish; you can either:

  • a. Start out in a small pond, become a big fish very quickly, and then hop to a bigger pond (with some effort)
  • b. Start out in a big pond, become a big fish very slowly, but there's no bigger pond to hop to (and your path to being a big fish is straightforward)

 

4). On a scale from 1 to 10: how foolish is it to vehemently refuse all equity-backed funding?

1) Consolidation plays are not really in my firms wheelhouse so I don't have a playbook or bunch of tombstones to reference. Generally, I say any time you can take multiple similar assets that one team could manage, pick the best team to run the RollCo, and kill the rest, you'll make money. That answer sounds like I googled it or something, but I think my preferred route is to group similar businesses together and remove the shittier management teams. I can't tell you how many businesses and companies I've seen in my short career that could be doing 20/30% more with better teams. People are the weakest link in any organization (lol). I even see this within our own PCs.

 

2) Depends on who I am and what my role is.

Based on your criteria: If I'm a managing partner with a short-term time horizon, I pick 10 of B. I could care less if they're dicks as long as they get me the best result at the end of the day.

If I'm in the trenches, or if I want to build a sustainable business, I pick 10 of A. I don't want to be involved with 10 assholes.

In practice, I think I'd almost always choose the loyal folks, because efficiency and rapidity can be very short-lived if they're achieved at the expense of mental/physical health

 

3) Personally I pick small pond. I come from small pond. I learned a shitton that way, sometimes just by being there. In the big pond analogy I feel like you're part of an enormous food chain just grinding away at your niche. Maybe you're a barracuda but you're still in the middle of the fucking ocean with a million other fish to compete with. In the small pond I think you see the entire ecosystem, even if that ecosystem is only a fraction of the size of the one beside it. 

 

4) Depends on the context. If you've exhausted all other forms of financing and are illiquid, its a 10. If you're getting proprietary knowledge/expertise/access/etc. with the equity investor, it's a 10. If you've got cheaper debt available that you can service, it's a 10.

 

This was another fun distraction from the grind, thanks for the reply.

 
Nov 19, 2020 - 1:49am

Spot on on many points. Active rolodex for sure.

Anecdote: a few times saw the parachuted MD. RfP for a deal out, strong teams and pitches, with relatable capabilities... And then... All of the sudden, "we need to include bank/advisor xyz, recommended by [insert power figure as chairman, controlling family, etc]". The ability to even scrap the whole RfP process is truly actionable rolodex.

Even stronger; right-hand/longstanding advisor of a family, ruler, CEO/chairman (while propping their career). He gets the deals before even they appear...and gets warmly refer to peers in same situations. That's another league for an advisor, beyond rainmaking. He is a franchise on his own.

 
Nov 21, 2020 - 8:16am
Start Discussion

Popular Content See all

Girlfriend vs PE
+96PEby Investment Analyst in Private Equity - Growth Equity">Investment Analyst in PE - Growth
I’ll never take WSO for granted again
+57OFFby Principal in Venture Capital">Principal in VC
I'm tired man
+37IBby Intern in Corporate Finance">Intern in CorpFin
First year analyst, still feel incompetent and like I haven’t learned anything
+30IBby 1st Year Analyst in Investment Banking - Mergers and Acquisitions">Analyst 1 in IB-M&A
Friends in IB are chilling hard, how can I get this?
+20IBby 3rd+ Year Associate in Private Equity - LBOs">Associate 3 in PE - LBOs
Q&A: Associate at MM Private Equity fund
+18PEby 1st Year Associate in Private Equity - LBOs">Associate 1 in PE - LBOs

Total Avg Compensation

January 2021 Private Equity

  • Principal (6) $693
  • Director/MD (15) $627
  • Vice President (58) $366
  • 3rd+ Year Associate (60) $272
  • 2nd Year Associate (116) $246
  • 1st Year Associate (249) $224
  • 3rd+ Year Analyst (23) $162
  • 2nd Year Analyst (56) $139
  • 1st Year Analyst (163) $119
  • Intern/Summer Associate (18) $71
  • Intern/Summer Analyst (178) $59

Leaderboard See all

1
LonLonMilk's picture
LonLonMilk
98.5
2
Jamoldo's picture
Jamoldo
98.4
3
Secyh62's picture
Secyh62
98.3
4
CompBanker's picture
CompBanker
97.9
5
redever's picture
redever
97.7
6
frgna's picture
frgna
97.6
7
Addinator's picture
Addinator
97.5
8
Edifice's picture
Edifice
97.5
9
NuckFuts's picture
NuckFuts
97.5
10
bolo up's picture
bolo up
97.5