To understand the work you’ll do in M&A, you need to understand the nature of the ‘deal cycle’. Just because you’re helping a company with its mergers and acquisitions, this doesn’t mean you’ll go straight into helping a client with the business of buying and selling.
Instead, the role of an M&A banker can be divided into three separate stages. First comes the marketing or 'origination' stage, in which senior M&A bankers travel around the world, meeting potential clients and discussing options for buying and selling companies which will advance the client’s agreed strategy. Second, comes a financing stage, in which M&A bankers who ‘originated’ the deal might work with other areas of the bank to work out how the deal can be financed (if it’s a purchase). Thirdly comes the ‘execution’ stage of actually doing the deal and arranging all the legal paperwork that comes with a transfer of ownership.
At some banks, these three roles are split out. At others, they’re not. At Deutsche Bank, for example, teams of industry-specific senior bankers work across M&A, equity capital markets and debt capital markets to discuss strategy with clients and advise them on buying and selling and ways of raising money and restructuring their balance sheets. – Senior bankers a Deutsche are not M&A specific. And once an M&A deal has been brought in, they will work with equity or debt bankers to help finance it and with execution teams to help bring it about.
When we go and pitch for business we are also personally responsible for ensuring that deal is done
Neil Thwaites, managing director of industrials, infrastructure and business services at Rothschild stresses that senior M&A bankers are both origination and execution specialists. “Unlike some large banks, we don’t have separate marketing and transaction execution teams,” he tells us. “Instead we all offer the full spectrum of marketing and execution services. When we go and pitch for business we are also personally responsible for ensuring that deal is done.” Boutiques and smaller banks like Rothschild also don’t become involved in financing deals – they simply provide advice. Bankers at these firms argue that they’re able to be more impartial when they offer advice because they’re not trying to flog their bank’s capital raising ability and are not under pressure to encourage clients to do deals just for the sake of it.
The more senior you are in M&A, the more that you will work across all stages of the deal (or ‘transaction’) process. “My day may involve one or more of the following situations: idea generation or exchange with our internal Asia & U.S. teams; pitching M&A ideas to clients; face-to-face meetings or conference calls with clients, lawyers and/or accountants on live M&A situations; or reviewing work prepared by analysts and/or associates in my team,” says Barbara Wong, managing director, Asia Pacific mergers and acquisitions, Wells Fargo Securities Investment Banking and Capital Markets. “I spend approximately 70% of my time on marketing and/or business development work, and approximately 30% of my time on deal execution,” she adds.
By comparison, as a junior M&A banker you will typically be focused on two stages of the deal process: marketing and execution.
When you’re junior in M&A, marketing isn’t about touring the world chatting through strategic options with chief executives of major international corporations. When you’re junior in M&A, marketing usually means working long, long hours in an office with other M&A juniors to put together 'pitch-books'. These are effectively marketing documents - usually prepared in PowerPoint, which explain why a prospective client company should do a particular deal.
Pitch books are there to sell a bank's M&A advisory expertise. You can see an example of a pitch book here. Pitch books are a lot of work and include information on the client's competitors and the market it operates in, an analysis of value of the competitors it might want to purchase, a look at similar transactions from the recent past, and a look at how the company's financials might be altered by the acquisition. Junior M&A bankers have to do all this analysis and then present the analysis in a way that will encourage clients to do the deal.
“As an analyst you’ll be both valuing companies and looking at their capital structure," says Thwaites. "You’ll also do a lot of work on the marketing presentations we put together and will help prepare the documents we need to buy and sell companies. The role of an analyst is about more than just financial analysis – it covers strategy too.”
When the deal is actually underway, the role of the junior banker becomes more about coordinating the purchasing process
Pitch books exist to encourage clients to do deals in the first place. Once a deal has been agreed upon, junior bankers have to help with its execution. When the deal is actually underway, the role of the junior banker becomes more about coordinating the purchasing process. For example, juniors are usually responsible for sending out 'non-disclosure' or confidentiality agreements in which buyers and sellers request more information about the companies involved in the transaction.
Working as a junior in M&A is notoriously hard work. When people complain about the long hours in banking, it's often M&A they're talking about. Mark Hatz, a former Goldman Sachs analyst who now helps students prepare for banking interviews, says you can easily work eighteen hour days: "You might start at 9am and finish at 3am. I was working through the night two or three days a week and working every weekend."
Following complaints about overwork, and the death of several young bankers, banks have made efforts to restrict juniors' working hours. However, some juniors say there has been little real change.