9 AM - No fire drills today, so I get to the office at a normal time once again.  The morning is fairly slow and I spend most of my time making further changes to the presentation/Offering Memorandum for Client A from yesterday.

I defined fire drill back in my post on investment banking lingo, but it’s an emergency where the Analyst has to produce something under a very tight time constraint (usually less than an hour).  Often it turns out to be unnecessary after the fact.

12 PM - Multiple requests from different MDs; one of them wants to see an analysis of deal-related documents that Client B (the public company being sold to a larger public company) and the buyer are exchanging.  Another one is asking for some old presentation we put together.

Managing Directors don’t interact much with Analysts, but there are always exceptions.  Everyone has a different style and some of the MDs are more “hands-on” than others.  Sometimes if it’s a simple request the MD will just ask the Analyst directly rather than going through 2-3 other layers of people.

3 PM - Have to run a Premiums Analysis for a potential client.  Dealing with them is often more painful than working with real clients.

A Premiums Analysis is one of those valuation methodologies you may not know about if you’ve only read the Vault Guide or some of the other packages out there before.

When a public company is acquired, the buyer has to pay a premium to the seller’s share price so that… there’s an actual reason to sell the company.  Why would you sell for $25.00 if your share price is at $24.75 currently?

A Premiums Analysis lists all public companies that have been acquired in a certain market (for example, Internet companies) in a certain deal size range (over $5 billion) in a given time period (since 2006) and establishes the median 1-day, 20-day, 30-day, 60-day (and sometimes even more) premiums paid to the seller’s share price.  The medians are usually in the 15-35% range, and sellers will rarely agree to be purchased for anything under 10% unless there are unusual circumstances (recent run-up in stock price).

If you apply the median of the set to the company you’re looking at, you get an idea of the price to expect.

6 PM - Analysis takes longer than expected since most of our data is wrong (this happens a lot).  Client C (the private equity deal) has sent a flood of information throughout the day and I make further changes to our models.

8 PM - Some of the other Analysts go out to eat.  I want to leave before 2 AM so I pass on this one.

10 PM - Finish up work for Client C and speak with Associate on changes for Client A’s presentation.

This is how the workflow in investment banking works: constant revisions of presentations and documents until they’re in passable form.  90% of your time is spent on everything after the initial version.

1 AM - Accomplish my goal of heading home before 2.  Changes took longer than expected.

2 AM - Decide to go work out despite being tired.  I don’t recommend this.

Note to incoming Analysts: If you’re at all into fitness, I recommend finding a 24-hour gym near wherever you work.  Often you’ll only be able to hit the gym at unusual hours.

3 AM - Arrive back home, even more tired.  Pass out.

This was a standard Tuesday.  There was probably less downtime than normal, with 16 hours of actual work.

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In the spirit of those previous posts, this week I’m posting an entire Week In The Life Of An Investment Banker. Today I’ll cover Sunday and Monday (what, you thought we had weekends off?) and each day I’ll cover another day of the same week.

Sunday

12 PM - Wake up late. Was up late the night before at a friend’s birthday (fun, but no models and bottles). Find food and get ready for the day.

1 PM - Head to gym. While there, run into another friend at a different bank and talk about plans for next year (one of the most popular discussion topics among Analysts) and why neither of us is at the office currently.

3 PM - Relaxing near the pool post-workout when the dreaded email arrives. Client A, a sell-side M&A client, has reviewed a presentation we sent yesterday and has changes. I have to run to the office at 4 to discuss the changes and then revise the presentation.

4 PM - While on a call going over the changes, I get bored and begin internet surfing in the background. Most of the edits involve wording and font sizes on graphs through 100 or so slides. This is going to take some time to finish because of the sheer volume of changes.

10 PM - I finish up with the revisions and the Associate sends out to client. Meanwhile, Client B, a public company being sold to a larger public company, has sent over revised projections and we need to update our merger model.

A merger model (also called accretion / dilution model or combo model) is used to analyze the impact of an acquisition. The output is generally the change in EPS (Earnings Per Share) - how much the acquisition raises or lowers it by - and the most important inputs are purchase price, form of consideration (cash, stock, or debt), and the buyer and seller’s financial profiles.

11 PM - Finish updates and head home.

This was a fairly standard Sunday - some time for fun, some work, and being in the office for at least part of the day.

Monday

9 AM - Arrive at work and chaos is unfolding. A standard Monday morning.

We’re working on further revisions to the presentation for Client A, and the Director in charge of the deal is quite persistent with the “Are you done yet?” questions.

At the same time, we’re also multi-tasking between that and getting NDAs (Non-Disclosure Agreements) executed for Client C, a large public company we are selling to several private equity firms.

(Yes, this was back in the day when Leveraged Buyouts were actually happening)

Getting NDAs (also called Confidentiality Agreements (CAs), among other terms) executed involves sending the document back and forth between legal representatives of the buyer and seller until they reach agreement. It’s somewhat of a joke because there’s no way to enforce an NDA, but both parties want protection so that their secrets and employees won’t be stolen if nothing comes of the discussions.

In this case the Associate is handling most of the work.

2 PM - CFO of Client C (the private equity deal) sends updated financials and other information that we need to incorporate into our own models and into the materials we’re sending to the buyer(s). VP informs me this is needed “ASAP.”

5 PM - Finish up updated model and the VP sends it to Client C’s CFO so he can review it and “sign off” on it. Just as I’m finishing, learn that I am being staffed on an upcoming Fairness Opinion for an M&A deal that is set to be announced soon.

A Fairness Opinion is just an extremely rigorous valuation that is prepared by a bank for legal reasons (to “prove” that a deal price is “fair”). It’s a bit silly because no bank is ever going to say that a price is not fair, and they’ve become formalities.

A perfect example is the controversy caused by the Bear Stearns deal back in March 2008. Lazard, its financial adviser, issued 2 Fairness Opinions, one for the original purchase price of $2.00 per share and one for the revised $10.00 per share price. Both prices were deemed “fair,” raising questions over what exactly these Opinions prove.

8 PM - Head to the Conference Room to eat dinner quickly with other Analysts and then go back and try to wrap up an Offering Memorandum and presentation for Client A. The Associate is side-tracked on other projects all night so I have to handle this work.

An Offering Memorandum (or Information Memorandum (IM) or Confidential Information Memorandum (CIM) ) is a long document with an overview of a company, including its products/services, customers, management, history, and financial profile that “sells” it to potential buyers. As an Analyst or Associate you spend a lot of time working on these.

12 AM - Head home.

This was a typical Monday - 15 or so hours of work, some chaos in the morning and a decent amount of actual work at night.

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He has some additional tips for everyone about to start their investment banking jobs / internships - these are great overall so I don’t have much to add, but I will throw in a few comments here and there so it looks like I did some work.

“I did a 10-week internship at a bulge-bracket investment bank last summer and will be returning there full-time in July. I’ve read a couple of the “Summer Analyst Tips / Success Guides” but I thought there might be a few additional tips that I could add.

Balance Between Being Proactive and Annoying

My process for finding this balance was simple:

1. If I was assigned a task, I got it done on time.

2. On quite a few occasions, I finished my task and was left with nothing to do. This usually happens when Analysts/Associates/Vice Presidents are busy with meetings, conference calls, attending to fire drills and forgetting about you.

I typically went up to the Analyst and asked, “Hey, is there anything you want me to do / get done?”

There’s a clear difference between that question and “Hey, is there anything I can do?”

The second one is a bit pushy and if that Analyst is busy, he/she might even get annoyed. (How do I know this? I found out the hard way because I used the second line at first and got some negative responses like “Uhh not right now.” “Umm, let me get back to you.” “Dude, come back later.”)

The first question almost always resulted in a favorable response because the Analyst was thinking in terms of how I could be of benefit to THEM, not the other way around.

Inquisitor Note: This is dead-on. I think of interns in terms of benefits - how can you benefit me, right now? If you emphasize this I will give you useful work.

3. On occasions where there was nothing to do, instead of browsing around aimlessly, I’d just access the team’s files on the shared folder and read about previous deals - pitchbooks, models, etc.

This actually helped when I got staffed on similar types of deals. Be careful not to flaunt this or everyone will think you’re a tool.

Inquisitor Note: I’ve actually done this before, mostly when I first started. BE VERY CAREFUL to keep it to yourself or else people may indeed laugh at you. I certainly will.

I also browsed the Internet and if I found any articles that could be helpful to the Analyst, I would summarize the article in bullet points and send it to him.

Inquisitor Note: Good idea but don’t go overboard here. If you send me 5 article summaries a day I’ll make you get my dry cleaning repeatedly.

Seeking Feedback, Especially Constructive Criticism

I received several reviews over the summer from different groups. Most of them were positive, but I sought out constructive criticism - things I could improve upon. Although they resisted at first, my groups eventually gave me the following feedback:

• You need to listen more carefully when we’re explaining instead of jumping to conclusions.
• Don’t be so entrepreneurial. Just execute.
• Don’t rush your work. Review your work by printing the documents and then giving them to me.

Inquisitor Note: Remember when I said “don’t do investment banking for the ‘entrepreneurial work environment’? (or the models and bottles?)” Yeah, I thought you did.

I solicited constructive criticism for 2 reasons: 1) I genuinely wanted to improve. 2) When the bank decided who to give full-time offers to, they would probably discuss my “flaws.”

Knowing my flaws allowed me to fix them before offers were handed out.

I believe that I got my offer because I made constant improvements over the summer, even though I wasn’t necessarily the best Summer Analyst there.

Finding An “Informant”

When I first started, I was clueless when it came to recruiting - luckily, early on I found a mentor from my school who told me the details of how my group recruited and selected Analysts.

He told me who the key decision makers were and how I could best position myself to get an offer. I didn’t ask these questions the first time I met him, but I made an effort to see him at least once every 2 weeks to stay in touch.

Over time, he trusted me enough to share some insights. Your “informant” can be anyone - an Analyst that’s close to you, a fraternity alumnus, your school alumnus mentor, assigned mentor, a friend that you already who worked there, or anyone who you befriend.

Reliability Is Key

My last piece of advice: BE RELIABLE. Your job is to make the lives of Analysts and the higher-ups easier so they can get an extra hour or two of sleep. If you screw up and they have to fix your mistakes or face the scorn of those above them, they won’t like you very much (and you probably won’t get the offer).

One day, I had to carry 5 boxes in 98 degree weather from building to building at 2:30 PM. I didn’t go to a great school to be a UPS boy and I hated this kind of work. But I did even grunt work and manual labor like this reliably, so I had a chance to do more meaningful work as well.

On another day, I was the lead guy on a conference call with MDs and executives to examine a potential purchase of a large international finance company. The reason I was the lead guy? Because what was originally a “project” to keep me busy turned out to be a potential deal for the group and no one had worked on it but me.

So you never know.”

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-..and Some More Investment Banking Summer Internship Donts, The All-Nighter

Despite explaining what you’ll actually do as a summer intern and even how to dominate your investment banking summer internship, summer internship questions have continued to roll in.

Sure, you want to do as much deal-related work and modeling as possible, but how do you get there?  How do you avoid just going to Starbucks and the dry cleaner for me all summer?  (Not that I would make a summer intern do that, of course)

How Work Is Assigned To You

Senior bankers and staffers are more hands-off with Summer Analysts than they are with full-time Analysts and Associates.  Sometimes interns are “assigned” to an Analyst over the summer; in other banks and groups Analysts will “claim” interns to help out on certain projects.

In any case, though, the full-time Analysts give you work and decide what you do.  So you need to keep us happy.

I always have a list of unfinished tasks, but only a few of them are high priority at any given moment.  And as I’ve mentioned before, there are basically 3 types of work in investment banking: deals, pitches and random stuff.

When a summer intern starts working, I will most likely give him or her whatever is at the bottom of my priority list: the random stuff.

Sometimes this means profiles (compiling information on companies and making it look nice in PowerPoint), sometimes it means comps (reviewing financial statements and inputting numbers into Excel) and sometimes it means finding the projected rate of oil production increase in the Alberta oil sands over the next decade.

What To Expect At First

Don’t expect to build an LBO model or draft an IPO S-1 registration statement right away.  You have no technical training, no one knows how competent you are, and who knows, you could have gotten the internship just because your dad is the CEO.

I would laugh if an intern asked about learning an LBO model his first day on the job.  I don’t care how many accounting or finance classes you’ve had or how many $3,000 “learn investment banking” seminars you’ve taken, you’re not going to know how we build models right away, and you will therefore not get that type of work at first.

Take the work you’re given, put a smile on your face, and do it without complaining.  When you’ve proven that you can do the basics well, you will be given more interesting tasks, and when you have proven yourself with those, you will get even more responsibility.

Don’t Screw Up

Screwing up repeatedly will kill your progression toward doing more interesting/useful work.

You might think, “If I’m just starting how can I possibly NOT make mistakes?  I don’t know anything yet.”

The short answer is “ask a lot of questions.”  No one will fault you for asking questions - as long as you ask the right people.

Never ask anyone above the Analyst level a question.  Bothering your MD with a question on comps will invariably make him think you’re an idiot.  Restrict your questions to other summer interns and Analysts.

If you ask questions on anything and everything you’re not sure of, you dramatically reduce the chances of screwing up.

Also, always print out and check your work before submitting it to anyone.  Mistakes are much easier to see when you print out your work, so you should always do this.

A Tale Of Two Summer Interns

Here’s a brief story of 2 interns in my group last summer:

The Worst Of Times

One intern arrived and, due to my workload at the time, he actually got a client-related project to work on.  It consisted of around 20 comps, and although I consider anything with the word “comp” in it to be grunt work, it was at least going to a client for an actual deal.

His task was straightforward: look at financial projections from equity research and enter in a few numbers on a spreadsheet for each company.

He finished and sent me the file - and the numbers were completely wrong.  I don’t mean “off by 0.1″ wrong or “forgot to add back one-time charges” wrong, I mean “revenue jumped around from $4 million to $400 million to $40 million in the span of 3 years” wrong.

Unless it’s a biotech company (and it wasn’t), you could tell something’s off by looking at that for 2 seconds.

After that incident, I rarely gave him much substantial work.  If he couldn’t even copy numbers correctly, there’s no way I could trust him to draft 50 page documents or build multi-property models for casino companies.

The Best Of Times

Another intern, by contrast, had a lot of grunt work at the beginning.  One time I had him do about 20 profiles because I didn’t have time and it was already well past midnight.

Although he had a lot of boring work at first, he rarely made mistakes and when he did, he always fixed them and never repeated the same mistake twice.

By the end of the summer, I had taught him so much about modeling that he knew more than some of the full-time Analysts.

I knew that he was reliable and that if he had more advanced skills he would save me days of time; as a result he learned a lot and performed the best out of all our interns.

The Consequences

Screwing up repeatedly has a chain reaction - no one at an investment bank gossips more than the junior guys, so if the work I give you is completely wrong, every other Analyst will know about it.

Usually the Analysts order dinner and go to a conference room to gossip and discuss the events of the day (you don’t just get fired in conference rooms).

Intern performance is a common discussion topic during the summer.  And don’t worry: even if we don’t discuss interns during dinner, we’ll do it over instant messenger or forward emails to each other all day.

But the real consequence of not doing well in your summer internship is not getting a full-time offer.  In a bear market this can be the kiss of death, though you can sometimes find a way to spin it favorably.

The Good News

The good news is that no matter how poorly you perform in a summer internship, it’s rarely the end of the world.  You can usually still find another internship the next year or a full-time job in the fall when you go back to school.

Still, it’s to your advantage to do as well as possible so that you have more options down the road.

And so that you can avoid being the Starbucks/dry cleaning delivery service.

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-MD’s, The Leveraged Sellout

Continuing our series in Investment Banking Lingo this week, we resume today with more essential vocabulary that any good banker must know to get ahead in today’s tough market.

Even Frank Quattrone had to learn the meaning of “Alt Tab” at one point or another (ok, maybe he was born knowing that one…).

Downtime

Typical usage: “I had some downtime today so I was catching up on American Idol.”

What it means for the Analyst: You get a break from staring at Excel and instead get to stare at your web browser.  Just make sure not to do anything too naughty, or your IT department may catch on and alert the authorities.

What it really means: There’s never a constant flow of work in investment banking.  Some days are nightmares and other days you don’t really do much, get to go home early and even watch low-quality made-for-TV movies.  Since your workload is dependent on whenever the senior bankers get around to reviewing what you produced (general rule of thumb: “I need it by tomorrow” = “Will look at it in 2 weeks”), a lot of time is spent sitting around waiting.  And waiting.  And waiting…

Tips and tricks: The key to using downtime effectively is simple: don’t get caught.  Whether it’s using Facebook 4 hours every day like a certain trader at Goldman Sachs, looking at uh, inappropriate sites, installing games or watching that episode of American Idol you missed, you must have a fast way to exit whatever it is you’re doing.  Be alert - don’t listen to blaring music - and avoid suspicion by browsing sites with mostly text.

Alt Tab

Typical usage: “I had some downtime today so I was catching up on House…  VP almost saw me but luckily I Alt Tabbed out of it really quickly!”

What it means for the Analyst: Alt Tab is your lifeline.  Bankers are pretty good at Excel, but we’re actually much better at hitting Alt Tab just before someone notices that we’ve been watching Grey’s Anatomy for the last hour.

What it really means: For those who haven’t yet entered the work world and learned the wonders of Alt Tab, it is a shortcut to quickly switch the visible program on your computer.  So if you have Excel and YouTube open at the same time, hitting the Alt and Tab keys at the same time will rapidly switch between the two.  Brilliant.

Tips and tricks: Alt Tab can be used successfully only when you have advance warning.  If someone pounces on you and sees you looking at Dealbreaker or Leveraged Sellout, it’s all over.  So make sure you don’t listen to blaring music, and try to position yourself in your cube so that you can see any incoming enemies and intercept them with Alt Tab.

Staffer

Typical usage: “Just walked by the Staffer’s office… he saw me and now my weekend is completely screwed.”

What it means for the Analyst: Let’s just say that if you were Spiderman, the Staffer would be Dr. Octopus.  The staffer is your arch-enemy.  He or she can end your life with a single sentence.  Avoid the Staffer at all costs and certainly don’t be anywhere near his/her office on Friday at 4 PM.

What it really means: The Staffer assigns work to Analysts and makes sure work is distributed evenly (theoretically, anyway).  This is one of the most un-wanted jobs at an investment bank, and usually only the most extreme sadists dream of one day becoming the Staffer.  The Staffer is usually an Associate or senior banker who handles this responsibility in his/her “spare time.”

Tips and tricks: Avoid the Staffer on Fridays.  You can try to befriend it, but such beasts are rather difficult to tame, so avoiding it and always looking busy is probably the best strategy.  Just make sure you always have a good explanation for why you’re so busy - the Staffer is a cunning demon and can see through the thin lies you tell.

Closing Dinner

Typical usage: “Sweet!  Closing dinner on Friday in Vegas.”

What it means for the Analyst: Relief.  The Closing Dinner happens after a deal closes and is a celebration for everyone involved.  Usually the finest restaurants, the finest wine, and yes, the finest models and bottles are involved.

What it really means: See above.  It’s a big celebration after a deal closes and you usually get to go to an exotic location (or it could just be Vegas), eat $1,000 dinners and drink ambrosia from the hands of the gods.  And the best part: you’re not paying for it.  It’s one of the most fun nights you’ll have as an investment banker.

Tips and tricks: DO NOT GET DRUNK.  Trust me on this one.  No matter how tempting it is, do not get drunk in front of your entire team and start telling stories of all your crazy youthful adventures.

DD

Typical usage: “Deal is taking awhile… their DD never ends.”

What it means for the Analyst: Waiting and sometimes formatting a company’s financials and other information so you can “add value” before sending them to the buyer.  But mostly waiting to see whether or not a deal is going to happen or not.  Sometimes you get to pretend you’re a consultant too, and you travel to wherever the buyer/seller are located.  Just hope it’s not Alaska in February.

What it really means: Due diligence.  Finding out everything and anything possible about a company you’re going to buy.  This is what private equity firms and VCs do all day.  This is usually a faster process if it’s a financial buyer (private equity) rather than a strategic, where they actually hold onto it for a long time and are therefore quite careful.

Tips and tricks: Remove yourself from the process as much as possible.  If there’s an issue, blame it on your client.  You can’t audit every single bit of information they send over.  Sometimes this tactic doesn’t work so be careful or you might find yourself in the conference room waiting to hear your severance number.

MD

Typical usage: “I completely messed up the numbers in front of my MD… my bonus is gone.”

What it means for the Analyst: If the Staffer is your arch-enemy, the MD is the man behind the curtain.   The Wizard of Oz.  The one giving the orders but not directly ordering the Analyst around.  He has the power to fire or hire you, and he doesn’t play nice.  Be respectful but fearful.

What it really means: The Managing Director.  The top of the heap.  The king of the castle.  He makes rain and brings in deals and revenue for the firm.  The only people higher than the MD are Group Heads and the executives of the firm.  The MD is usually a lifelong, battle-hardened banker who has been through it all.

Tips and tricks: Don’t screw up.  If you do something wrong in front of an Associate or VP, that’s one thing, but screwing up repeatedly in front of the MD is one sure-fire way to assure yourself of a bottom-bucket bonus and no recommendations for those exit opportunities you’ve been dreaming of.

Just Wait, There’s Even More (Maybe)

Lingo is one of my favorite topics so expect to hear more about this one in the future.

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Most importantly, however, I want to stress how willing I am to do “anything for the team.” I realize the possibility of long hours exists in such a position, and I am ready to work as hard as necessary. I have been practicing staring at a computer monitor for extended hours; I can currently sit motionless in front of a screen for 28 hours, and I am improving daily.”

-RE: Lehman Brothers Recruiting, The Leveraged Sellout

So, how do you succeed as a young investment banker?  How do you perform best in your upcoming summer internship?  What if you’re a full-time hire and you don’t want to be laid off 3 weeks into the job?

Dressing for success and buying some nice clothes might help (don’t go crazy, though).  And yeah, make sure you network and make a good impression on everyone.  Maybe try to learn some modeling before you start.

But one aspect that advice-giving bankers often overlook is the lingo.

Not the basics, like IPO, M&A and LBO - you can read about those in some book called the Vault Guide.

Let’s just skip to the interesting lingo.  The lingo that determines your life or death as a young banker.

Fire Drill

Typical usage: “Sorry for the fire drill, but we need to get this presentation out in the next 30 minutes - can you take care of it?”

What it means for the Analyst: Your life is going to suck for the next 30 minutes… or next 2 hours… or even longer, but at least it will be over at some point.  No, not your life.  The sucking.

What it really means: A “fire drill” is an emergency where you need to finish a presentation or analysis under very tight time constraints.  Generally it’s client-related (so the firm might end up getting paid something for all the insanity), although often it turns out to be completely useless.

Tips and tricks: Unfortunately, you can’t do much when confronted with a fire drill except extinguish the flames as quickly as possible.  The good thing about a fire drill is that it forces you to focus for a set period, and then all the work is done.  You may lose some hair in the process, though.

Bake-off / Beauty Pageant

Typical usage: “We have an IPO bake-off on Friday - can you work on the pitch?”

What it means for the Analyst: Your life is going to suck until the bake-off is over.  There will be many, many (as in potentially over 100) revisions of the presentation until every last comma is placed in exactly the right location.

What it really means: A “bake-off” (also called a “beauty pageant” or “beauty contest” though that sounds even weirder…) refers to several investment banks competing for the same business, whether it’s an IPO, a financing or an M&A deal.  These types of “contests” involve long and very painful pitchbooks.

Tips and tricks: The best way to deal with an upcoming bake-off is to do as little work as possible and to only do specifically what you’re told without going overboard.  If you don’t need a graph with market share by competitor, don’t do it.  Don’t submit work too far in advance of the actual deadline - this just gives people an excuse to add unnecessary material and increase your workload.

Bandwidth

Typical usage: “We have an IPO bake-off on Friday… do you have any bandwidth?”

What it means for the Analyst: Unless you answer “no” with a compelling reason, your life is going to suck until you finish whatever it is the senior banker is indirectly asking you to do.

What it really means: They are trying to give you work and assess whether you have any “capacity” (bandwidth) left to finish it by a certain time.  If you are leaving before 2 AM every night, you have bandwidth.  If you have 3 other bake-off pitches in the next few days and 5 active deals, you don’t have bandwidth.

Tips and tricks: When you’re trying to convince them you have no bandwidth, focus only on future deadlines.  It doesn’t matter how many all-nighters you’ve pulled in the past week, all that matters is how much work is due in the next 24 hours.  This one is straight out of Monkey Business and is as true today as it was back in the 1990’s.

Face Time

Typical usage: “I’d leave right now but it’s only 9 PM… need to put in some face time.”

What it means for the Analyst: Even if you have no work and no one has successfully detected this and given you work, your life is still going to suck because you can’t go home and risk alerting the higher-ups of this truth.

What it really means: “Face Time” refers to staying in the office until an acceptably late time (11 PM or later, though some offices can be more like 2 AM) so that everyone thinks you’re busy and no one gives you more work.  This concept might seem strange to those of you who don’t work in finance.  Don’t worry - it still seems strange to me and I’ve been doing this for 2 years.

Tips and tricks: Actually, many firms and offices are not as big on face time as they once were.  If you have a bad staffer (the one who assigns work to Analysts), he or she might actually go back to the office late at night and check to see who’s still there.  But even at bulge brackets, most groups have become more reasonable in recent years.

If you are in a bad group or one where a lot of face time is required, I would find other ways to get out of the office, like going to the gym on weekdays.  Also, you can start a blog on investment banking to pass the time.

Below The Bar

Typical usage: “This deal is below the bar… I think we’re going to pass on the business.”

What it means for the Analyst: Your life, for once, is not going to suck because your MD has decided to give up a client that was too small for the firm.

What it really means: Every firm has a “bar” or “minimum size” deal it will do.  The minimum size can be based on either potential fee or potential deal size (the 2 are not always directly linked, though generally a larger deal will result in a larger fee).

Most bulge brackets, for example, will not do deals below $300 million or so in size.  In a tough market this can change, but bulge brackets focus on deals over $1 billion.  At middle-market firms, the “bar” might be $25 or $50 million.

A small deal takes as much work as a large deal and generates a lower fee, so why spend time and resources on the small fish when you can land the whale?

Tips and tricks: Just keep your mouth shut and be glad you avoided some extra work.  Small deals are really painful anyway because those involved tend to be less sophisticated and cause an uproar over small issues.  So be glad you got to work on Microsoft-Yahoo, even it fell apart, rather than the sale of some $10 million family-owned business with more leaks than the Titanic.

Low Hanging Fruit

Typical usage: “Currently we only have 1 office in Europe but we’re getting requests from European customers all the time… so staffing up there to meet demand would be some real low-hanging fruit.”

What it means for the Analyst: Your life will consist of many painful PowerPoint charts and you may have visions of being a consultant for awhile.

What it really means: Clients usually use “low hanging fruit” to refer to any easy opportunities to increase sales that will become available only after they get sold… or raise money… or get taken private.

Generally “low hanging fruit” is not low hanging at all and requires substantial time and resources.  It’s just a “selling point” or “acquisition consideration” you might try to sell investors on.

Tips and tricks: Use your presentations department.  Avoid the temptation to do too much PowerPoint yourself.  I’ve seen this mistake in many banking newbies.  Also, try to mentally replace any reference to “low hanging fruit” with “this is going to take a lot of time and money and it’s all a lie.”

More To Come

This just scratches the surface - what other investment banking lingo do you use a lot, or do you want to hear about?  Again, nothing as simple as defining IPOs or M&A- you can read about those in an outdated version of the Vault guide.

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Investment Banking And Ego

“One question I’ve always wondered about whenever I read about investment banking is whether it boosts your ego.  Is everyone working at a bulge bracket basically a miniature version of Gordon Gekko? 

And as an Analyst, do you have to assert yourself to avoid being trampled on?  I know you have to have a decent ego to even get the job, but do you have a bigger ego now compared to when you started?  Or at least a thicker skin?  It would be great if you could dedicate a post to this question.”

Inquisitor:

That’s a great, great question and one I’ve never heard before.  It’s an interesting topic and I may indeed devote a post to it, assuming I can come up with something intelligent to say. (note: this has not happened yet, which is why it is being featured in Q&A for now)

I do think you develop a thicker skin and become more assertive after doing banking, both of which are probably good things.  I was not at all assertive before doing this job, but now I’m much more direct with people when I need something.  Sometimes I can come across as rude or impatient, though, so it’s a double-edged sword.

As far as whether or not it boosts your ego, that’s hard to say.  Some days you feel like you’re on top of the world, and other days you want to crawl into a hole and hide.

Sometimes you do feel like you’re Gordon Gekko, even though you’re just an Analyst, and other times you get assigned random stupid work like formatting Excel, crossing out names in documents and even manual labor (I’m not making this one up… full story coming later) and you feel like a peon.

On the whole, though, I would say it boosts your ego simply because you’re around so many important people and get to witness such high-level business discussions.

Hopefully I can write more on this topic soon.  As one of my friends observed, banking is one of the few jobs that changes peoples’ personalities, so I think there’s a lot more to explore here.

Finance: Just How Male Dominated Is It?

“In your post How To Get An Investment Banking Job you wrote: “No one at an investment bank will spend more than 2 seconds on your resume (unless you are a hot girl and attach a picture, I mentioned banks were male dominated and chauvinistic, right?).”

As a female, this made me wonder how much my looks and gender will factor into banks’ decisions to hire me.  If investment banking and finance in general are really that male dominated, should I try to dress up for interviews?  Are people really hired based on appearance, or is that all a myth?”

Inquisitor:

Well, that line was kind of a joke.  Banking is indeed male dominated, but I don’t think it’s so ridiculous that females should attach their pictures to their resumes or anything.

To be honest, I think attractive people (whether males or females) are at an advantage in the recruiting process.  And this is not just true in finance - I’ve heard the same conclusion across the board regardless of the industry.

In terms of interview attire, looking nice is good but I would not go all out and wear provocative clothing or anything.  Just by being female you will be at an advantage; if you try too hard it might end up backfiring if you happen to get a female interviewer.

Finance is still very male dominated but that is definitely changing.  The workplace is becoming more diverse, and I know of quite a few females who have very senior positions at banks.

In 2001, for example, Izumi Kobayashi made waves when she became the first female President of Merrill Lynch Japan.  And that’s in Japan, where the workplace is even more male dominated, so things are changing.

Excel Mistakes In Front Of The MD

“I’m a first year Analyst at a bulge bracket bank.  My second month into the job, I completely screwed up an Excel model for my MD.  Since I was new to the job, the file looked a bit odd to me but I didn’t see anything blatantly wrong with it. 

Before showing it to him, I had some friends check it over and had an Associate look at it.  Everyone said it was fine, but as soon as the MD saw the printout he saw a massive mistake in one cell and had a temper tantrum.

Ever since then, no matter how good my work has been, the MD has always looked at me like I’m an idiot.

Am I doomed to get bottom-tier bonus?  Is there anything I can do to save myself?”

Inquisitor:

That’s a tough one.  Assuming you can’t switch and work for a different MD, I don’t there’s much you can do beyond what you’re already doing.  People tend to have a short memory in banking so I’m surprised they’re still making a fuss over that.  First impressions are important, but 2 months into the job is well after the “first impressions” period ends.

If it continues to be a problem, I might try to switch groups (probably difficult at this point); I don’t know if I would bring it up directly to the MD because that would just make him remember the incident again.

If it’s any consolation, I screwed up plenty of times in front of my MD and he often looked at me like I was an idiot but I still got top bonus last year, so you might be worried over nothing.

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As we all know, at the top levels investment bankers are just miniature versions of Ari Gold.

But are summer interns just miniature versions of Lloyd?

Is the internship just a matter of getting abused repeatedly, fetching coffee and running around fixing printers? Or do you ever get to do anything interesting (or NOT use Excel in a given day)?

I’m afraid you’ll be buried in Excel most days. So forget about that one for now.

But what you’ll be doing as a Summer Analyst is very simple: you’ll be acting as a full-time Analyst who just started, except you’re only there for a few months.

Types Of Work: Deals, Pitches, And Random Stuff

There are three types of work as an Analyst: 1) working on actual transactions where a company is going to get sold or buy someone else or raise money, 2) pitching for those transactions, and my personal favorite, 3) the random stuff category.

As you might have surmised from this site, you want to be doing the most of #1 and as little of #2 and #3 as possible. Deal experience will be the most important part of your private equity resume, and will be the key point of all your interviews for other exit opportunities as well.

As a Summer Analyst, you won’t get as much deal experience as a full-timer would, simply because you’re only there for a few months. It’s extremely rare for a deal to start and finish in only 2-3 months; normally it takes 6 to 12 months or even years (yes, it’s harder to close a deal than it is to have a child).

So senior bankers will be reluctant to staff you on as many deals as the full-time Analysts.

Still, even as a Summer Analyst you should try to work on deals as much as possible. If you interview at other places in the fall, deal experience will be the best kind to speak about.

Why You Should Avoid Pitches And Random Stuff

There’s a misconception out there that deals are all “real work” and that pitching to win deals and doing random administrative tasks is “grunt work.”

I hate to disappoint, but this is not true. Everything you do as an Analyst has a high degree of “grunt work” in it. On deals, you do a lot of meeting scheduling, note taking, and formatting Excel files and presentations so there’s “stupid work,” even on transactions.

The real reason you should avoid pitches and random stuff is because they are not good to talk about in interviews.

Many pitches will only take up a few days, and random administrative tasks such as doing research on companies or pulling reports for senior bankers take up even less time.

It’s very difficult to make work that only took up a few days sound significant in interviews, and if you do too many of these, you end up sounding like you were a glorified secretary (which, let’s face it, sometimes you are).

Ok, So Those Are The Types Of Work… But What Will I DO?!

Within those wonderful 3 categories of deals, pitches, and random stuff, there are 4 main tasks an Analyst will complete on a daily basis:

1. Excel work.  Valuing companies or modeling a merger or acquisition or financing.  Sometimes it goes beyond this, but that’s the bread and butter of what you do in Excel.
2. Writing, in PowerPoint or Word.  For pitches you’ll write slides on industry trends, executive summaries and explanations of your analysis… for deals you will create marketing documents that “sell” your client in Word or PowerPoint.
3. Research.  This can be finding reports for senior bankers, doing industry research, or Googling for hours on end trying to find the adoption rate of cell phones in a southern province of Kazakhstan.
4. Administrative Tasks.  I hope you like scheduling meetings, taking notes, and sending out status updates to your team, because you’ll be doing a lot of that.

As a Summer Analyst, you won’t be doing too much writing of documents.  You’ll spend your time mostly supporting full-time Analysts, but given the state of the market right now they probably won’t assign you to a project by yourself… there just isn’t enough work to go around.

What You Should Be Trying To Do

You want to focus on #1, Excel work, during your internship.  Push to learn as much modeling and valuation as you can - those are the best topics to talk about during an interview.  And they’re good to know in general.

I would recommend volunteering for as much as possible and especially pushing to do as much Excel work as humanly possible - you may get lucky one day and have some bleary-eyed, full-time Analyst who has pulled one too many all-nighters ask you to do an LBO model for him.

If you have a deadline, you’ll find a way to make it work and you’ll learn a lot in the process.

What NOT To Do As A Summer Analyst

Every year there are always a few lazy summer interns who try to leave at 6 PM every day without doing anything substantial.

What do you think this is, a normal job?

If you do this you will be pigeonholed into constantly doing stupid work, like administrative tasks and stuff that has nothing to do with finance.

So don’t be that guy.

I have some other Summer Analyst Tips as well, but in general be extremely eager and don’t say/do anything stupid.  Remember that saying that “there are no stupid questions”?

That is not true in banking.  So don’t ask any.

If you have any questions at all, always ask another Summer Analyst first, then a full-time Analyst.  Resist the temptation to go up the chain because you will regret it when the Associate or VP laughs at your question on how to format something in Excel (and then decides not to give you a full-time offer).

Learn To Deal, And Learn To Model

That sums up what you want to do as a Summer Analyst: deals and modeling.  And if you do get stuck doing lots of admin work, get out… as soon as possible.

Unread Emails - I Know

I realize I have about 5,143,785 unread emails from readers - sorry guys, crazy busy week (which also explains the lack of posts).  See, even in a market downturn you get busy occasionally… anyway, I’ll reply to everyone this weekend.

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It can’t always be that bad, right? There has to be some upside. You can’t always have days where you pull all-nighters and are yelled at by 5 different Associates for 10 different things while being forced to fix printers and provide tech support, right?

Right.

I admit it; not every day is like that. That was indeed one of my worst days ever. So I’ve searched through old emails, talked to friends and former colleagues, and have pored through my own personal journal all in a quest to find my best day as an investment banker.

And I think I’ve found it.

6:30 AM - Wake up. Not because of the job, but because a friend staying at my place is leaving on vacation and has to get to the airport.

7:00 AM - Get in and begin going through emails for the day. We’re in the final stages of an M&A deal and I’m setting up some calls between the buyer, seller and other parties like the lawyers and accountants.

This sounds mundane now, but at the time I felt like I was kind of a big deal.

8:30 AM - 9:30 AM - Join an update call with the rest of my group. Associate asks me to go print a couple hundred pages of material during the call and deliver it to them. Hey, not every part of this day was good.

9:30 AM - 10:30 AM - Internal call with our banking group to decide on whether or not to take on a large, but highly speculative new deal. Remember, this was back when the market was frothy and times were good. Today, this probably wouldn’t happen.

Afterward, one of the Managing Directors pats me on the shoulder.

And you thought Analysts got no respect.

10:30 AM - 11:00 AM - Extended Starbucks break. Extended breaks can always be brushed off as, “I got caught up in a meeting” or “I was in X’s office chatting about Y deal.”

11:00 AM - 3:00 PM - Customer due diligence calls throughout most of the day. These are always amusing, because they usually consist of the private equity firm asking customers questions like, “So, what other alternatives did you consider and why did you pick this one?” and the customer responding with, “Actually I don’t even know what this company does, but it was cheap and we had already been using it for 10 years.”

In the background, the Associate on the deal and I are chatting over instant messenger and trying to decide which customer has made the dumbest comments thus far.

3:00 PM - 5:00 PM - Lawyers on both sides have made 0 progress on the Purchase Agreement in the past week. This is concealed because the language throughout the agreement has changed significantly.

However, everyone is brought to their knees when one young Associate at a well-known, prestigious law firm, points out that all the legalese is in fact 100% equivalent to what it was last week.

We decide to chat again tomorrow. Mocking of the lawyers over instant messenger proceeds in parallel.

5:00 PM - 6:00 PM - Another call held with private equity firm to discuss timing on the deal. Luckily, the Associate (and not me) sends out the incorrect call information so everyone is late and blaming him. Meanwhile I observe and smile with glee as I plug away in Excel in the background.

What, did you think this time slot was going to be me eating dinner? No sir, go to your 9 to 5 job for that.

6:00 PM - 8:00 PM - The deal is falling apart because of legal issues. When it happens, this is great because all you can do as an Analyst is merely sit back and watch. You don’t have to do any work. Client calls us to complain for a few hours and we listen and pretend to care.

Meanwhile, another deal in our office is also falling apart due to similar legal issues.

This might sound like a bad day. It certainly was a bad day for the firm, but it was great for me since I wasn’t really doing anything other than listening to calls and Internet surfing.

8:00 PM - 9:00 PM - The Grand Finale. Just as I’m getting ready to sneak out early, the CFO (I use that term with reservation; he was more of a glorified Controller) of the company in question calls me and asks my views on the process and what is going to happen.

Yes, you read that correctly. A quasi-CFO called an Analyst to ask for my thoughts and not just my Excel. I mentioned this was a very, very screwed up deal, right?

I’m sure stranger things have happened. Just not very frequently.

I get to ramble on for awhile while the CFO listens intently. Afterward I proceed to run around telling all my peers of my accomplishment.

9:00 PM - Go home extremely early and watch a TNT rerun of “A Perfect Day.” Don’t get me wrong, I’m a huge fan of Rob Lowe and The West Wing, but this movie… just wasn’t good, even for a made-for-TV movie.

It is a fitting title though, even if my day wasn’t quite perfect.

So that’s a good day as an Analyst: laughing at other peoples’ misfortunes, not having to do any real work, talking to the client on the phone over something they view as important, and leaving early to watch a bad made-for-TV movie.

Are you living the dream?

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“I’m done with school a semester early and have nothing to do between now and when I start my full-time job at Goldman Sachs / Morgan Stanley / (Insert Other Prestigious Firm Here). Should I just start in January so I can get a leg-up on other Analysts and get an additional 6 months of work experience?”

No, you shouldn’t.

I always recommend starting at the same time as the other investment banking analysts in your “class,” and not just so you can spend those months sitting on the beach and drinking Piña Coladas.

It can hurt you both financially and in terms of work experience if you go outside the norm and start in January or February before everyone else.

Work Experience Issues

If you start early, you’re not going to be put on any live deals or good projects in your first few months.

When you apply for those investment banking exit opportunities, deal experience is critical. You can’t write a private equity resume, for example, without having substantial deal experience.

Instead of giving you real work, banks will just use you for gruntwork and menial tasks - the work that more experienced Analysts do not have time for.

So you’re not going to great experience if you start early. And by the time you’ve moved up the learning curve and can actually work on real transactions, you’ll be sent off for 1-2 months of training - which means you have to stop working on your deals.

Therefore, banks are no more likely to give you real work at the end than they are at the beginning of your early start.

But How Is It Different When I First Start In August?

In all fairness, you won’t get much “real” work when you first start with the rest of your Analyst class anyway. But there are 2 big differences:

1. When you come in, a whole lot of Analysts have just left and projects are under-staffed. Which means you’ll be getting all the “real work” they are no longer doing.
2. You’ve been through training. Although arguably worthless, it makes you more credible in the eyes of senior bankers and more likely to get good projects.

Market Conditions

Back when Blackstone was buying a new company every day, there were way too many deals and not nearly enough Analysts. But when the market goes downhill and deals dry up, the amount of good experience you get goes sharply downhill as well.

New Analysts, especially ones that start early, are hit hardest by this phenomenon. When the office has more Analysts than it does deals, the newbies don’t get to work on anything substantial.

Salary / Bonus Issues

If you start early, you do have a chance of not getting a pro-rated bonus for your first 6 months.

This means effectively you’re only getting paid less than half of what you should be earning.

This is relatively unimportant in the long term if you stay in finance and keep earning investment banker salaries through the years, but it is yet another good reason not to start early.

I’ve heard mixed reports on this; some people I know of started only 2-3 months early and were actually paid nothing, while others who started half a year early did get some kind of bonus.

Going back to the market conditions argument above, though, in today’s economy you’re less likely to be well-compensated for an early start, simply because there’s less money to go around.

Go Enjoy Life

Bottom line here is to go enjoy college rather than enter the real world 6 months early. Even if you’re done with classes, you can find other interests… take athletic classes, get more involved in activities, travel the world.

It doesn’t hit you while you’re still in school (I didn’t realize it either), but the spring semester of college is the last time you’ll have to do whatever you want with very few consequences.

When you’re working 80-100 hours a week, you’ll wish you could have gone back and not started early. And you’ve already worked hard enough getting your investment banking resume in shape and practicing for your investment banking interviews; it’s fine to relax for a bit.

The Fine Print (Exceptions Apply)

As with most everything else on the site, I like to point out that there are some exceptions to what I’ve written here.

One exception occurs when you’re not in college and are instead breaking into investment banking from other fields, like engineers going into finance, lawyers becoming investment bankers, going into finance from industry, or even getting into investment banking from academia.

In any of those cases, you may just have to start immediately. Aside from these, there aren’t too many reasons why you’d want to start early.

If you’re graduating early and the bank is making you start in January or February, I would make up a story as to why you can’t do this. Some other commitment, family issues, a study abroad program you’ve already committed to, anything really.

Or just don’t tell them you’re graduating early.

No one ever said investment banking was an honest profession.

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