From Boutique Consulting Firm to Top Bulge Bracket Bank: How to Dominate the MBA Investment Banking Recruiting Process
You know you can’t buy bottles with Starwood points, but what about investment banking internships?
It’s still tough.
And if you haven’t worked at MBB, it’s even more difficult to move from consulting to IB.
But it gets easier if you combine that boutique consulting experience with a stint doing internal consulting at a PE firm and a top business school – as our interviewee today did.
He came out of the recruiting process with multiple offers at bulge bracket banks and elite boutiques, which is somewhere within the top 1% of results for MBA-level candidates.
Among other points, we discuss:
- Why it’s probably a bad idea to accept a boutique consulting offer over MBB.
- What the recruiting environment at a top business school is really like, and how to stand out when everyone else is as smart and hard-working as you.
- How to be prepared without being overbearing – a crucial distinction that sinks a lot of otherwise great candidates.
- Differences between bulge bracket and boutique interviews at the MBA level.
From Boutique Consulting Firm to Top Business School
Q: So what brought you to business school initially?
A: I had been interested in investment banking coming out of undergrad, but I graduated in the middle of a recession, and most banks were only hiring from their summer intern classes that year.
I hadn’t completed an IB internship, so I recruited for consulting roles and picked a boutique firm over MBB (McKinsey, Bain, and BCG).
That was a BIG mistake. But I was young and stupid, so…
Q: Why was it such a big mistake?
A: There is a much bigger difference between smaller consulting firms and MBB than there is between middle-market / boutique banks and bulge bracket banks.
You also gain access to a much wider network at the top 3 consulting firms and better exit opportunities all around, including options that would be very difficult coming from a boutique firm (e.g., private equity).
If you want to stay in consulting for the long-term, a smaller company might make sense, but it’s much better to work at one of the top 3 firms if you can do so.
Q: OK, and what did you do next once you had accepted this offer and worked there?
A: I ended up moving into the internal consulting group at a private equity firm and worked with several portfolio companies there.
A lot of my job was due-diligence-related and involved making recommendations to boost companies’ revenue via pricing changes and other operational efforts.
That made me even more interested in IB for a few key reasons:
- First, I won’t lie: compensation was a big factor. Investment professionals in PE were earning quite a bit more than me, and the only difference was that they had ~2 years of banking experience.
- “Deal work” had a much faster pace, more urgency, and more importance. With consulting, no one really cares what you do. Your report or presentation is the 4th or 5th item on the person’s priority list.
A lot of the people I interacted with as a consultant were junior finance managers; CFOs and other executives were rarely involved.
By contrast, capital markets and M&A activities are some of the most highly leveraged things you can do to create value for companies – so all the C-level executives are heavily involved with those.
Finally, I became more interested in finance than determining a company’s marketing strategy as I saw more and more transactions from the PE team.
Q: All that makes sense. But why did you apply for business school instead of networking aggressively?
A: I did want to get in at the Analyst level because there’s a clearer path to buy-side opportunities.
I did a fair amount of networking, but most of the MDs and senior bankers I spoke with told me to go to business school.
I had already had several years of full-time work experience by that stage, so it was tougher to win entry-level roles.
So, I ended up applying to MBA programs and won admission at one of the top schools.
Recruiting at a Top MBA Program: Shark Tank Meets Survivor?
Q: So what was the first thing you did when school began? Or did you start preparing before school began?
A: The two most important points were preparation and outreach.
Oh, and don’t listen to the “career coaches” or “career advisers” at your school – even at a top school, I got useless advice from them.
For example, one person there told me that I’d be OK if I spoke with two bankers at each firm; I thought it was bogus, so I multiplied that by five just to be safe.
Remember that these advisers are most concerned with avoiding embarrassment.
They know that someone from their school will win an offer at GS or MS, and they don’t necessarily care if it’s you or someone else.
Their goal is to make sure a reasonable percentage of students win job offers in their desired industry, but, as we both know, not all banking jobs are created equal.
Q: I agree with you on the general uselessness of career offices.
Going back to my original question, what kind of preparation and outreach did you do?
A: I didn’t do a ton of work far in advance; I got started around the time my first semester began.
For my outreach, I focused on alumni and only contacted bankers in the specific coverage group in which I wanted to work.
The PE fund where I had done consulting also specialized in that industry, so it made sense to focus exclusively on those groups.
To prepare, I went through your courses and guides and sacrificed quite a bit of time that my peers spent partying or “networking with each other.”
Q: So most of your peers who did not win offers spent too much time partying and not enough time preparing?
A: The most common mistake, by far, was falling into the trap of thinking that IB recruiting is not as competitive as it used to be.
A lot of students went into the process thinking, “I’m at a top business school. Of course they’ll want me!”
But it is still pretty competitive.
To give you an idea of numbers, one of the bulge bracket banks at our school had these stats:
- 60 people applied.
- 40 people received interviews.
- 15 went to the final round.
- 6 received offers.
Most students apply to multiple banks, so the overall success rate was NOT 10%.
Some students who failed to win offers in that process did win offers at other banks; the student success rate might have been more like 30-40%.
But it’s still competitive, and going to a top school doesn’t guarantee anything.
You need to have the technical side and your “story” mastered, but it takes more than that at this level.
Q: Like what? You have me intrigued.
A: The truth is, any idiot can walk into the interview room and tell a story about why they “want to work on deals.”
So the best way to prove your interest in the field is to know a lot about the investment banking business and recent deals before you step into the room.
I spent a lot of time on the following activities:
- Learning the “qualitative technical” side (the process behind a deal, but not specific analysis) by reading DealBook and by running screens on Capital IQ to research deals done by the group I was interviewing with.
- Finding proxy reports on deals, reading everything about them I could on Capital IQ, and even asking friends in banking about them.
- Reading annual and quarterly reports from publicly traded boutique banks and looking for comments from the CEO and management team on the business itself.
The last point is particularly important: the large, diversified banks’ reports don’t have much useful information since they do a lot more than just IB advisory.
So I scrutinized boutique firms’ public filings to understand major business trends.
I treated investment banking and M&A deals the same way someone would treat football if he/she were a football fan.
I didn’t go as far as creating a “fantasy M&A team,” but I did go far beyond spinning a good story and learning the technical questions.
Q: That’s an interesting strategy, but it also has some risks.
For example, sometimes people who do a lot of research come across as “overbearing” in interviews.
How do you prevent that from happening?
A: I think there are two main problems:
- Becoming a Robot Who Just Recites Facts – To avoid this, you should not just memorize deal information and financial figures. Instead, you should focus on the “why” and then use that to remember the numbers. Bankers will also be more impressed if you can explain the rationale behind a deal rather than citing dozens of figures.
- Coming in Acting Like You Know More Than the Banker Interviewing You – To avoid this one, you must understand that you could spend hundreds of hours researching the industry, completing modeling exercises, case studies, etc., but you will still only understand 10% of the job like that.
To really “get it,” you need to be a banker first.
So you have to admit upfront that even if you have good technical knowledge, you still don’t know as much about the job itself as your interviewers.
Q: Can you give an example of how that attitude could lead someone astray, and what you could do to correct yourself?
In one interview, the banker asked me a question on depreciation of PP&E, and then asked a follow-up question about how I would value that PP&E if it generated a certain amount of cash flow.
In my answer, I made a reference to LBO modeling, and the interviewer then asked me if I knew how to do it.
Instead of saying, “Yes” or “Sure, I’ve done some practice exercises on my own,” I made a joke out of it and said, “I can try.”
You want to come across as “informed, but humble.” You’ve done your homework, but you still have plenty to learn.
MBA-Level Interviews: Case Study Extravaganza?
Q: That neatly leads us to the next topic: interviews themselves.
Beyond what we’ve already covered, were there any surprises or key differences at this level?
A: Not really, but I got a lot of ethics-related questions.
A lot of banks like to test your “moral compass” and make sure you won’t short those CDS that a client just bought.
They also frame many of the qualitative questions differently. For example, instead of asking the standard “greatest weakness” question, they asked about a group exercise at my school and the peer feedback I received.
It was still a “weakness” question, but I had to come up with something on the spot because I hadn’t prepared for that specific question.
Technical interviews turned out to be easier, because I was much more prepared than the average candidate.
Q: Were there any differences between different banks? How common are case studies at this level?
A: Technical questions varied tremendously at different banks.
The large banks tended to ask predictable questions about changes on the financial statements, picking the right comps, etc., while the elite boutiques asked questions that were closer to case studies or extended exercises.
It makes sense if you think about it: the top boutique banks compete by hiring the best and brightest.
But you’re a bit more of a “cog in the wheel” at a large institution, so you don’t necessarily need to know the underlying concepts as well.
The most challenging technical interview I had was with an elite boutique: they asked me to build a 3-statement model based on a company with long-term contracts and a high deferred revenue balance.
Then they asked a lot of detailed questions about:
- How to set up a DCF for it;
- What range of discount rates would be appropriate, based on the theoretical maximum and minimum for the company’s valuation; and
- The relationship between discount rates and multiples.
So you had to understand the fundamental concepts at these firms.
Memorizing questions and answers or completing simple exercises would not have worked at all.
Picking an Offer: Decisions, Decisions
Q: You were very successful with your recruiting efforts, winning multiples offers from the elite boutique and bulge bracket banks.
How did you decide on an offer?
A: There was a lot of conflicting advice, but only people in the finance industry recommended the elite boutiques.
Their rationale was that the elite boutiques offered a better lifestyle, less office politics, more independence, and more interesting work.
And I agreed with them: if I wanted to be a career banker, it would have made more sense to start out at an elite boutique.
First off, no matter what they tell you, deals and clients will generally be smaller.
Also, the elite boutiques have little brand-name recognition outside of finance. Everyone worldwide knows “Morgan Stanley” or “JP Morgan,” but only finance professionals know the top boutique banks.
I wanted to keep my options open, so I decided to accept an offer at one of the bulge bracket banks.
Finally, this option may sound crazy, but I might even end up going back to consulting – but at MBB this time – in which case a bulge bracket bank also looks more impressive.
Q: Back to consulting? Yes, that is crazy.
Before we wrap up, any final thoughts, questions, or tips?
A: What are your thoughts on exit opportunities for Associates?
Is it “impossible” to move into buy-side roles at that level?
Q: That’s a great suggestion for a future article…
UPDATE: I ended up writing this article on post-MBA investment banking exit opportunities. Check it out!
A: Great! Thanks for writing that one. And I hope your readers found this interview helpful as well.
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