Investment Banking: Pakistan Edition
But this is such a good interview and has such specific information that I wanted to publish it anyway.
Plus, the interviewee has been a long-time reader of M&I and captured the personality of the site very well. So let’s get started and learn all about banking, PE, recruiting, and the lifestyle in an emerging market that might be completely off your radar.
Q: Can you tell us about your background?
A: I play the drums. I love buffalo wings with sour cream and ginger ale. I love stargazing. I’m a huge Tolkien fan. I find jazz very relaxing. I just discovered a hidden passion for photography and hopefully I’ll be traveling to Iceland in a few months after I buy a Canon DSLR.
I was born in Abu Dhabi and raised in Dubai. My father retired from his marketing job and we moved to Islamabad (Pakistan’s capital), where I completed high school and undergrad. I was a very distracted student during my O/A Levels because I really didn’t know why I was studying and what I wanted to do, so I definitely lacked direction for a time.
But during the first year of my undergraduate, I got really interested in corporate finance and M&A – so I actually performed decently and did much better than in high school.
After graduating, I networked my way into an investment banking analyst position at a bulge bracket bank in Karachi (Pakistan’s finance capital), and then I moved into private equity in the same city.
Q: Most Westerners know very little about Pakistan aside from what’s reported (accurately or inaccurately) in the news. What is the country really like, and how is the finance industry there different? Are the rumors of economic collapse / bankruptcy true?
A: A recent Newsweek cover described Pakistan as “The World’s Bravest Nation” – after describing it 3 years earlier as “The World’s Most Dangerous Nation.” I know the general perception is that it’s a country filled with corruption, religious fundamentalism, and no roads or women.
There is an element of truth to those claims, but for the most part we’re just regular people and most of what you read about in the news corresponds to a very small part of the country.
So don’t believe everything you read about the claims above (especially the part on roads and women) or the frequent accusations of terrorism – there are isolated extremists here but they are not representative of Pakistan at large.
Economically, we were always an underdeveloped country due to corruption from previous governments – but during Musharraf’s 10-year rule we were elevated to “developing country”status. Since that time the rulers have been questionable, so the progress has been disappointing since then.
The rumors of economic collapse are untrue. We’re not in the best shape right now, but we’re far from bankruptcy – the US and its allies also have too much of a stake in the country to let a bankruptcy happen. And we’re part of an IMF program that has pledged billions to us over the next 3-4 years.
Overall finance is still very much in a growth phase here, and private equity is at a nascent stage; Islamic finance is developing rapidly and corporate finance is also thriving. Hedge funds don’t exist yet, but many banks do have investment banking divisions and a handful of research and brokerage houses here offer investment banking and related services.
Q: What’s different about recruiting there? Do they prefer certain backgrounds or certifications?
A: The recruiting process for both IB and PE is highly unstructured.
Unlike the US or Europe where certain “paths” are preferred, here you can transition from almost any finance-related field into IB or PE.
I know people who have gotten into investment banking from industry, management consulting, and research, and people who have gotten into PE from Transaction Advisory Services, research, middle office trading support roles, and corporate banking.
My VP (from the US) would always tell this analyst at my bank that the CFA was completely useless in banking, but in Pakistan people have been conditioned into believing that a CFA + an accounting degree is the key to achieving unprecedented glory.
Wheeling & Dealing
Q: You were at a bulge bracket bank there – do the other global bulge bracket banks have presences in Pakistan, or are local firms more common?
A: It’s a mix of both. JP Morgan has been here since the early 90’s, Citi even earlier than that, and Credit Suisse has been here since 2008. UBS and BoAML operate through local affiliates, but aren’t officially here.
Even though they’re bulge bracket banks, they usually work on deals worth around $100 million USD – sizable for here but small by US standards.
M&I Note: Middle market banks in the US would do deals of this size; most bulge brackets focus on $500M+ or $1B+ deals, though they do occasionally go lower depending on the market.
Since that’s “the bar” for bulge bracket banks, smaller, local firms – called “investment houses” – advise on deals worth less than $100 million USD.
They offer everything from research to mutual funds to M&A advisory and capital raising. Two of the largest investment houses also have consumer and corporate banking divisions that they use for syndications.
Pure-play boutique investment banks are still very rare here – off the top of my head I know of just one firm that offers only M&A advisory and restructuring services to clients.
Q: What types of deals and companies are most common in Pakistan?
A: The breakout for deal types is something like this:
- Debt Financing: 70%
- IPOs: 15%
- M&A: 10%
- Restructuring: 5%
M&A is most common in the banking and telecom sectors. Here’s a table of M&A activity from 2002 – 2010 that I’ve been updating from time to time:
M&A in Pakistan rarely takes place to create value – this consolidation in the banking sector is driven by regulatory requirements (specifically higher capital adequacy requirements).
The actual rationale for M&A activity would be more interesting to look at – in my opinion it’s something like the following:
- Regulatory: 65%
- Gain Market Share: 20%
- Divesting Operations or Exiting from Pakistan: 10%
- Private Equity Investment: 5%
- Value Creation: 0%
The government also has a massive privatization program in place (the numbers above exclude this, by the way) and so all the bulge brackets submit RFPs (Requests for Proposals) to the Privatization Commission for each deal.
Even some banks like Goldman Sachs, Morgan Stanley, and UBS that don’t have a direct presence in Pakistan will fly in, submit their RFPs, pitch, and fly out – they’re known as “parachute bankers.”
Some local firms also work on these privatization transactions, while the bulge bracket banks focus more on attracting institutional investors via road shows or finding international buyers for assets that the government is divesting.
Here are lists of completed and upcoming privatization transactions in Pakistan:
Q: You mentioned how you networked into investment banking and then into private equity – how is it different in Pakistan? Do informational interviews and cold calls still work?
A: Right, so just to give you a brief overview first of how I networked my way in:
I went to a non-target school, but I did have 5 internships and decent extracurricular activities, as well as the resume template on your site. And I knew a lot about investment banking and private equity and kept up with global M&A deals and private equity activity via the NY Times Dealbook site.
A year before my graduation, I cold-called the bulge bracket bank I worked at – they’re known for only hiring summer interns from top US and UK schools, so it was a bold move.
A man picked up and I asked to speak to someone regarding summer internship opportunities in investment banking – the guy replied with, “I’m the guy” and he turned out to be my future VP.
I asked about the recruiting process for summer internships and he said they had already gotten started with interviews – but to email my resume anyway so he could send it to the team.
I did that, and about an hour later he replied and said, “When will you be able to join us for an internship?”
Q: Wait a minute, so you actually got an internship just by cold-calling a bulge bracket and asking for one?
A: Far from it, though that’s what I actually thought at the time – I didn’t even get an interview. I think he was just asking that to see when I would be free for an internship rather than actually giving me one on the spot.
He said they really liked my resume but were looking for a winter intern, which didn’t work for me timing-wise due to classes.
Over the next 5-6 months, I stayed in touch, emailed him on his birthday a la Bud Fox, added him on LinkedIn, and even sent the occasional random link.
Q: So you actually pinged him consistently – that’s interesting because I usually tell readers NOT to worry about constantly staying in touch and to focus more on making a good first impression and then asking for what they want when the time comes.
A: Right – you do have to be subtle if you want to take this approach. I didn’t want to give the impression that I was stalking him or wanted to be his best friend.
I did this more because I had an uphill battle given my school and background, and because there just aren’t as many banks in Pakistan – so it’s not like the US where you could easily go through hundreds or thousands of contacts to find the most helpful bankers.
Q: So what was the final outcome here?
A: In May I called him again, sent him my updated resume and “reiterated my interest” for an investment banking analyst position.
Despite being up against 100+ candidates from target schools, I was interviewed and offered the position.
What worked in my favor?
- I was myself and had the ability to laugh at myself – I didn’t act like some super-genius with perfect grades who claimed to know everything about finance.
- I had a burning desire to get into investment banking – I read everything and anything related to banking that I could find and this came across with how much I knew about the industry vs. the other candidates.
Q: What about your move into private equity? Did you go through a headhunter there or was that also networking?
A: Networking, once again. I cold-called my current PE firm’s Dubai office and spoke to a Partner there – we chatted about how Dubai has changed over the years and about the Middle East PE market in general.
I sent my resume, he forwarded it to the Partner in Karachi, and I interviewed a couple times and was offered the position.
M&I Note: This may seem ridiculous, but keep in mind that in certain parts of the world they are looking for very specific people and recruiting is less structured. It would be tough to pull off the scenario above in the US, but the same is not true in emerging markets.
Q: So it sounds like overall, the standard networking strategies still work and may even work better since recruiting is so unstructured in Pakistan.
You mentioned before how knowing so much about investment banking gave you a big advantage – but doesn’t everyone coming out of target schools there know the industry quite well?
A: No! A lot of students from top schools have absolutely no idea what investment banking or private equity are.
I’ve interviewed candidates from top schools here and this is how interviews often go:
- Me: What do you think investment bankers do?
- Interviewee: They make investments so that you get higher returns.
- Me: Higher returns… um, ok, and why do you want to get into investment banking?
- Interviewee: I’ve heard really good things about investment banking and [Interviewee inserts objective from his/her resume and “pitches” it] and how much I can learn there and bring my skills to the organization.
- Me: Right, we’ll let you know.
One time I had a PE candidate try to convince me that he was a “private equity investor” because he invested in the stock market.
I’ve come across only one candidate who made a convincing argument for why he/she should work in investment banking or private equity. And I’ve met hardly anyone else who has networked his/her way into IB or PE here like I did.
But as you can see from my story, it’s definitely possible – if you’re hungry and motivated, you can do pretty much anything.
Private Iniquity, Pay, and Exit Opps
Q: Not to sound like those annoying kids in Harold & Kumar, but what’s it like working for a PE firm there? What types of companies do you invest in, and is your job more about sourcing or execution?
A: Work is very unpredictable, which makes the hours unpredictable as well. I’ve pulled all-nighters, and I’ve found that there is a massive cultural difference / work ethic difference between local firms and international firms.
PE firms here do not focus on specific sectors – they’ll invest in anything from green/brownfield projects to mature companies and even distressed assets.
LBOs are highly uncommon here and so most of these investments are minority stake acquisitions instead.
Work is a function of sourcing and execution – I’d say I spend 20% of my time on sourcing (looking for new investments) and 80% on execution (doing due diligence, modeling for investments, and coordinating our team).
Q: As with other emerging markets, I’m assuming that salaries and bonuses are lower on an absolute scale but higher on a relative basis if you take into account the cost of living – is that accurate?
A: Yes, definitely true. In a good year, an analyst at a local firm can make 10 to 15 times his monthly pay with his bonus (around 80% to 125% of his annual pay).
In average years an analyst’s bonus might be around 50% of his annual pay – which is quite a lot of money in Pakistan.
Q: And are your co-workers all from Pakistan or are you starting to see immigrants there as well?
A: Right now there are hardly any immigrants – it’s 99.9% Pakistani co-workers.
Q: What are your future plans?
A: I’m planning to attend business school in 2 years, ideally at Wharton. I do want to stay in PE, and post-MBA I’d want to go to a larger firm in the US and work there for a few years before returning to the Middle East or Pakistan. If all goes well, I might start my own buyout fund here one day.
I also want to take up stellar and extragalactic astronomy – it has always fascinated me. And if I have enough capital, I want to start a theme-based restaurant at some point.
Or I could just take the CFA…
Q: Please, don’t.
A: Yeah, I think my own restaurant would be more fun anyway.
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What’s In Investment Banking Pitch Books?
If you’ve been reading this site awhile, you’ve seen a number of references to pitch books – whether they’re in day-in-the-life accounts, explanations of what bankers actually do, or even horror stories from other sources.
But there hasn’t been much detail on what goes into pitch books, why you spend so much time on them, where you can get some samples, and how you can learn to make them.
So let’s get started:
Types of Pitch Books
People use the term “pitch book” for almost any type of PowerPoint presentation that you create in investment banking.
But this is too broad for our purposes, so I’m going to split “pitch books” into the 3 main types of presentations you create:
- Market Overviews / Bank Introductions – Introducing your bank and giving updates to potential clients.
- Deal Pitches – Sell-side M&A, buy-side M&A, IPOs, debt issuances, and so on.
- Management Presentations – Pitching a client to investors once you’ve actually won the client.
There are other types and sub-types, but 99% of your work in PowerPoint falls into one of these 3 categories.
These 3 main variants have a few common elements:
- Title Slide with the date, bank or client logo, and description of the presentation.
- Table of Contents listing the different sections right after the Title Slide.
- Slides with bulleted text and slides with graphs / diagrams.
There are no fancy transitions, animations, 3d effects, or anything else: pitch books are printed out 99% of the time, so none of that makes sense.
The length varies widely – some presentations might be 10 pages and others might be 150 pages depending on the category, where you’re working, and how much your MD wants you to suffer.
Market Overviews / Bank Introductions
This is the simplest type of pitch book – it’s usually around 10-20 slides that introduce your bank and give an overview of recent market activity to “prove” that your bank knows what it’s talking about.
1. Slides showing your bank’s organization, the different departments, and how “global” you are.
2. Several “tombstone” slides that show recent deals your bank has done in a particular sector. So if you’re presenting to Exxon Mobil, you might show recent energy M&A deals, IPOs, and debt offerings you have advised on.
Along with these, you might create “league table” slides that show how your bank ranks in different areas like tech M&A deals, equity issuances, and so on.
3. “Market overview” slides showing recent trends and deals in the market and data on how similar companies (“comps”) have been performing lately.
These types of pitch books are the least painful for investment banking analysts because you mostly just copy slides from elsewhere and update existing data.
Some banks don’t even use these types of presentations at all – they’re more common at smaller banks where you actually need to introduce yourself.
Sell-Side M&A Pitch Books
Here’s where the fun begins. These pitch books are the longest and most complex, and can sometimes be well over 100 slides.
You create these when a company says, “We want to sell, and we’re holding a bake-off to select a bank to represent us. You get to play – create a presentation and then pitch us on why we should choose you.”
The usual contents:
1. Bank Overview
This is similar to #1 and #2 above, but there’s more of an emphasis on cutting data in creative ways to make your bank look better than it actually is.
“We’re not #1 in energy deals over $1 billion? Try $1.5 billion… try North America only… try between $750 million and $1.5 billion!”
2. Situation / Positioning Overview
Here’s where you create a few textual slides on what makes the company attractive and how you would pitch it to potential buyers.
You might also create graphs showing how quickly the market is growing and how this company dominates the competition, even if it doesn’t.
3. Valuation Summary
This is where you exaggerate the company’s value and make bold promises so that your bank can win the deal.
You start off with a textual summary, then present the infamous “football field” graph showing the company’s valuation according to different methodologies.
Then you show individual methodologies such as public comps, precedent transactions, and a DCF.
Senior bankers usually know how much a company is worth, so they give you a number and you have to work backward to make the data support it.
Yet another reason why banking is not rocket science.
4. Potential Buyers
This is where you give an exhaustive list of everyone who could potentially buy this company.
You might split this into strategic acquirers (normal companies) and financial sponsors (PE firms and hedge funds), and you include a summary slide in the beginning followed by detailed descriptions (“company profiles”) afterward.
This can easily be the most painful section of the entire pitch book.
Imagine looking up a company’s business description, products, executives, and financial information and pasting all of that into PowerPoint… now repeat that 20 times.
5. Summary / Recommendations
You give advice and recommend how many buyers the company should approach, how long it will take, and what your bank is going to do in this section.
These are almost always templated slides taken from other presentations, so this part isn’t too painful.
This contains all the data that no one reads.
You might paste more detailed models, backup data, and even lengthier lists of company profiles into this section.
Bankers like to make presentations as long as possible so thick appendices are very common.
Buy-Side M&A Pitch Books
These are similar to sell-side M&A pitch books, so I won’t repeat everything – the key differences:
- They’re shorter because not as much data is stuffed into the appendix.
- Rather than listing potential buyers, you list potential acquisition candidates – this list may be much longer and you may create more profiles for these companies.
- There’s not as much information on the company’s own valuation – you’re buying another company, not being sold.
Despite being shorter, buy-side pitch books may be more annoying because you have more time-consuming company profiles.
Debt Financing or IPO Pitch Books
These are both similar to the sell-side and buy-side pitch books above. The differences:
- There are no company profiles and no potential buyers / potential acquisitions sections.
- You include relevant financing models – for example, an IPO model showing what multiple a company might go public at and how much in proceeds it will receive.
With no company profiles, these presentations are somewhat less painful than M&A pitch books.
These pitch books – created for real clients instead of prospective clients – are less quantitative and are more focused on the client’s strengths.
You’re pitching the company itself to investors (for debt / equity offerings) or to potential buyers (for sell-side M&A) so you use the client’s colors and presentation theme rather than your bank’s.
The structure depends on the client’s industry – a management presentation for a bank will look much different than a presentation for a tech company.
If we assume that the company is a “standard” one selling products or services to customers, a typical structure might be:
- Executive Summary / Company Highlights
- Market Overview
- Products & Services
- Sales & Marketing
- Expansion Opportunities
- Org Chart
- Historical & Projected Financial Performance
You never use company profiles, information about your own bank, information on other companies (e.g. showing the comps), or valuation data in these presentations.
You still use a mix of bulleted text slides and graph/diagram slides, but it’s harder to generalize the exact slides you might see.
Common slide types: Bar graph showing the total addressable market each year; graphical display of all the company’s products; customers by geography, industry, and size; historical and projected income statements and the most recent balance sheet.
For asset-heavy industries like financial institutions and oil & gas, it doesn’t make sense to discuss “products” or “customers” so you would instead give more detail on their assets, proven and unproven reserves, and so on.
Management Presentations are less repetitive to create than other types of pitch books, but they also take more time to complete.
You might throw together a sell-side M&A pitch book in a few days, but management presentations often take weeks.
That’s not because they’re longer – most of the time they’re actually shorter, in the 30-50 slide range.
Instead, they take more time because you need to interact with the client, get their feedback, and go through more iterations.
The US tends to have the lengthiest pitch books – bankers there like to do work for the sake of doing work.
In emerging markets, such as investment banking in Saudi Arabia, pitch books tend to be simpler and less focused on numbers.
English is the predominant language used in pitch books, but sometimes you see local languages depending on the market – the best example is Japan, where you pretty much need to know the language or you can’t do anything.
Other Types of Pitch Books
There are a couple other types of pitch books and sub-types of the ones described above:
1) Combo Pitch Book / Scenario Analysis
A company isn’t sure whether it wants to go public or sell – so you create a pitch book with both scenarios and show the tradeoffs.
You might also do this if you’re pitching a restructuring deal and you want to show what happens if the company sells vs. declares bankruptcy vs. restructures itself vs. refinances its debt.
2) “Targeted Deal” Pitch Book
A buyer has just approached your client with an acquisition offer and you want to show accretion / dilution under different scenarios.
In this case you would skip all the upfront materials about your bank and just get into business, showing mostly numbers from your analysis.
3) “Client Update” Presentations
You create these if you’re running an M&A deal and you want to update the client on your progress.
You would skip all the fluff and just create a few slides showing who you’ve contacted, what they’ve said, and a summary of any offers received so far.
4) Fairness Opinions
You do these right before a deal is officially announced – they consist of detailed valuations that prove the price your client is receiving (or paying) is “fair.”
Again, you skip all the fluff and get straight into business with a few slides that summarize the offer terms and then a whole lot of slides with valuation graphs and data.
Differences at Boutiques vs. Bulge Brackets
Pitch books are similar no matter what bank you’re at, but there can be a few differences:
- Bulge brackets tend to be more numbers-focused while smaller places may be more qualitative and market-focused.
- Bulge brackets often show more scenarios than boutiques and therefore have lengthier pitch books.
In Other Areas of Finance
Sometimes you see similar types of presentations in private equity, hedge funds, and asset management.
But these presentations are shorter and have less fluff compared to investment banking pitch books.
Some buy-side firms like to make analysts and associates create “investment memos” that summarize everything for the Partners before they make an investment decision.
These look similar to the Management Presentations described above – whether or not you do them depends on your firm’s culture.
Why Do You Spend So Much Time On Them?
You never create pitch books from scratch – you’re always working off of templates and pasting in data from other sources.
So that raises the question – “If pitch books aren’t rocket science, why do you spend so much time on them?”
Much of this goes back to why bankers work so much – so let’s go through the reasons.
You will spend a lot of time making sure that everything is properly footnoted, that all your sentences end with periods, and that the employee counts for all 50 of your company profiles are 100% correct.
If you’ve read Monkey Business, you already know about this one: yup, nothing has changed in 20+ years.
When you distribute your pitch book, the Associate will make one set of changes, the VP will make another, and the MD will make another – which results in conflicts on every single slide.
You will also spend a lot of time receiving marked-up pitch book faxes at 3 AM and then implementing all the changes.
Dozens of Revisions
It’s not uncommon to see “v73” and other large numbers at the end of each file name – sometimes you go through over 100 revisions of a single pitch book.
These have diminishing returns after the first few major changes, but bankers follow the 20/80 rule instead of the 80/20 rule.
You’ll also spend a lot of time trying to decipher what your VP meant when you can’t read anything he marked up in red pen on your latest draft.
Inefficiencies & Pride
It’s one thing if a senior banker wants to sketch out a new graph for you to create, but often they re-write the text of entire slides on the printouts of those slides.
That alone takes longer than re-typing it in the first place, but then it also costs you time because you have to read their markup, interpret it, and type it all over yourself.
Why? Because senior bankers are “above” editing PowerPoint files directly.
Finally, bankers have irrational obsessions: if you’re not murdering people in your bathtub, you’re changing minutiae in a pitch book instead.
When you’re pitching a company, relationships and the actual in-person pitch matter far more than the presentation – but rather than focusing on those, bankers like to spend time on tasks they feel more comfortable with, like changing font sizes in a presentation.
Where Can You Get Example Pitch Books?
They’re quite tough to come by – leaked pitch books are easy to trace back to whoever leaked them because they include bank logos and specific company names.
So, it’s far more difficult to get sample pitch books than it is to find sample Excel models.
Still, you can find a few if you scour the Internet:
- BAML – Sports Authority – Deal Process Update (Consumer/Retail)
- MS – How to Prepare for an IPO
- Sandler O’Neill – Bank & Thrift M&A Presentation (FIG)
- Robert Baird – Gehl Compact Equipment Valuation (Industrials)
- Silverwood Partners – Media & Technology Industry Update
Many of these are quite old, but bankers are creatures of habit, and pitch books barely change aside from the formatting and color schemes.
These tutorials walk you through the process of creating a sell-side pitch book as well as company and deal profiles that you could use in assessment centers, case study-based interviews, and even on the job itself.
These aren’t 100% representative of what you’d see at a bank because they skip over the “bank introduction” section – but you don’t do much original work there as an analyst anyway.
What Do You Do With Them?
Before you start working in banking, you should get familiar with the layout of these different types of pitch books and try to learn some PowerPoint basics.
Don’t go crazy with it because a lot of the process depends on your bank, but it’s always good to know the structure and how to arrange slides, text, and objects before you start working.
More questions? Ask away.
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