by Brian DeChesare Comments (171)

From Analyst Monkey to King of the Jungle MD: The Investment Banking Hierarchy

investment-banking-hierarchy

“This is not a fraternity house,” my staffer explained as he hauled me into a small conference room.

“Some of the MDs have complained about how messy your desk is, so clean it up.”

Genuinely curious, I replied, “Were you referring to the empty Red Bull cans or to all the papers too?”

Not a good start to your 3rd week on the job.

I told this story to a few co-workers afterward and they all laughed and responded the same way:

“He’s lying, a bank is exactly like a frat house.”

They were right – just like a fraternity, there’s hazing, a hierarchy, and certain rituals you must go through to advance.

While this site has been analyst-focused in the past, today you’re going to learn all about this hierarchy, how much you get paid at each level, how the work differs, the average age range, and the possible exit opportunities.

And if you’re curious about hours please stop reading this site right now.

Footnotes & Starting Assumptions

As with the analysis of where your paycheck goes, here I’m starting with the assumption that you’re in a developed country in a major financial hub like New York, London, or Hong Kong.

At the end you’ll learn how this hierarchy might differ outside banking, outside those cities, and in other countries.

These pay figures are not exact – I used recent salary and bonus figures, data from the Careers-in-Finance compensation listings, and other sources like that to get numbers.

So yes, there are exceptions and sometimes you see more pay or less pay – these are rough averages.

Let’s dive right in and start with the bottom of the hierarchy: the analyst monkey.

Analyst

What You Do: You’re a monkey, and your chief responsibility is to collect bananas for the bigger monkeys higher up in the food chain.

You do most of the Excel and PowerPoint work, take notes, send emails and call people, and even take care of random tasks like fixing printers and picking up dry cleaning.

Most of this site has been focused on what analysts do, so see all the day in the life and week in the life posts for more.

How You Get In: You’re recruited from a top undergraduate or Master’s program, or you network like a ninja and get in from a lesser-known school. Once you go beyond a few years of full-time work experience, you won’t get in as an analyst because you’re overqualified.

Yes, some people pull this off anyway but it gets exponentially harder the longer you’ve been working.

Age Range: Most analysts are just out of school, so 22-27; in countries with military service or with 5-year undergraduate programs (Europe) the upper end of the range is more common.

Pay: This varies by region and the state of the economy, but most 1st year analysts make at least $100K USD all-in (base salary + bonus) and that may go up to $150K or more if the economy is good.

2nd and 3rd year analysts see increased pay, usually closer to $200K in a good year for a 3rd year analyst, and maybe $150K or a bit less on the lower end in a bad year.

Time to Get Promoted: Usually it takes 3 years to become an associate.

Possible Exit Opps: See our comprehensive article on IB exit opportunities.

Analysts have the most exit opportunities out of all bankers because they’re young and haven’t had “too much” experience in a certain field yet.

Associate

What You Do: If the analyst is the monkey, you’re a bigger and better-groomed monkey who’s much smoother in social situations.

You may still do Excel work if the model is complex, but mostly you are checking the analyst’s work and making sure he doesn’t screw up. You spend most of your time managing the analysts and making sure the VP’s orders get executed.

Much of your time is spent talking to clients and seeing what they need when you’re working on deals; analysts are too busy cranking away to have much client interaction, at least at large banks.

You get to attend more meetings and pitches than the analyst, but you will always have a non-speaking role unless the MD needs a number from you.

How You Get In: You either work as an analyst for 3 years and get promoted, or you get recruited out of a top MBA program after working full-time for 3-5 years in another industry.

Theoretically you could get recruited for an associate position if you’ve already graduated from an MBA program and have been working in industry for a while, but this is rare – your chances are 100x better when you’re still in school.

Age Range: This one varies more than the analyst age range because associates come from more diverse backgrounds; 25-35 is the safest estimate because some associates are promoted directly from the analyst pool while others get recruited out of business school.

Getting in when you’re under 25 would be virtually impossible unless you graduated college early, and having 10+ years of experience pre-MBA makes you overqualified.

Pay: Again, there’s more variation here than with analyst pay because the bonus takes up the bulk of an associate’s compensation and that’s heavily dependent on the economy.

In a bad year, a 1st year associate might get between $150K and $200K USD all-in, while more senior associates (3rd and 4th years) might get closer to $400K or $500K all-in in a great year.

If your group is just OK and the economy is neither great nor terrible, your pay will be in the middle of that range.

Time to Get Promoted: Usually it takes 3-4 years to reach Vice President, and it’s harder to get that promotion than it is to go from analyst to associate – you need to show more leadership and client management skills.

Possible Exit Opps: It is more difficult at this level, but the same exit options that exist for Analysts also exist for Associates.

There’s less of a structured process, and you have to be far more proactive in reaching out to recruiters and networking.

Beyond buy-side roles, other common destinations include corporate development at a normal company or corporate finance.

Vice President

What You Do: Moving up the pyramid once again, you are an even larger and more intimidating monkey, and you’ve got lots of barrels to throw down at the chimps below you climbing up the ladder.

You make sure that deals and pitch books get done – you interpret what the MDs and Directors want, and ensure that whatever pops out of your analyst’s cubicle resembles it.

You get a lot more client interaction, and may call buyers and directly pitch a company that you’re selling.

And as you move up, you have to start shifting over to relationship development and winning clients – which is incredibly tough and one of the most difficult transitions to make.

How You Get In: You get promoted after working as an associate for 3-4 years.

It’s extremely rare to break in as a VP coming from outside banking, and I’ve never seen it happen. To have the skills required to run deals and win clients you need to have been in banking for a long time.

Age Range: Since you must have been an associate first, we could say the age range is 28-40, with the average somewhere in the middle.

Pay: There’s even more variability since the bonus takes up such a high percentage of your compensation; base salaries do not increase that much as you move up (even MDs might see only around $150K-$200K base).

Most VPs will earn between $300K and $1MM USD, with the upper-end of that range for more senior VPs in a good year and the lower end for more junior VPs in a bad year.

Time to Get Promoted: Probably another 3-4 years to reach Director / Principal / SVP, though it varies and you may do it more quickly depending on performance.

Possible Exit Opps: Even more limited than associates – either stay in banking or go to a normal company in corporate development.

Moving into PE from this level would be “challenging” to say the least, and even in other fields of finance you would have too much experience to have a good shot.

NOTE: Again, though, in practice people can and do move around – so exit opportunities do still exist even at this level

Director / Senior Vice President / Principal

What You Do: This one is a mix between what VPs and MDs do, and the role differs depending on the bank and group.

Sometimes you focus more on developing relationships and winning clients, and other times you do more execution work and project management like VPs.

But no matter what your role is, you will have to move closer to winning clients if you want to advance to the next level – Managing Director.

How You Get In: You’ve already been an associate and a VP, and you get promoted to this level after a few years of being a VP. I challenge you to find a single example of someone who was not already in investment banking and entered the industry at this level – it doesn’t happen.

Age Range: Sometimes you could get promoted more quickly (2 years rather than 3-4), so we’ll say 30-45. 45 is on the high end and you’d see that only if the person did something else for many years before getting into business school and then investment banking.

Pay: This one’s hard to pinpoint because it’s somewhere in between VP and MD in terms of pay; we’ll say $400K – $1.5MM USD to reflect that range.

As with the other pay numbers here, you should expect the lower end of the range in a bad economy if you haven’t performed well (your closed deal count is low or nonexistent) and the higher end of the range in a good year.

Time to Get Promoted: Similar to the others, a few years to go from here to the next level: Managing Director. We’ll say 2-3 years to get a specific number.

Possible Exit Opps: Imagine a blank screen with no visible life forms. Now imagine seeing this every day after you quit or get fired.

In all seriousness, you could always move over to the corporate side but it would be tough to move into other fields of finance from this position unless you happen to be a serious rainmaker and you have enough contacts to make yourself useful to a PE firm or other buy-side firm.

Managing Director

What You Do: You’re King of the Jungle. All the other chimps answer to you, and you move them around much like a chess grandmaster would move around pawns, bishops, and knights.

90% of your time as an MD is spent winning clients, meeting companies, and developing relationships – you fly around to conferences, meet with PE and VC firms, and position yourself to advise CEOs and win deals.

Occasionally if there’s a massive deal and it’s too big to fail, you get involved with the negotiations. Or if you have a special relationship with an investor or buyer, you may pitch a client to them.

But otherwise, you are sitting back and bringing in new business while everyone below you executes.

How You Get In: Most of the time, you’ve been a banker for life (or close to it) and you’ve worked at all levels in IB before – often across many different banks.

Sometimes you do see MDs who get into the industry from other fields (e.g. a Partner at a law firm that focuses on corporate and securities law, or a PE Partner who has lost his sanity and wants to move back to the sell-side).

But those scenarios are rare even at this level and you don’t see them much at large banks.

Age Range: This one is impossible to define precisely because some MDs really do stay in it for life, or at least until retirement age – for most bankers it is the highest they’ll ever go.

We’ll say early 30’s is the minimum age here, but on the upper end of the range there’s no limit – you rarely find MDs who are past their 50’s, though, so maybe that’s the limit.

By that time they are either burned out and retired on a beach somewhere in Thailand, or they’ve advanced further within the bank (see below).

Pay: This is where compensation has the highest “beta” (this is a finance site, so I am allowed to whip out finance jargon when convenient).

In a bad year with no closed deals, an MD might not make much more than his base salary – maybe the $200K – $300K USD range.

In a good year, they might make in the low millions USD ($1MM – $3MM) depending on how the group is set up, how many deals they’ve closed, and how well they’re playing the office politics game.

Time to Get Promoted: Yes, there are levels beyond MD at large banks (Group Head, C-level executives) but there’s no set path to reach them – you could get lucky and get there in a few years, or you might be there for a decade and never see the light at the end of the tunnel.

Unlike other levels of the banking hierarchy, it’s not “up or out” at the MD-level – it’s more like “make lots of money for us or out.”

So as long as you keep producing, your position will remain intact.

Possible Exit Opps: If you’ve been a lifelong banker, it will be very difficult to move into a completely different field – but you do sometimes see financiers at the top moving around to other high-level positions in the industry.

Some MDs may also just retire and do something completely different – business coaching, angel investing, writing, and so on – especially if they are worth tens of millions of dollars and don’t have a pressing need for cash.

Wait, What About Other Levels?

Note that in some regions and at some banks these levels have different names – VP might be labeled “Director” and SVP might be “Executive Director,” for example.

At firms with a partnership still in place (Goldman Sachs), there is also a difference between normal MDs and Partnership MDs – the Partnership ones make a lot more money.

And then beyond MD, there are Group Heads (e.g. Head of M&A Europe or Head of Capital Markets Asia) and the C-level executives at firms.

With those, the potential compensation is even more variable and could range into the tens of millions (or higher for C-level in a good year) – or the bank might slash its CEO’s pay to $0 in a symbolic gesture if they’ve had a bad year and caused economic Armageddon.

Differences at Boutiques?

Boutiques tend to have fewer levels than bulge bracket banks, so you might not see as many VPs and Directors/SVPs.

Advancement may be faster depending on the firm’s size, but pay will also be lower since the deal sizes are smaller – regional boutiques might pay 50% of the bonus that bulge brackets do (very rough estimate).

This does not apply to the “elite boutiques” (Evercore, Lazard, etc.) which pay more in-line with bulge brackets.

What About Trading?

On the trading side there is a flatter hierarchy and you may reach the MD level more quickly.

Pay is also extremely variable and the top traders might make tens of millions even if they never advance beyond the MD-level (ok, it’s questionable how true that will be post-crisis and financial regulation).

The Buy-Side: Private Equity and Hedge Funds

This one is impossible to cover fully here (maybe in a separate article if someone has good data), but let’s give it a shot:

The private equity side is similar to banking, but you will make more at each level; as a Partner in PE you could make significantly more than MDs in banking (hundreds of millions if you’re Henry Kravis), but at smaller firms you’ll see compensation closer to what banking MDs earn.

The main difference is that you get carry at the Partner-level as well, so that opens up the possibility of earning into the stratosphere if you’ve invested well over the years.

On the hedge fund side, there’s so little reliable information that it’s hard to say anything concrete.

You hear stories about people making hundreds of thousands or millions at young ages, but the average case is probably closer to the compensation levels above for banking.

And while hedge fund managers making billions of dollars a year get a lot of attention, that is far from the average case: the majority of funds out there are much smaller ($100M – $1B AUM) and it’s impossible to earn anywhere near that amount.

In short: hedge fund pay has the highest ceiling of anything here, but there is a massive difference between the founder or the portfolio manager and everyone else in the fund, and pay is almost 100% dependent on fund size and returns.

Other Countries

Developed countries (Western Europe, Hong Kong, Japan, Australia, etc.) see similar pay levels and have the same sort of promotion timelines.

In emerging markets, it’s more chaotic and you might advance far more quickly – but also make less in absolute dollars, even if you have your own palace and a harem or two.

The investment banking culture is not as well developed in the BRICS of the world, so you will see many deviations from the hierarchy above.

But in most of these places you have a 0.0% chance of breaking in as a foreigner with no connections: they are looking for locals who have studied or worked abroad and who are now returning to their home countries.

How Do You Move Up the Ladder?

Please see this article on investment banking promotion.

Key Takeaways

So, what does all of this mean?

Stop Assuming That Investment Banking / Finance in General are Guaranteed Paychecks

Especially as you move up, your pay is based almost entirely on your performance and the economy. A VP who has several closed deals may make more money than an MD who has nothing and gets a bonus of $0.

I’ve attempted to estimate pay ranges above, but to get there in the first place you’ll have to work 80-hour weeks for years and sacrifice your social life and maybe your first-born son or daughter.

Most MDs are Not Mega-Wealthy

Look at the Forbes list of richest people in the world, and you’ll see that there are very few (no?) banker-types on there, unless you count Warren Buffett as a banker (he’s not).

After you’ve taken into account taxes, recessions, the cost of living, and so on, a 10-15 year veteran MD might have $10 million or more saved up.

That is an enormous amount of money to most people, but you will not become a billionaire in finance unless you’re on the buy-side and you’re one of the best in the world like John Paulson.

Forget About Breaking Into Banking in the “Middle Years”

You either get in as an analyst or associate, and if not, you’ve missed your chance unless you have highly relevant experience, the market is frothy, and you trade down (i.e. go from a F500 to a boutique).

Even getting in at the top from other industries is uncommon – you see it more often in VC or PE where operational skill sets are valued.

If you’re in this position, you’re better off looking at other industries or starting your own business.

Expect Your Role to Change Gradually, Not Rapidly

Even though banking has a rigid hierarchy, what you do at each level is not as narrowly defined.

When you move from analyst to associate, you won’t instantly start dating super models or get your own reality TV show – sorry.

Your hours might improve slightly and you won’t have to do as much grunt work, but the pressure to perform will be greater than ever as well.

And…

Oh yes, and please reduce your expectations of $10 million and that beach in Thailand.

By the time you get there as a banker, you’ll be old and wrinkly and probably can’t stay out in the sun for very long anyway.

A frat house, on the other hand, might be well within your reach long before that.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (116)

From Analyst to Associate and Beyond: How to Get Promoted In Investment Banking

From Analyst to Associate and Beyond: How to Get Promoted In Investment Banking

So, what happens if you’ve lost your mind and suddenly don’t want to move into PE, go to a hedge fund, or become a venture capitalist?

You continue on in banking, and move from Analyst to Associate – and beyond.

If you’re in the US, you might be wondering why you’d ever want to do this – but in other parts of the world exit opportunities are less hyped and many bankers actually remain bankers.

Plus, if you don’t get any buy-side offers you’ll have to stick around in banking anyway – so here’s how to get promoted and how to avoid turning into Patrick Bateman in the process.

Why Would You Want to Get Promoted?

The usual arguments for moving to the buy-side are strong:

  • Improved hours (maybe)
  • (Potential for) Better pay
  • More responsibilities
  • More interesting work

Of course, there are downsides to the buy-side as well and it’s not right for everyone.

If you’re a really social / “salesy” person who likes a fast-paced environment, staying in banking might be a better fit.

Plus, once you get to a certain level the “Show me the money!” arguments make less sense because any MD will make far more money than he has time to spend – even if he quits and moves to Buenos Aires.

How Common Is It?

The often-cited statistic is that 10% of investment banking analysts move on to become associates.

But that’s misleading because it doesn’t indicate a 10% “admission rate” – the majority of analysts don’t want to be promoted.

The top analysts usually leave for the top PE firms and hedge funds, and everyone else is too burned out after 2 years of 100-hour weeks to want to stay in banking.

But banks that desperately need to hire would much prefer a seasoned analyst to a freshly minted MBA – knowing how everything works saves months of time and piles of money.

So the option is there if you want it – but most analysts don’t, which is why you hear that it’s very difficult to advance.

What’s the Difference, Anyway?

The roles are not that much different since they’re both classified as junior bankers, but:

  • Associates manage analysts and communicate directly more often with senior bankers.
  • Associates get more client exposure and speak to management teams on more than just technical details of models, as analysts would.
  • Banks assume that associates want to stay in banking for the long-term, whereas they know that many analysts will be gone after 2-3 years.
  • When something goes wrong, the VP will blame the associate before the analyst since the associate was responsible for his work.

Hours may be slightly better for the associate, and base salaries and bonuses are both higher – good news if you have $150K or so of business school debt outstanding.

How Do You Do It?

First, you need to become a 3rd year analyst – that’s the standard in the US, UK, and pretty much all other countries.

The 3rd year offer comes via mutual consent – senior bankers approach you midway through your second year and sit down to discuss whether or not you want to stay on.

In 99% of cases they already know whether or not they want you to stay – that’s what happens when you spend 80-100 hours per week with the same group of people over 1-2 years.

So it’s more a question of what you want to do in relation to your performance.

In addition to all the usual qualities an analyst must have – attention to detail, not screwing up models, multi-tasking, and so on – you need a couple extra qualities to get a 3rd year offer:

  1. Leadership – Do you mentor 1st year analysts and summer interns? Can you manage those below you without causing an insurrection?
  2. Profit – Are you saving or earning more for the bank than you’re costing? Just like in PE, no one will keep you around if you have a negative ROI. This is finance, not non-profit land.
  3. Senior Banker Fans – Will senior bankers in your group go to bat for you when it’s time to make a decision? If not, you need those types of relationships to get a 3rd year offer.

There’s no quick-fix solution to achieving any of this, so you need to be thinking about these points from day 1 and actively working on them as you move from your 1st year into your 2nd.

Examples

To be more specific, here are a few examples of behavior that won’t get you promoted and behavior that will get you promoted:

  • Non-Promotion: You give a 1st year analyst a set of public comps to complete and check his numbers before giving it to the associate or VP.
  • Promotion: You give the analyst a set of public comps, but in addition to checking his work you think of another company that would be good to include because it boosts the valuation significantly. You run the idea past the associate or VP and point out that it may help with winning the deal.
  • Non-Promotion: You look through a 1st year analyst’s operating model for a client and find that all the numbers are correct before giving it to your associate.
  • Promotion: You look at the analyst’s operating model and find cost-saving opportunities for the client, which you can pitch to PE firms as an easy to boost their returns if they acquire the company. You also teach the younger analyst how to create scenarios in his model to support this.

Neither of these examples is a big deal by itself – it’s more about going above and beyond what you’re asked to do consistently, over 1-2 years, than discovering the magic bullet promotion solution.

…And Then From There

Once you’ve become a 3rd year analyst, you then need to get an associate offer.

You need to demonstrate the same criteria as what’s listed above, only more of it – rather than just informally helping out new analysts, you need to give analysts instructions and see pitch books and models through to completion.

At this level, more senior buy-in is required – your group head needs to like you, and the senior bankers need to say, “We like this guy/girl, he/she has run a bunch of deals and acted like an associate for us, and is ready for the role.”

This is a lot of self-selection here – if you want to continue in banking, chances are you’ll step up and start contributing more.

And if you don’t, you’ll probably be going home early every day or waiting to bounce when your new job starts anyway.

Boutiques vs. Bulge Brackets

Some argue that it’s easier to get promoted at boutiques because they need the manpower and because there’s more competition at bulge brackets…

…which can be true, but it’s definitely not a rule.

The key difference between small and large banks holds true here as well: it’s more random at boutiques.

You might be at a boutique where the loss of 1 key associate means they need someone ASAP; or you might be at a bank where turnover is low and hardly anyone moves up.

At bulge brackets, by contrast, the process is more standardized and you’ll most likely catch neither a lucky break nor an unlucky break.

Other Groups

On the sales & trading side, there’s not quite as much confusion over analyst to associate promotions because that’s where most associates are coming from anyway – MBA hires with no S&T experience are rare.

Most traders move up the ranks because they’ve made a lot of money, not because they went to a top business school – so the profit part of the equation above is even more important if you want a promotion there.

Analysts and associates exist at other institutions like hedge funds, private equity firms, and so on, but sometimes there are limitations on how much you can advance.

For example, if you’re hired as a private equity analyst right out of undergraduate there might be no option to advance to the associate level – the firm might expect you to go to business school or move elsewhere after 2 years.

Is an MBA Required?

Nope, and the degree won’t necessarily help you.

Finance, unlike most other industries, is driven more by results than internal politics.

No one’s going to say, “This guy got an MBA from HBS – therefore he should be promoted to VP over this other guy who doesn’t have an MBA.”

Instead, they’ll say, “This guy has really good reviews and worked on a bunch of high-profile deals – clients love him, and he’s starting to develop relationships of his own. Let’s promote him.”

Some bankers argue that even if you don’t need an MBA, you should go back to school anyway to gain a broader perspective and network.

There is some merit to that argument, but most bankers who go back for the degree use it as a 2-year vacation.

You will learn a lot and meet a lot of people – and that may make you a better associate.

But it’s a stretch to say that an MBA is required to advance.

But Will They Pay For It?

No.

When times are frothy some banks may cover the expense if you agree to return in 2 years, but that is rare.

There’s no actual difference in pay or responsibilities if you get an MBA vs. if you just advance naturally – there’s far more of a difference between the associates with no banking experience and former bankers.

In sales & trading, you may be at a disadvantage with an MBA – direct promotes are usually given a portion of the trading book, but you won’t have that if you’re graduating and moving to a new firm.

What About Exit Opportunities If You Make the Analyst to Associate Move?

Don’t hold your breath.

It’s easier if you’ve been an investment banking analyst, but there’s still a strong bias against hiring associates because they’re perceived as “career bankers.”

So don’t use an associate offer as your backup plan unless you’re 100% set on banking – otherwise you will be pigeonholed.

If you do realize you want to move to the buy-side, do it quickly – it’s much easier to move over as a newly promoted associate than as a 3-year veteran.

OK, But Do You At Least Get Some Nice Perks?

Usually you’ll get a signing bonus comparable to what new associates would get – around $40K – plus a few weeks to a month off and the option to attend “training.”

If you’ve been an analyst for 3 years, “training” has no value for you so it’s really just a long vacation.

Those are the main perks – plus, of course, you won’t be treated like a newbie who knows nothing about banking.

So, Should You Do It?

Choosing to become an associate is more of a career choice than moving to the buy-side or going to corporate development at a Fortune 500 company – in those roles you have more mobility and you can hop around to different positions.

But at the associate level, you’re expected to stay in banking for the long-haul – so if you’re not 100% committed, do not use it as a backup plan.

Staying in investment banking for the long-term can be a good career, but you will be more limited if you make the leap.

And After You Get Promoted…

You’ll get more responsibility, you’ll have to formally manage analysts, and you’ll need to start thinking more like a VP.

You won’t be expected to pull in clients yet, but you do need to start building relationships and making yourself known as more than just another nameless analyst.

The hours may be a little better, but you won’t see a big improvement until you’re more senior – and even at the MD level, ruined weekends and being on-call 24/7 are still expected.

And yes, pay improves as well, but you still won’t be making $1 million+ until you’re a more senior VP or MD – which is not easy to do.

If you do well and prove that you can execute deals with little supervision, you might just get promoted to VP.

The VP’s Dilemma

But lots of promising bankers stall out at the VP level because you have to balance 2 huge, often conflicting tasks:

  1. Executing deals and making sure all the presentations, books, and meetings go as planned.
  2. Bringing in clients and developing relationships.

If you devote too much time to #1, #2 suffers – and vice versa.

Because of this dual responsibility, your hours may not even improve much – you’re busy with potential clients during the day and you’re occupied with deals at night.

And while MDs are also under a lot of pressure to bring in clients, that’s all they do: they don’t need to juggle sourcing with execution.

The VP to MD transition is the toughest one in banking, and that applies on the buy-side as well – going from due diligence, model-crunching mode to sourcing investments is a delicate balancing act.

If you’re a star, you might move from VP to MD or Senior VP in only 2-3 years; more often it’s around 4-5, and if it takes longer than that you’ll probably be making a trip to the conference room in the near future.

Is It Really This Hard?

Did you really expect to make millions of dollars per year without putting in a lot of effort?

Of course it’s tough – if you’re looking for something easier, though, I hear Best Buy is hiring.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (103)

What’s In Investment Banking Pitch Books?

Presentation and collaboration by business people in office

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:

  1. Market Overviews / Bank Introductions – Introducing your bank and giving updates to potential clients.
  2. Deal Pitches – Sell-side M&A, buy-side M&A, IPOs, debt issuances, and so on.
  3. 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.

Common Elements

These 3 main variants have a few common elements:

  1. Title Slide with the date, bank or client logo, and description of the presentation.
  2. Table of Contents listing the different sections right after the Title Slide.
  3. 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.

Common elements:

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.

6. Appendix

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:

  1. They’re shorter because not as much data is stuffed into the appendix.
  2. 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.
  3. 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:

  1. There are no company profiles and no potential buyers / potential acquisitions sections.
  2. 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.

Management Presentations

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:

  1. Executive Summary / Company Highlights
  2. Market Overview
  3. Products & Services
  4. Sales & Marketing
  5. Customers
  6. Expansion Opportunities
  7. Org Chart
  8. 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.

Regional Variances

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:

  1. Bulge brackets tend to be more numbers-focused while smaller places may be more qualitative and market-focused.
  2. 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.

Attention to Detail

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.

Conflicting Changes

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.

Irrational Obsessions

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:

Many of these are quite old, but bankers are creatures of habit, and pitch books barely change aside from the formatting and color schemes.

Another Option

If you’re looking for another way to learn, we also offer comprehensive PowerPoint training on Breaking Into Wall Street:

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.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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