From Big 4 Restructuring to Investment Banking: How to Make the Leap
“Help! I hate my accounting job and want to move into banking, what do I do?”
“What group should I transfer to if I want to get into finance?”
“My Big 4 salary doesn’t give me enough cash for bottles!”
If you’re at a Big 4 firm right now, you’ve had one of the thoughts above before – maybe multiple times.
We covered how to move from accounting to investment banking before, but this time around there’s a different twist – an interview with a reader who moved from a Big 4 restructuring group to investment banking.
Here’s how he made the leap, and how you can do the same:
Background & Culture
Q: Let’s start with your background – how’d you end up at the Big 4 firm, and what did you do before that?
A: Sure. I actually started out as an athlete, and played at the college level for a few years before I got a serious injury that ended my career.
Then, I transferred to a smaller and lesser-known school in the Midwest, and got more interested in finance once I knew that being a professional athlete was no longer an option.
The investment banking industry is smaller in the Midwest, but there are still a few local banks there and they were doing a lot of distressed M&A deals for the auto industry, so I started contacting them and asking about internships each week.
After a ton of networking, one bank finally caved in and decided that they needed an intern – so I joined and got to help out with a few live deals there.
As graduation approached, I continued networking and found a few guys who used to work at a very well-known PE firm.
They had just started a lower middle-market fund just for family/small-business investments, and they needed some analysis done on Project Finance-type investments (power plants and such). I volunteered to do the modeling for that, and they were impressed with my work and turned it into a full-time internship.
Since I had so much experience in restructuring, I went to a restructuring group at a Big 4 firm after my internship at the middle-market PE fund. I stayed there for around a year, and then recently moved to a bulge bracket bank.
Q: That’s a great story – before we jump into it in more detail, I think a lot of readers might wonder what it’s like working at a Big 4 firm in their restructuring group.
We’ve covered the work and culture in IB and PE before, so how would you say the Big 4 firm compared to those?
A: There was definitely a skill set overlap – we did lots of cash flow modeling, presentations to lenders, and distressed M&A deals where we advised the company on selling, restructuring, or bankruptcy options. We also worked with the big auto companies, so you got good exposure to their finance teams.
The financial modeling and deal skills were similar, but there was a big cultural difference because we only worked on 1-2 projects at once and the hours were very, very tame. I only worked on one weekend, and a “late night” was staying to 8 or 9 PM.
Q: Why do you think there’s that cultural difference? Deals are still deals, so I don’t understand how you could “choose” to be less busy if you’re working with Fortune 500 clients all the time.
A: It’s mostly because financial advisory services were a very small part of what the firm did. At an M&A boutique bank, 100% of revenue comes from advisory, but at this Big 4 firm advisory accounted for maybe 2% of revenue.
Their focus was accounting/audit and consulting – they had investment banking and restructuring services, but they were an afterthought next to everything else there.
Q: OK, so it sounds like they consciously chose not to take on as much business as they could have since it wasn’t their core focus.
Obviously you did well moving into banking from restructuring, but what other groups would be good if you wanted to make the Big 4 to IB move?
A: As you’ve mentioned before, Transaction Advisory Services (TAS) can be good since you get exposed to bankers in some scenarios.
But I don’t think it’s necessarily the best group all the time because many TAS groups focus on accounting and due diligence, and you may not get exposed to valuation, financial modeling, or other aspects of the deal. They may also spend a lot of time on tasks that bankers don’t care about, such as making sure that working capital requirements are met when a deal closes.
So I would recommend looking at the internal middle-market banks that all Big 4 firms have – they do mostly sell-side advisory, and while it’s not comparable to the experience you’d get at a real bank, it’s closer than most other groups at the Big 4. Here are links to each firm’s internal bank:
- Deloitte – Corporate Finance
- KPMG – Corporate Finance
- PricewaterhouseCoopers – Corporate Finance & Investment Banking Services
- Ernst & Young – Transactions
And then anything transaction-related – like the restructuring group I was in – could work as well.
Networking & Interviews
Q: Can you talk about the networking you did to get the bulge bracket offer? What was the best source for finding contacts and meeting bankers?
A: Keep in mind that I had been networking all along, ever since I got my original internship via aggressive cold-calling.
So it was just continuing what I had already started – I took the Big 4 offer knowing that I still wanted to move into banking and would have to continue networking.
It was difficult to find bankers at first because few alumni worked in finance, I didn’t have co-workers I could reliably ask, and headhunters were useless unless you had at least some full-time work experience.
Q: So where did you find bankers if not through the usual sources like your alumni database?
A: A couple ways:
- High School Contacts – Even though my university had few alumni in finance, there were quite a lot from my high school who worked in the industry.
- Random Online Contact – I would just go through LinkedIn and look up bankers in the Midwest and start reaching out them like that.
- Cold-Calling/Emailing – This is how I got my first internship. It’s time-consuming and has a low hit rate, but it does work.
- Upscale Gyms – I joined a few higher-end gyms in my area and ran into a bunch of financiers there. I met a few bankers, people in private wealth management, management and turnaround consultants, and even a PE Partner like that.
All of that helped, but the most helpful thing for me was always asking, “I’m interviewing with this group / interested in this area – do you know anyone else I could speak with?”
I got tons of referrals with that line at the end of each call or meeting. It sounds very simple, but you’d be surprised at how many people are too afraid to make simple requests in a conversation.
Q: I really like the tip about upscale gyms; it reminds me of Gordon Gekko playing racquetball.
So it sounds like your networking was pretty similar to what we’ve covered here before with getting names and contact information, setting up informational interviews, and then following up aggressively.
How did you spin your resume when you were applying, since the Big 4 firm was your only full-time experience?
A: I actually downplayed the Big 4 experience, because I felt my banking internship and my work at the middle-market PE fund were both more relevant. So I focused on those and described my transaction experience using the template you’ve suggested before.
For my Big 4 experience, I focused on the valuation and modeling work and left out anything that was closer to accounting/audit.
Even though I had worked in restructuring there, I was interested in moving to industry or M&A groups in investment banking, so I didn’t want to make myself look too specialized by writing 100% about restructuring or distressed deals.
Q: That makes sense, and it’s great advice for anyone who has worked in a more specialized group and wants to move elsewhere.
What about the interviews themselves? Were they mostly technical or deal experience-focused?
A: They focused a lot on my deal experience – and more my experience at the bank and PE firm rather than in my restructuring group.
There were technical questions, but they were more curious about why certain deals happened, potential complications, and what I thought of the valuation and the process for different companies.
For some of the industry groups, a key question was “Why this industry?” They get a lot of people who don’t know why they want to work with financial institutions or industrial companies or whatever they cover.
Q: We covered a few possible answers to that one before, but what did you say?
A: In my final year of university I had completed a finance course where we valued companies in different industries, so I used that as my “spark” to show them how I got interested at first.
It didn’t work for every industry group, but by using that I could at least talk about my interest in the more common ones, like energy, financial institutions, and industrials.
I also used a few of your industry-specific modeling courses to demonstrate my interest and they were really impressed with that, since hardly anyone else had gone to the effort of completing entire case studies on these companies.
Q: I’m surprised by that one, because we generally tell customers that the industry-specific courses are more helpful once you’re already working – but you found them useful for interviews as well?
And these were lateral interviews at the top bulge bracket banks – even there most other interviewees still hadn’t done as much as preparation as you might expect.
Q: Well, glad to hear the courses were helpful!
It seems like the interview process was straightforward for you, but I’m sure bankers had at least a few “objections” to your background. What were the key issues, and how did you overcome them?
A: Their main concern was that my academic experience looked very spotty.
I had taken a year off after I got my injury back in college, and then had to enroll in another school and ended up missing another semester, so it looked like I had taken forever to graduate and had been to school twice.
Some bankers just focused on that for 100% of the interview – they asked about all my gaps in education and why I had gone to schools they never heard of.
I answered those questions by explaining that for my first 2 years in university, I was practicing constantly, still doing well in school, and working 1-2 part-time jobs at the same time. So I spun a negative into a positive, and pointed out that I was working crazy hours a good portion of the time and could therefore handle the hours of a bulge bracket bank.
And then I also had my previous IB and PE internships, so they weren’t too concerned by the end.
What If? And the Future
Q: Since you had those internships, you had 100% relevant experience when applying to larger banks.
But what advice would you give someone who’s at a Big 4 firm in some other role, like audit? What should they do if they have no transaction experience and want to get into IB?
A: First, get out of audit immediately. Do something – anything – more stimulating.
People make fun of investment banking for being mindless work, but in my opinion audit is even worse because it’s so mundane.
At least with deals, you witness drama as different buyers and sellers express interest, back out, make different proposals, and negotiate. In audit you’re staring at numbers all day unless you happen to uncover the next Enron.
Most Big 4 firms are fine with internal transfers – it’s often easier than it is at a bank. Sometimes the Partner you’re working for may take it personally, but that depends on your group.
You should reach out to the other group you’re interested in first, contact people there, and make sure they know what you’re interested in doing before you even run the idea by your current boss.
The Big 4 firms all have lots of events and internal mixers where professionals in different areas can meet each other, so it’s easier to get to know other groups than it would be in IB – most people don’t work more than 50-60 hours per week, so they have the time to help you.
You really have no excuse not to move to a group that’s more closely related to banking – I would recommend restructuring, valuation, internal M&A, and TAS as your best options.
Q: It’s interesting to hear that the internal transfer may be easier at Big 4 firms, but I guess the culture is just more relaxed across the board.
So now that you’ve won this bulge bracket offer, what’s next for you? Will you stay at your new bank for some time, or are you thinking about moving to the buy-side?
A: Unlike most other bankers, I’m actually interested in staying in IB for the long-term.
Back when I was interviewing for this role, a number of distressed investment funds also approached me, but I wasn’t interested in PE back then and I’m not interested now, either.
My key issue is that you must put your own money to work to progress in PE.
It’s not just Partners investing the fund’s capital – they also put in their own funds, so a poor investment could wipe out a good chunk of your personal savings.
Yes, the pay ceiling is higher and you could make mind-boggling money – but let’s be honest, at the MD/Partner-level, the average is about the same in both industries. The outliers in PE make far more, but for me the risk isn’t worth it.
The other issue is that private equity is much less of a team environment than banking, and coming from an athletic background I enjoy working in teams more than the solo work that you see in PE.
Q: That makes a lot of sense, and that point you raised about putting your own money to work is a great one that often goes overlooked. Thanks again for taking the time out to chat, I learned a lot!
A: You’re welcome, it was my pleasure.
From Non-Target School and Unpaid Wealth Management Internship to Full-Time Bulge Bracket Investment Banking Offer: How to Make the Leap
In this interview we’ll speak with a reader who landed a full-time bulge bracket investment banking offer with 0 banking internships and a non-target school on his resume.
There have been a few interviews with readers from similar backgrounds – but I thought this one was great because he shares unique insights and unusual networking strategies – including surprising conclusions on what worked and what failed miserably.
So let’s jump in and see how this reader went from no connections and no experience to a full-time investment banking offer – and how you can do the same.
Background & Last-Minute Networking
Q: Tell us about yourself.
A: Sure. I went to an unknown state school that was off the radar of major banks, and which had very few alumni in finance. My family was involved in the retail industry so they knew almost nothing about it, and I had no connections.
I started getting interested in finance my sophomore year, but I knew almost nothing about it so I had to look online to get started, using your site and others.
The summer after my sophomore year I did an internship selling life insurance. It was commission-based and absolutely brutal – they just throw you out there and say, “Find clients and sell insurance ASAP.”
After that, I did an unpaid private wealth management internship at a large bank, which I leveraged into a full-time investment banking offer at a bulge bracket bank.
Q: Impressive. So let’s go back to that internship selling life insurance – most people would discount this experience because it has nothing to do with investment banking or private equity. Was it helpful at all in securing your PWM internship or your full-time offer?
A: Yes – in fact, my internship selling life insurance was my #1 talking point during interviews.
It sounds crazy, but bankers spent more time asking me about that experience than anything else on my resume – including my PWM internship at a brand-name bank.
In one bulge bracket interview, they spent 30 minutes having me pitch them an insurance policy.
I think they focused on it so much because it was extremely tough and I had almost no direction – it wasn’t much different from what you do at the top levels in banking, although obviously MDs work on much larger deals and with more sophisticated clients.
Q: I’m still surprised they focused so much on that internship. How did you make the transition from selling insurance to private wealth management?
A: It was pretty much a last-minute networking effort on my part – I knew I needed an internship for my junior year summer, but I assumed I had no chance at investment banking, so I didn’t even try.
I did contact a few friends and alumni from my school who were in the industry, but most of those leads didn’t go anywhere.
I got the internship itself by going through a friend who had recently graduated from my school and who was working in New York – he passed my name along to a recruiter at his bank.
Then I followed up and sent 20 emails over the next month before the recruiter agreed to discuss an internship.
Q: Let me stop you right there – why did you send so many emails? I usually say that calling and meeting in-person are more effective. Did you try cold-calling at all?
A: Yes – but it didn’t work at all for me. I could never get past the gatekeepers no matter what I did.
I know it works since I’ve had friends who pulled it off successfully – but overall I didn’t have much luck with it. You need to be really good at sweet-talking secretaries and finding the right people to begin with, and I wasn’t great at that.
M&I Note: In addition, location seems to matter a lot with cold-calling. A lot of readers have used it successfully in California, for example, but other regions are more hit-or-miss.
Q: Yeah, people do tend to have mixed results with cold-calling. Going back to that internship, though, I’m curious – most bulge bracket banks don’t do unpaid internships. How did you arrange that?
A: It worked because this was in the midst of the financial crisis / recession and everything was chaotic at the time. They actually gave me a choice of 2 internships: a paid, back-office position in New Jersey or an unpaid, front-office private wealth management position in New York – I wisely selected the second one.
A lot of students would have chosen the paid internship, but I knew it was a bad move because banks want to know that you can live and work in New York – and as you’ve pointed out before, the back office to front office transition is difficult.
Going back to your original question, the bank itself and the industry as a whole were in such trouble around this time that everyone was running around frantically trying to cut costs – so they decided to give large groups of us unpaid internships.
The “interview process” itself was really informal, and all it took was 1 interview to get the offer.
Q: Ok, so it was more of a firm-wide policy than a special exception for you – which makes sense. So how did you keep networking with bankers once you started? Were the people in your PWM group helpful?
A: From day 1 I walked in there thinking, “How can I turn this into investment banking?”
Most people in PWM were completely useless for investment banking recruiting – a lot of times they’d give me contact information for recruiters, but then the recruiters would ignore me or lie about the process.
People in PWM were fine if you wanted to do Sales & Trading, but they hated investment bankers – if you mentioned that you wanted to do that, they would instantly start looking down on you.
The only good contact I got through the PWM group was actually in private equity – my boss had the interns go around to visit key clients in-person one day, and I met the head of a PE firm like that.
I made a good impression on him, and then ran it by my boss before I contacted him for networking purposes – he was fine with it, so the PE guy referred me to a lot of people and forwarded my resume to all his contacts, which was huge.
Q: Nice – I guess we can call that one “door-to-door networking.” So aside from that one PE guy, did you do most of your networking outside the bank?
A: Yes. I did an extensive search and left no stone unturned – which was key, because my most random strategies ended up working really well.
I reached out to alumni via our database as well as LinkedIn – I often found names on LinkedIn, and then plugged them into the alumni database to get contact information. I didn’t limit myself to investment banking, either – as long as the person did something in finance, that was close enough for me.
I ended up getting my full-time offer via an alum that no one from my school had ever contacted before – he worked in a Restructuring group and had good friends at bulge bracket banks, so I got the referral through him.
No one had contacted him in the past because he went to a top business school and was detached from his undergrad institution – so others wrongly assumed he was “off limits.”
I also met alumni via my finance classes, and I directly asked a lot of professors for referrals – teachers are severely under-utilized for networking purposes.
It was really important to be the first person to contact an alumnus – the same alum is unlikely to help more than few people with referrals, so getting in early is crucial.
Q: Right, that makes a lot of sense. But those strategies don’t sound that much different from what you’d expect – you mentioned some “random strategies” before. Could you give a few examples?
A: Sure – here are 2 specific examples of more unusual strategies:
Example #1: I found out that someone very high-up at an investment bank a few years ago (C-level executive) was an alumnus from my school from many years ago. I couldn’t find his contact information anywhere, so I went through my Dean to get it instead.
I met with my Dean, told him about myself, and then he sent the resume along to the C-level executive because he knew him personally. A few days later the executive called me personally and I would have gotten an interview at his bank had I not already accepted an offer elsewhere by that point.
Example #2: Many people didn’t respond to emails, so I tried a more creative strategy instead – I went through the Bloomberg terminals available at my school.
You can look people up there if you know their names – rather than calling or emailing, I instant messaged them via Bloomberg. It worked really well, especially for people in Sales & Trading and Equity Research that were on Bloomberg all day.
Q: That’s a great way to use Bloomberg, though you do have to be careful not to go overboard with IM. Once you contacted these people, what did you say to them? Was it just the typical informational interview?
A: For most of the interviews I just said, “I’m interested in your industry and want to learn more about how I can get there.”
I did this because I knew that industries like private equity and portfolio management require another job first – and I wanted my contacts to give me referrals to other industries.
So if I called up a PE contact I would say, “I’m interested in private equity – how can I get there after I graduate?” and he would say, “Well, you have to do investment banking first,” and I would say, “Oh, ok, do you happen to know anyone in the industry?” and then I would get contact information like that.
I found that feigning ignorance – to a certain point – was more effective than acting like I knew everything from the get-go.
Q: I think that one should answer all the “Which industry should I tell them I’m interested in?” questions I get. Did you do anything else to prepare for full-time recruiting?
A: Not really – I read the usual sites online, interview guides, message boards, etc. but I focused on my networking efforts through the summer and fall. I’d say I spent around 40 hours per week networking and interviewing until I had my offer lined up.
It’s important to be persistent even when it’s the last minute and interview slots are being announced.
Quick example: A couple people from one class of mine got interviews at this one bank, and I noticed that my friends all had interviews lined up but I didn’t.
So I contacted the recruiter directly and said, “I noticed some classmates of mine had interviews lined up with your firm. I’d really appreciate the opportunity to interview with you as well.”
And just like that, she set up the interview and I got through first rounds there.
This might seem obvious, but 90% of people are too afraid to ask for what they want so they sit there and get no results.
Q: Another bold but effective move there. So what were interviews like? Did you have to address a lot of “objections” because you had no banking experience and because you were coming in from a non-target school?
A: Not really. They didn’t care much about the lack of banking experience, and hardly anyone raised my school as an issue.
However, that may have been because I interviewed fairly late in the process – after most full-time recruiting was finished. A friend who interviewed at the same firms earlier than me got grilled on why he wasn’t from a big city and why he didn’t go to a better-known school.
I had a low GPA (3.2 / 4.0) so that came up in interviews a few times. I gave the usual defense and explained that I didn’t feel it was low given my work experience, and hardly anyone asked about it past the first round.
I know a lot of people complain about their GPA, but I think those concerns are overblown – especially if you’re from a lesser-known school, networking is far more important than boosting your GPA by a small amount.
Interviews were actually easier and less technical than I expected – even though I was a finance major and had the PWM internship, I received only a few technical questions throughout the entire process.
Thinking on your feet and being good at making up stuff on the spot was critical, because I got some curve-ball “fit” questions that I hadn’t thought about before.
Q: Any interview tips that we haven’t heard before?
A: A few points:
- Interviewers often drifted if I went beyond a minute or two when telling my “story” – I know some people say that 3-5 minutes is ok, but I’d aim for 60 seconds instead.
- I tried to keep all my “fit” answers to a max of 3 sentences, or people would start to lose interest – be concise and let them ask for more detail if they want.
- Be confident but not cocky – cocky gets you obscure technical questions, while confidence makes them like you.
On the last point: a friend and I were interviewing for the same bank on the same day, and I got 0 technical questions while the interviewers asked him to build a 3-statement model on a piece of paper (!).
It was all because he walked in and acted like he was a finance guru, which was a huge mistake.
Q: Yeah, definitely. People try way too hard to impress and it always backfires. So now that you got this offer, what are you planning to do in the future?
A: I want to do PE and get an MBA in the future, but those are both quite a ways away. In the short-term I’m definitely looking forward to joining my group, but I’m also interested in the distressed debt side and possibly doing something there.
Q: Awesome, thanks for your time.
A: No problem. Later!
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.