Money, Hours, Models, Bottles: Investment Banking in New York, California, and Everywhere In Between
“Are you guys even in the office past 8 PM? Whenever I call no one’s there.”
“New York is hella lame, people are so much better out here.”
“If you say ‘hella’ again I’m going to make you pay for the bottles next time – and maybe the models too.”
“Fine, I’ll do some research and see what I can send over. NY is still overhyped, though.”
No, it’s not a short story or a new TV show about bankers – it’s a banker from NYC and one from San Francisco talking to each other.
And you read that headline correctly: today you’ll learn how banking differs in different regions of the US rather than going off on adventures to distant lands.
As one reader pointed out a while back, “Hearing about all these different countries is great, but what about how banking is different on the east coast vs. west coast of the US and everywhere in between?”
The Most Common – and Wrong – Arguments
Many people claim that the pay and hours differ significantly and that New York is more “hardcore” than other regions.
That makes sense intuitively: New York is the biggest financial center and the biggest deals tend to happen there.
But in practice, these differences are greatly exaggerated – pay is standardized at the junior levels in finance and bonuses depend more on your bank and group rather than the city you’re in.
At the senior levels, geographic differences become more important because certain offices have better deal flow and clients, and senior bankers’ bonuses depend 100% on performance.
New York bankers like to argue that they work way more than people in other regions, but there are no scientifically controlled surveys to support these claims.
Yes, maybe the hours are somewhat worse since more deals happen there – but we’re talking a difference of 85 hours per week vs. 90 hours per week: you still won’t have a life.
So the more substantial differences have nothing to do with pay or hours, but rather the industries covered, the cost of living, and the exit opportunities.
And yes, I’ll address the ever-popular models/bottles, networking, and a few other points as well.
This is the main difference – banks in the top 5 cities for finance in the US focus on a different industry:
- NYC: Diversified
- Chicago: Industrials
- Houston: Oil & Gas
- San Francisco: Technology / Healthcare
- Los Angeles: Gaming & Lodging / Media
There is no “best” because it depends on what you want to do in the future and how certain you are of your career.
Some of these fields are more specialized than others; something like oil & gas requires more specific knowledge than tech or healthcare since energy companies play by different rules and require different valuation methodologies.
So if you’re already interested in a specific industry, it may be a good idea to start out in the region that focuses on that industry – but if you have no idea yet, New York is the safest bet.
Just as actors get typecast, you will get more and more pigeonholed as you move up the ladder, so you need to consider these options carefully.
One friend worked on a telecom deal at a small VC firm, then got placed into the telecom group at a boutique bank, and was then placed into the telecom group at a bulge bracket bank.
Effectively, he became “the telecom guy” all because of one small deal he worked on ages ago.
And it’s even worse once you move beyond banking: good luck interviewing for that hedge fund that wants people with European telecom merger arbitrage experience if you don’t have any.
But What About Deal Flow?
“But,” you rightly point out, “There’s a difference between deal flow, hours, and industries covered – even if you’re working a lot, you might just be building pitch books all day. And what if your industry isn’t ‘hot’ at the moment?”
I don’t disagree with you there, but it’s almost impossible to determine deal flow of specific offices without talking to real people.
So if you’re such an overachiever that you’re going to pick your bank and group based on deal flow and exit opportunities, go talk to people at the different offices you’re considering and see what they say – but keep a critical eye open because they’re likely to oversell you on everything.
And no, I’m not going to rank cities and groups by deal flow here since that changes quite frequently and since you’re likely an obsessive-compulsive person already if you’re reading this.
Cost of Living
In ancient times, New York was the most expensive city in terms of real estate, taxes, food, and so on.
Now, however, San Francisco is actually more expensive, or at least as expensive, due to the tech boom and the number of high-paid startup employees there (as of 2015).
So you are not likely to save much money during the year in either place; it’s also a bad idea to live in New Jersey or another location outside the main city to save money, since you might go insane in what little free time you have.
The “cost of living” ranking looks something like this:
- NYC ~= SF > LA > Chicago > Houston
You will save the most money working in Houston because Texas has no state income tax, rent is ridiculously cheap, bottles are less pricey, and even the models are less demanding and will give your wallet less of a workout.
Cost of living shouldn’t be your top concern, but you should be aware of it.
Finance people are notorious for making millions of dollars and then blowing it all on luxury spending – so pay attention if you want to retire on more than $50K in that savings account you forgot about.
One other note: driving will be required in most of these places, especially in a city like LA where there is no public viable transportation.
So if you hate driving and owning a car, your best bet is New York.
NOTE: Ride-sharing services such as Uber and Lyft are actually changing this dynamic.
If you live relatively close to the office, you might be able to take one of those to and from work every day and gain some peace of mind in the process.
The main problem with exit opportunities is that it’s hard to interview when you’re far away.
You need to take time off work by using questionable excuses, hope people don’t notice your repeated absences, and then visit the firm enough times to seal the deal.
Since New York to SF or LA is a 5-6 hour trek, it’s not easy to hop from banking on one coast to the buy-side on the other coast. Pretty much all the analysts I knew in California stayed there, and pretty much all the ones in New York stayed on the east coast.
So you’re more likely to stay in your first region unless you can pull off in-person trips or interview entirely via video conference (unlikely for traditional exit opportunities).
Again, people like to argue that New York has “better” exit opportunities, but plenty of analysts on the west coast and elsewhere get into mega-funds as well; it’s just that they work at local offices rather than in NYC.
One legitimate difference is that there are more exit opportunities in New York just because it’s the biggest financial center.
And you also run into the pigeonholing problem if you start out in another region: go to Houston and you’ll more than likely recruit only for energy-focused PE firms and hedge funds.
But aside from those differences, the actual quality of exit opportunities doesn’t differ as much as you might expect.
Networking opportunities are another more significant difference, and one that people overlook all the time.
Since NYC is much bigger than the other regions, you’ll simply meet more people there and you’ll be better equipped to network your way into other roles.
Just as with other financial centers like Hong Kong and London, sometimes half the people you meet in NYC will be in finance (the other half will be “aspiring” artists or models, which is great for you as a financier).
How much does the quality of networking really matter?
It depends how certain you are of your “career path” – if you’re interested in doing tech banking and then doing venture capital in California, you’re better off starting in SF and networking with tech and VC groups there.
But if you have no industry preference, you’ll gain more options by starting out in New York.
How to Satisfy the Models
Ah, now to the fun part.
The main difference is that the New York models tend to be higher-maintenance, more expensive, and more demanding; LA comes close since everyone is required to get plastic surgery, but you’ll still spend more overall in NYC.
But flashing around wads of cash also doesn’t impress as much in New York because $200K is barely middle class – not enough to satisfy models who are expecting a new bag every day.
In all seriousness, you really will spend a lot more money going out in New York if you actually enjoy it.
LA and SF can also be expensive, while Chicago and Houston are more reasonable. Some also argue that people in the South and Midwest are “friendlier” but I don’t want to get into a debate over that one.
I’m not qualified to comment on the quality of men in each place, other than to say that SF is probably the worst place to find hot guys unless you’re into tech guys with a ton of money from startups.
(Yes, a female friend recently asked if there were a lot of tall, muscular blonde guys in SF and I started laughing.)
“Aha,” you say, “But even if the pay and hours are not much different, surely they must ask completely different interview questions in each region, right?”
Sorry to disappoint, but no, not really.
No one sits down and says, “Well, in Chicago we should ask this specific set of questions but in Houston it will be completely different.”
Once again, the main difference comes down to the industry focus: you don’t need to be an expert on the industry of focus in each city, but you should know something about recent deals and any industry-specific valuation methodologies.
It’s not really “easier” or “harder” to get into finance in different cities – there are fewer spots outside of New York, but there’s also less competition.
Yes, there are banks in places besides NYC, Chicago, Houston, SF, and LA – but the offices tend to be much smaller and they don’t always recruit on-campus.
Other cities with a presence in finance include Boston (similar to SF due to the industry focus), Washington, DC (aerospace/defense), Atlanta (lots of wealth management), Miami (healthcare, Latin America), Dallas (got equities?) and maybe a few others.
I can’t recommend starting out in these places if you have the option to go to one of the 5 major centers listed above.
Maybe if you’re interested in only a very specific industry, like aerospace and defense, then DC makes sense – but you’ll be at a disadvantage in terms of deal flow and exit opportunities.
A lot of boutiques are also based in other regions, so you should jump at the opportunity if you have nothing lined up in a bigger city – but otherwise, stick to the top 5 above.
Outside of IB: Sales & Trading, Hedge Funds, and More
You run into the same differences in other fields like private equity, sales & trading, hedge funds, and asset management: a different industry focus and more geographically limited exit opportunities.
Some cities also tend to be stronger in certain fields.
For example, Chicago is great for prop trading and the SF Bay Area is the spot to be for venture capital.
One downside to any type of markets-based role such as trading or hedge funds is that you have to wake up very early if you’re on the west coast because you work New York market hours.
If you’re fine waking up at 4 AM, getting off work at 5 PM, and sleeping at 9 PM every night, you might be OK; if you’re not a morning person, though, you may want to stay away.
So, Where Should You Work?
If you have absolutely no idea what you want to do and don’t mind spending more money, New York is your best option – there’s more networking, more opportunities, bigger deals, and you don’t even have to drive.
But if you have a more specific goal such as going into VC, joining a tech startup, or working in the oil & gas industry, you could make a good argument for starting out in a different city.
There may be slight differences in pay, hours, and how much you save in your first year (with bigger differences on that last one), but those don’t matter much in the long-term.
To figure out which office has the best deal flow, network with bankers and ask directly – that information changes quickly and you’re always better off going straight to the source.
And whatever else happens, make sure you don’t end up doing equities in Dallas.
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Bottles and Bottles? How You Really Win Clients and Land Mega-Deals as an Investment Banker
Why does the mainstream media hate Wall Street so much?
You can think of dozens of reasons, but one of the biggest is that they don’t understand what bankers really do to earn their fees.
They see news of million-dollar bonuses and assume that financiers earn those bonuses by sitting around and playing Monopoly.
But you don’t earn massive fees by playing board games all day – it’s a process that takes years, which is one reason why bankers make the money they do.
And the infamous “pitch” has very little to do with it.
It’s All About the Pitch, Right?
The most common, wrong suggestion I’ve seen before is that “Bankers win clients by pitching them.”
But that’s like saying that you got into Harvard or Oxford by submitting a really good application – technically true, but not the full story.
Yes, the application is critical and if your essays suck, you’re screwed – but you got into a top school because you spent years developing the skills and experiences to do so, and you then presented them in the best possible light.
It’s the same with winning clients as a banker: your pitch needs to be on-point for you to win the deal, but the process of putting yourself in the position to pitch for the deal starts long before that.
What Really Happens
As you move up from Associate to VP and beyond, gradually you’re tasked with more and more sourcing work: finding potential clients, getting to know them, and then pitching for a deal when the time is right.
Managing Directors spend almost no time on deal execution – unless it’s a massive transaction that requires their involvement – and instead spend most of their time on finding new clients and serving existing ones.
If you already work with a company on all their M&A deals and your bank has been advising them for the past 20 years, you’ll probably continue to do so in the future.
Like legacy admissions in university or Roger Sterling and Lucky Strike, it’s a good bet that you’ll receive the benefit of all that history unless you make a colossal screw-up.
So it’s more interesting to look at how you find new clients – companies your bank has never worked with before.
This entire process is more applicable to smaller firms than to bulge bracket banks, because there the “legacy” factor is high and you mostly work with huge companies that everyone already knows about.
But even at huge firms, you still need to find new clients because existing companies get acquired, merge, and go out of business all the time.
In sales, a “lead” is just a potential customer – someone who might sign up for the products or services you’re offering.
It’s the same idea in banking, but since your leads are fewer in number and are worth much more, some strategies don’t work so well.
What Doesn’t Work
Strategies like online marketing (paying for ads on websites, Google, Facebook, etc.), TV/radio/direct mail advertising, and posting flyers would never work.
It may sound silly to even point this out, but I’ve actually seen some banks use Google AdWords to market themselves to clients and I have no idea why they bother.
All these methods are too impersonal – it’s like walking into Armani and having a robot display a list of recommended clothes for you rather than having a real live person greet you, chat for a while, find out what you’re looking for, and then suggest something good.
When the number of clients is low and the per-client value is high, you need to get very personal to make deals happen.
PE / VC / HF Referrals
One way to do this is to go through your friends on the buy-side, see what portfolio companies they have, what sectors they’re interested in, and who else they’ve been speaking with lately.
Let’s say you’re an MD who has worked with a private equity firm for 10+ years. At your next catch-up meeting with them, you might casually ask how their portfolio companies are doing (translation: are any of these companies ready to sell, refinance debt, or go public?).
If the PE Partner likes you and wants to give you business, he might refer you to the CEO or CFO and say, “Hey portfolio company, this banker’s good – you should get to know him.”
Or if a deal is imminent, he might tell you directly: “They’re going public next year, and the pitch is coming up next month – we’ll be sure to include you.”
In tech and healthcare groups, venture capitalists are arguably more important and bankers get referrals to startups via VCs.
Just like with your own networking efforts, cold-calling is less effective than meeting in-person first or getting referrals – but sometimes it works.
You’re far more likely to see cold-calling at smaller banks where you have to fight for every deal – and if you’re a summer analyst there you might get tasked with poring through lists of companies and finding contact information.
Cold-calling is also more common at small and middle-market private equity firms, some of which are notorious for making their newly hired associates cold-call companies all day long.
Bankers also spend a lot of time on the conference circuit, meeting with executives at events (CES, Davos, etc.).
These are like information sessions: if you can stand out from everyone else and then follow-up appropriately, your chances of success go way up.
The real action at conferences happens offstage, so bankers skip keynotes and panels and schedule as many 1-on-1 meetings as possible during the day.
Wouldn’t it be nice if banks just called you when they wanted to hire someone?
When companies want to sell or raise capital, they sometimes contact banks directly – this scenario is much more likely when a lesser-known company wants to work with a bulge bracket bank and has no other way to get on their radar.
Sometimes investors also contact bankers directly and provide the introduction, especially if they’re pressuring the company to sell so they can realize their returns.
Wining & Dining: Building the Relationship
Once you’ve contacted or been contacted by the executives at this potential client, you need to build the relationship.
If it’s an inbound contact and they urgently need to sell or raise capital, you won’t do this and you may be asked to pitch for the business right away.
But if the deal is further off in the future, you need to take time to build trust and convince the CEO that you’re not just another Gordon Gekko or Patrick Bateman character waiting in the shadows to decapitate him and steal all his money.
You do that by:
- Coming up with acquisition ideas and meeting with the executives to discuss what areas they might want to expand into.
- Giving market updates to the executives and telling them what’s going on in the M&A or capital markets.
- Meeting casually for lunch or dinner to catch up on what the company has been doing and their future plans.
- Being “on call” to answer whatever questions they have, whenever they have them.
The tricky part is that you don’t get paid for any of this – and the entire process could take years before you see any revenue.
Sure, making $10 million on a single deal sounds great – but if it takes 10 years of relationship building to get there, the NPV is much lower than $10 million.
This is the slowest and most extended part of the “client-winning” process, and if you’re not interested in relationships, this is where you’ll fail.
But if you like meeting and greeting and can’t stand Excel, then you might make a great MD – even if you’re a lousy analyst.
How does a company decide when it should sell, buy another company, go public, or raise capital?
Sometimes it’s forced to sell by investors who want to realize their returns (Amazon / Zappos) – going back to our theme of NPV, the longer an investment stays unrealized, the harder it is to get solid returns.
Other times the executives reach the decision themselves – the CFO looks at their cash flow projections and realizes their burn rate is too high, so they decide to raise debt or equity.
And still other times, bankers “plant” the idea in the CEO’s mind.
While you don’t have to plant this idea in a dream within a dream within a dream within a dream, you do have to be subtle about it – going out and blatantly pitching an LBO won’t work even if you really want a PE firm to buy the company you’re speaking with.
Instead, bankers are more likely to make casual references to private equity firms and leveraged buyouts elsewhere in the market when they meet with the company to discuss other topics.
Over time, if the CEO and Board buy into the idea or show interest, the bankers keep selling them on it and gradually start to reveal more and more information.
The best bankers – the true rain-makers – are the ones who are best at “selling” the company on a transaction, even if the management team had no interest initially.
Regardless of whether the idea was planted or original, once the company decides it’s ready to sell or raise capital, it then pits bankers against each other in a bake-off.
Sometimes if a company has a special relationship with just 1 banker and has never spoken to others, it will skip the pitch and give the business to that banker.
But that’s more common at private and smaller companies where there’s not as much oversight from the Board of Directors – at anything bigger the Board usually requires the management team to solicit competitive offers.
At this point they would contact all the bankers they’ve gotten to know over the years and tell them what they’re planning, send over relevant financial information, and invite them to pitch for the deal.
The number of banks invited depends on the deal type – IPOs have many banks, whereas in M&A deals there’s just 1 or 2 advising the buyer and seller – and whether or not the company wants to stick with the bankers it knows best or go for a broader set.
Who Wins the Deal?
This must come down to whether or not you’ve dotted all the i’s and crossed all the t’s in your pitch book, right? And whether or not you remembered to change the font size on every single page, right?
Nope – most of the time the pitch book itself is irrelevant to winning the deal, even if you pulled 4 all-nighters to create it.
What matters is how much the company likes the senior bankers, what the senior bankers say, and how they say it – and what they say compared to the other bankers pitching for the deal.
Let’s say you go in and claim that the company is worth $500 million and that you can complete the sale process in 6 months. Then another banker goes in and says the company is worth $400 million and that the sale process will take 12 months.
You might assume that you’ll win since your claims are more aggressive and will result in a better price for investors – and sometimes that’s true.
But the CEO and other Board members/executives could also look at your pitch and think that your numbers are unrealistic and that you’re not being honest – especially if everyone else there is predicting lower valuations.
So you need to use a careful blend of salesmanship and pragmatism to win deals.
After the Pitch
There may be a clear “winner,” but more often than not, the company will follow up with multiple banks to see what the fee structures are like and what their recommendations are in more detail.
For smaller companies and deals, the fees make a bigger difference and sometimes a bank will win the deal by promising lower fees or a structure that rewards them for better results (e.g. 0.75% under $500 million and 1.5% for the amount above $500 million).
Most of the time, though, it comes down to all of the above factors and the company considers everything when making a decision.
This is not a rational or logical process – just like selecting which applicants will receive interviews, it’s random and fraught with emotion.
If you think executives are rational just because hundreds of millions or billions of dollars are involved, nothing could be further from the truth – sometimes the more money that’s involved, the less rational the deal (AOL / Time Warner).
Putting everything together, here’s an example of how you, after you become a Managing Director, might meet a CEO, develop the relationship, and then pitch for the deal:
5 years ago you were having a catch-up meeting with a local VC and he mentioned that a tech startup in their portfolio was hot and would change the world of online media.
He gave you an introduction, so you met with the CEO, learned about his vision for the business, and got an idea of the company’s financial performance.
A year later, you caught up with the CEO once again and gave him an update on the capital markets and what IPOs were pricing at. The company was not yet cash flow-positive, but they had killer revenue growth.
The next year (3 years ago), the IPO markets were closed but the CEO wanted to use his stock to acquire smaller competitors – so you ran a buy-side M&A process for him over the course of 6 months. It never went anywhere since they couldn’t find anything good and got distracted by other issues.
Then, 2 years ago, the company finally turned cash flow-positive and started thinking about an IPO, which they told you about during your quarterly meeting with them.
You made your analyst monkey stay awake for 60 hours straight to prepare a 200-page pitch book laying out all the nuances, but then the CEO decided to hold off until the market got better.
Finally, a few weeks ago the CEO contacted you again just before another meeting and said that they are now serious about selling and want to hear your thoughts – so he invited you in to pitch for the deal.
Not only did this process take 5 years, but there’s no guarantee that this planned sell-side M&A deal will even happen – or that the mandate will go to your bank.
Maybe no one will be interested; maybe the CEO will change his mind yet again; or maybe investors will pressure them to go public instead.
And you ran a failed buy-side M&A process for them a few years ago.
This is why investment banking is such a tough business: you could do everything right for 5 years and still lose the deal because your fees are 0.1% too expensive, or because the CEO gets emotional and happens to like an unknown banker more.
Wait, This Sounds Boring!
One time I was explaining this process to a friend who was still in university and he said, “Wow that sounds boring – I’d rather do modeling and analytical work.”
If your IQ is higher than your EQ, it may not sound too appealing to develop relationships like this and constantly pitch for new business.
But as Jonathan Knee points out in The Accidental Investment Banker (highly recommended), all deals start to look the same after a while.
You learn a lot at first and valuing and modeling companies seems exciting when you’re new, but they become routine and boring once you’ve done them 500 times.
We’re more interested in stories and inter-personal drama than we are in staring at Excel all day – so even if the process above doesn’t sound interesting right now, you may change your mind in a few years.
You might assume that you should move to the buy-side if you’re not interested in any of this, but that’s only partially true – in PE and VC you still do a lot of relationship-building, meeting with new companies, and so on.
So if it’s really not your cup of tea, think about hedge funds or trading – where you can make bank without talking to people or leaving your 8 computer screens.
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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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