A Week in the Life of an Investment Banking Analyst: Tuesday
My week continues with an account of what happened on Tuesday – not quite as dreaded as Monday, but still far from the weekend.
9 AM – No fire drills today, so I get to the office at a normal time once again. The morning is fairly slow and I spend most of my time making further changes to the presentation/Offering Memorandum for Client A from yesterday.
I defined fire drill back in my article on investment banking lingo, but it’s an emergency where the analyst has to produce something under a very tight time constraint (usually less than an hour). Often it turns out to be unnecessary.
12 PM – Multiple requests from different MDs; one of them wants to see an analysis of deal-related documents that Client B (the public company being sold to a larger public company) and the buyer are exchanging. Another one is asking for some old presentation we put together.
Managing Directors don’t interact much with analysts, but there are always exceptions. Everyone has a different style and some of the MDs are more “hands-on” than others. Sometimes if it’s a simple request the MD will just ask the analyst directly rather than going through 2-3 other layers of people.
3 PM – Have to run a Premiums Analysis for a potential client. Dealing with them is often more painful than working with real clients.
A Premiums Analysis is one of those valuation methodologies you may not know about if your knowledge of finance is limited to the Vault Guide.
When a public company is acquired, the buyer has to pay a premium to the seller’s share price so that there’s an actual reason to sell the company. Why would you sell for $25.00 if your share price is currently $24.75?
A Premiums Analysis lists all public companies that have been acquired in a certain market (for example, Internet companies) in a certain deal size range (over $5 billion USD) in a given time period (the past 2 years) and establishes the median 1-day, 20-day, 30-day, 60-day (and sometimes even more) premiums paid to the seller’s share price.
The medians are usually in the 15-35% range, and sellers will rarely agree to anything under 10% unless there are unusual circumstances (e.g. a recent run-up in the stock price).
If you apply the median of the set to the company you’re looking at, you get an idea of the price to expect.
For example, if the median premium is 20% and the client’s share price is $50.00, then they might expect at least $60.00 if they sell the company.
6 PM – Analysis takes longer than expected since most of our data is wrong or missing (this happens a lot). Client C (the private equity deal) has sent a flood of information throughout the day and I make further changes to our models.
8 PM – Some of the other analysts go out to eat. I want to leave before 2 AM so I pass on this one.
10 PM – Finish up work for Client C and speak with associate on changes for Client A’s presentation.
This is how the investment banking workflow works: constant revisions of presentations and documents until they’re in passable form. 90% of your time is spent on everything after the initial version.
1 AM – Accomplish my goal of heading home before 2. Changes took longer than expected.
2 AM – Decide to go work out despite being tired. I don’t recommend this.
Note to incoming analysts (and associates): If you’re into fitness, find a 24-hour gym near your office. Plan on hitting the gym only at unusual hours.
3 AM – Arrive back home, even more tired. Pass out.
This was a standard Tuesday – there was probably less downtime than normal, with 16 hours of actual work.
Series: A Week in the Life of an Investment Banker
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