Mergers & Acquisitions
The international jet-set of investment banking
Because of its reputation as the more glamorous side of the investment banking industry, mergers and acquisitions (M&A) is one of the most competitive sectors to break into. As the name suggests, M&A teams in investment banks advise client companies on mergers (where two companies join up as equals) and acquisitions (where one firm takes over part or all of another). Big investment banks aren’t interested in smallfry M&A deals. They only start to get involved at the mid-market level, with transactions that are worth at least US$100m. At the upper end, the deals can be worth billions. A career in M&A demands considerable commitment. M&A bankers advise their clients at what are often stressful and critically important periods in a company’s lifetime. They must therefore make themselves available whenever the client needs them – even if it’s the weekend, their summer holiday or Christmas Day. Junior bankers will work long hours and can expect to be busy assembling the required financial information and legal documentation late into the night when the job demands. “Within investment banking, M&A is often seen as the more demanding and complex discipline,” says Angela Hu, executive director and junior resources manager at investment bank J.P. Morgan Asia-Pacific. “The hours can be very long and the workload is often intense, but despite these pressures it is integral – especially at the analyst level, which requires a lot of financial modelling – that your work remains accurate.”
Key players
On the global stage, the big US investment banks dominate the top five spots in the 2009 advisor rankings. The highest ranked European player was Credit Suisse, followed by UBS and Barclays Capital.
Roles and career paths
There’s a relatively straight route up the career ladder in M&A. You start out at analyst level, move up to associate, then vice president, director and managing director – although the job titles may vary depending upon the bank you work for. Within those roles you have a chance to focus on a particular sector – for example, consumer, financials, oil and gas or media and telecommunications. The more senior you get in M&A banking, the more you’ll get to deal face-to-face with clients. At the junior level, you may be fortunate to attend a few client meetings with more senior bankers, but mainly you’ll be focused on complex financial modelling and research to put together ‘pitchbooks’ for the bank. This is the document a firm will use to outline its ideas on which companies a client should be buying, or which it should be selling to. “Many of an analyst’s key tasks will include financial analysis – for example, building a financial model, valuing a company or benchmarking a company against others,” says Anne Perez, executive director, IBD at Goldman Sachs. It’s only later that you step away from the number crunching, she adds. key difference between an analyst and an associate is that the associate will take more ownership of the project. Typically, associates can take on more projects because they will not always be doing the tasks themselves, but they will oversee the work and take responsibility for it.”
Pay and bonuses
Government crackdowns on investment banking bonuses – which would traditionally comprise the largest proportion of overall compensation – have dominated headlines for some time now. Many banks mitigated against this by increasing base pay, as well as tying bonuses more closely to performance, which means longer deferrals, a greater percentage being paid in stock and the potential for the firm to ‘claw back’ payments if a predefined return on equity is not met.
Skills sought
Given that you’ll be working on complex financial models for valuing companies and piecing together presentations to clients, numerical and analytical skills are essential. Additional languages are valued for working with overseas clients, as are stamina and attention to detail. “In order to be successful long-term, a junior professional should also strive to understand the big picture of every transaction they work on. This is crucial for M&A because of the strategic nature of deals. It is also important to learn about the legal and regulatory issues pertinent to the jurisdiction that the professional works in,” says Elizabeth Wang, COO of investment banking at Morgan Stanley Asia-Pacific. Jan Skarbek, deputy head of UK investment banking at Citigroup, adds: “You need to have a reasonable degree of comfort with numbers, be prepared to work hard, have an appetite to learn, and be prepared to work as part of a team. You will also need good social skills and flexibility. Often in M&A you need to be a jack of all trades, so we generally look for people with diverse interests and skills.”
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