Ask a former Wall Street investment banker (almost) anything

[vijax]

OP I'm currently an auditor working in the Big 4 wanting to switch into M&A. What are my chances?

[kraxxis]

i hope all you ******s arent focusing on just GS.

- Deutsche Bank
- Credit Suisse
- UBS
- JP Morgan
- Citi
- BA Merrill Lynch
- Nomura
- BNP
- SocGen
- Macquarie
- Jeffries

etc...

lol only applying to GS is like only applying to Harvard. Even if you're a god-like candidate there is a high chance that you're screwed anyways. If people don't know this, then they shouldn't be applying in the first place.

[namechange]

OP I'm currently an auditor working in the Big 4 wanting to switch into M&A. What are my chances?

Zero. Only chance to get in would be bschool.

[Whartonite2014]

I've only been a banker for almost two months, but have already had headhunters reach out to me. Another analyst in my class signed an offer already... WTF. He is going to work at a family office and will resign in several months. Things move pretty fast.

[dimitriy]

Hey all. I've got a masters in engineering and the opportunity to start a career as an IB or quantitative strategist. I was initially quite averse to the idea of working as a quant since I planned to veer away from the engineering scene, but people have convinced me that a technical path offers compelling long-term opportunities.

Any insight/advice would be very helpful. Thank you

[namechange]

Hey all. I've got a masters in engineering and the opportunity to start a career as an IB or quantitative strategist. I was initially quite averse to the idea of working as a quant since I planned to veer away from the engineering scene, but people have convinced me that a technical path offers compelling long-term opportunities.

Any insight/advice would be very helpful. Thank you

Do what you are more passionate about.

[Logros]

Hey all. I've got a masters in engineering and the opportunity to start a career as an IB or quantitative strategist. I was initially quite averse to the idea of working as a quant since I planned to veer away from the engineering scene, but people have convinced me that a technical path offers compelling long-term opportunities.

Any insight/advice would be very helpful. Thank you

As said above do what excites you. I've gone from engineering to IB as well, because I liked getting to know the ins and outs of how companies work and I learn a ton of skills which will help me in the career path I'd like to go on. Starting as a quant your exit options and the skills you develop are going to be way different, so that is an important thing to consider.

[falconx4]

Well I didn't know I really wanted/liked finance until my Junior year and by that time I was already involved in campus activities that I really enjoyed. I already downloaded some books. My work does mortgages, but it's downtown Minneapolis and I'm in the brokerage side of business. Oh and I already got some of the GMAT books downloaded lol. Not trying to crank out more than $1,600 like I did for my first CFA exam.

Sup brah, another minnesotan checking in. I'm graduating with a Finance degree from UST this december, even though i walked last may, i'm taking a few extra finance and accounting classes (more than the req) to help me further with my CFA in June 2015. I would appreciate any pointers, tips for studying what and how etc. and pretty much anything that you wished someone had told you. My class list is accounting all the way to intermediate 2, and all the finance classes i've taken are- financial mgmt, corp fin, investments, strategic, derivatives, Fixed income, securities port mgmt (pitched my stock to Abbot downing and got voted to pitch to our school's endowment fund).
Thanks.

[walshyn93]

Proconsul, how do you make friends within the industry? From what you've said above it sounds like bankers take themselves way too seriously (like Hugh Grant's brother). I'm a pretty down to earth guy who really wants a career in M&A but don't think I could relate to some of the people you've talked about above.

[whitecollarcrim]

Are your stats real life?

I have a great personality, I'm incredibly good with people. People at the NYSE loved me. Trying to leverage my connections w/ the CEO and Sr VP atm. The CEO's son told me I'm the only intern he'll ever miss and he still texts me every week. Made a lot of good friends there. If I could get an interview at Goldman/any BB, I'd bet my life savings that I'd get an internship, just gotta get an interview.

dat feel.
when all you need is an interview.
i always feel like if I could just get in any interview I can win haha.

[nick187]

[proconsul]

Proconsul, how do you make friends within the industry? From what you've said above it sounds like bankers take themselves way too seriously (like Hugh Grant's brother). I'm a pretty down to earth guy who really wants a career in M&A but don't think I could relate to some of the people you've talked about above.

Everyone is pretty down to earth. I can't tell you the number of times we'd take out time to meet with someone for coffee, even a bad/longshot candidate, just to help them out a bit.

In Jamie's defense, somebody asked him if he was his brother's dad. It would be reasonable to ask what that guy might have said to a client, off-the-cuff, that might have showed equally bad judgment. Little things can lose you a $50 million fee mandate.

[ForeverWin]

fark mirin thread subbed for later!




BTW, did you come from money?

poor, lower middle, upper middle, high middle, wealthy

[Godyssey]

always enjoyed reading up on finance guys. in

[HGM1989]

can u break into IB with a law degree? but no finance/business experience in UG?

[proconsul]

fark mirin thread subbed for later!
BTW, did you come from money?
poor, lower middle, upper middle, high middle, wealthy

I did not really come from money. My dad was a doctor in Canada, so we weren't poor. However, I was a refugee at age 3 and he had to re-do his medical training when we came over, so it's not like my dad had made a ton of money in his lifetime. I grew up in a farm town (pop 1000) until my dad sent me away to private school.

Not quite rags to riches, but I never felt well off growing up. I just felt like everyone else around me, and some of them were pretty damned poor.

My dad died while I was in college.

can u break into IB with a law degree? but no finance/business experience in UG?

Yes, although my experience with converted lawyers has been less than stellar. It's very difficult for people who don't have a highly quantitative/accounting background to "see through" the numbers on a page unless they've spent years and years toiling away creating them. They just lack the strong foundation to start building a higher level understanding on top of.

Having said that, many lawyers do make the transition. Tor Braham, who headed DB tech M&A, used to be a partner at Wilson Sonsini. Rob Kindler, who headed JPM global M&A and is now chairman of Morgan Stanley's investment banking practice, came to JPM from Cravath. When my group head and I were hired by Merrill Lynch, the rumor was that the two leading candidates to replace him were a pair of Wilson M&A partners, Steve Camahort and Mike Kennedy.

My experience is that the easiest transition is for a partner-level lawyer in M&A to come over as an M&A managing director in banking. At the associate and vice president level, I saw more "bad" converts than "good" ones.

Having said that, in good markets we would definitely hire biglaw M&A associates to fill the pool.

[walshyn93]

Everyone is pretty down to earth. I can't tell you the number of times we'd take out time to meet with someone for coffee, even a bad/longshot candidate, just to help them out a bit.

In Jamie's defense, somebody asked him if he was his brother's dad. It would be reasonable to ask what that guy might have said to a client, off-the-cuff, that might have showed equally bad judgment. Little things can lose you a $50 million fee mandate.

Ty for the response. That's a pretty good point. I can see the logic in not wanting people who don't think before they speak around.

I'm entering a University M&A competition on Monday. We're given a case study at 5pm on Monday and have to give a presentation at 5pm on Wednesday. It's sponsored by a BB so it's well worth doing to get your name out or just to put it on your resumé. I know very little about financial modelling or how to advise clients etc. We're to compete in teams of 4 on a case study requiring knowledge of law and finance. I study Business and Law but we've barely covered the basics of finance and haven't touched corporate law yet. All of my team-mates are in the same boat.

I'm guessing we'll be given a client who wants to acquire or merge with another company and we just have to come up with the right strategy and then sell it with a presentation.

Any recommendations? Even if you could just give a brief summary of what your job entailed from the start of a project to the end or what you'd look for in a company when deciding on a strategy I'd really appreciate it.

[Logros]

Ty for the response. That's a pretty good point. I can see the logic in not wanting people who don't think before they speak around.

I'm entering a University M&A competition on Monday. We're given a case study at 5pm on Monday and have to give a presentation at 5pm on Wednesday. It's sponsored by a BB so it's well worth doing to get your name out or just to put it on your resumé. I know very little about financial modelling or how to advise clients etc. We're to compete in teams of 4 on a case study requiring knowledge of law and finance. I study Business and Law but we've barely covered the basics of finance and haven't touched corporate law yet. All of my team-mates are in the same boat.

I'm guessing we'll be given a client who wants to acquire or merge with another company and we just have to come up with the right strategy and then sell it with a presentation.

Any recommendations? Even if you could just give a brief summary of what your job entailed from the start of a project to the end or what you'd look for in a company when deciding on a strategy I'd really appreciate it.

From having done a ton of these cases and having been on the other side as well, don't worry that you don't know too much technically. You usually have to do some simple valuation stuff which comes down to an EBITDA multiple or DCF. But most important is the presentation at the end which you just have to sell a bit, talk about how the companies will grow together in the future, synergies, shareholder value, board positions bla bla bla. Think about who you're presenting to (sometimes they'll say it's a presentation to the board for example) and what would be most important for them.

As for the strategy to do an acquisition/merger, it almost always comes down to synergies. Cost savings is usually most important (back office redundancies, scale advantages), but you can look towards revenue synergies as well. Can you use new distribution channels/establish a strong position in new markets/cross sell products etc. etc. Maybe the #1 player is larger, but by acquiring the #3/4 player you can catch up or surpass them.

[walshyn93]

From having done a ton of these cases and having been on the other side as well, don't worry that you don't know too much technically. You usually have to do some simple valuation stuff which comes down to an EBITDA multiple or DCF. But most important is the presentation at the end which you just have to sell a bit, talk about how the companies will grow together in the future, synergies, shareholder value, board positions bla bla bla. Think about who you're presenting to (sometimes they'll say it's a presentation to the board for example) and what would be most important for them.

As for the strategy to do an acquisition/merger, it almost always comes down to synergies. Cost savings is usually most important (back office redundancies, scale advantages), but you can look towards revenue synergies as well. Can you use new distribution channels/establish a strong position in new markets/cross sell products etc. etc. Maybe the #1 player is larger, but by acquiring the #3/4 player you can catch up or surpass them.

Great response. Much appreciated, Logros.

[Godyssey]

The problem is that nobody knows my college unless you've lived in Minnesota, South/North Dakota

South Dakota checkin in. you a Kato brah?

[proconsul]

Ty for the response. That's a pretty good point. I can see the logic in not wanting people who don't think before they speak around.

I'm entering a University M&A competition on Monday. We're given a case study at 5pm on Monday and have to give a presentation at 5pm on Wednesday. It's sponsored by a BB so it's well worth doing to get your name out or just to put it on your resumé. I know very little about financial modelling or how to advise clients etc. We're to compete in teams of 4 on a case study requiring knowledge of law and finance. I study Business and Law but we've barely covered the basics of finance and haven't touched corporate law yet. All of my team-mates are in the same boat.

I'm guessing we'll be given a client who wants to acquire or merge with another company and we just have to come up with the right strategy and then sell it with a presentation.

Any recommendations? Even if you could just give a brief summary of what your job entailed from the start of a project to the end or what you'd look for in a company when deciding on a strategy I'd really appreciate it.

Am I too late on the draw for this?


So, the financial part of it is pretty straightforward.

First:

1) Are you overpaying or underpaying? i.e. is it fair?
2) What are the financial repercussions of a transaction? i.e. is it accretive or dilutive?
3) What does it do for your pro forma valuation? i.e. does the combined company trade at a higher multiple than you do now? why or why not?

1. valuation

This is pretty straightforward:

- Look at comparable companies, comparable precedent M&A transactions, and run a DCF. Figure out what the comparable metrics are (Total Enterprise Value to EBITDA? TEV to revenue? TEV to levered free cash flow? TEV to gross profit? Don't laugh, some companies are actually valued on TEV/GP such as semiconductor companies and distributors. Or Equity Value to net income? EV to levered free cash flow?) Your DCF will be highest, generally.

- Find a band around which the reasonable valuation range is. Remember, while you lever off the trailing multiples, you value off the FORWARD multiples. Determine if your company is better or worse than the industry average and be prepared to articulate why.

2. Pro forma analysis

- Learn how to apply proper purchase accounting. While pooling was easier, it has been disallowed since a decade ago, with SFAS 141/142. Remember that many elements of amortization are tax deductible, and that goodwill is no longer amortized. Thus you must figure out what part of excess purchase price should be estimated to be allocated to intangible assets.
- The easy back of the envelope is that in a stock transaction, you can pay up to your multiple (ignoring GAAP adjustments) before it is dilutive. For cash, it is 1/(cost of capital/tax rate). In other words, if your cost of debt is 5%, tax adjusted to 3% after tax, your break even multiple is 1/0.03, or 33.3x.
- Figure out what amount of pre-tax synergies are required to break even if the transaction is dilutive.


3. Multiple expansion

Are you a better company (in the eyes of investors) after a deal?



For the legal aspects of a deal, this is complicated by the situation - I'd want to know this first:

1. Are you public?
2. Is the target public?
3. What exchange are you listed on?
4. What states are you domiciled in?
5. Is this transaction going to be hostile or friendly?
6. is this going to be a cash or a stock deal?
7. Is it a subsidiary purchase?
8. Can it be structured under a tax efficient statute? (most deals are done under section 382, tax free and taxable reorganizations), but you can do section 338, 355, or 754 transactions which can bring additional tax benefits.

[Godyssey]

not wall street related necessarily but I could use some "older than me brah" wisdom


im moving across country to florida where I have no friends/family.


give me some advice.

srs

[Griggz]

What is your favorite movie? How many times have you watched it?

[4armsrhuge]

Is it possible for a beginner in the stock market to make atleast 100$ a day? If so how can I start learning, got any books to read? forums? etc etc not looking for a hand holder just a point in the right direction

[Godyssey]

not wall street related necessarily but I could use some "older than me brah" wisdom


im moving across country to florida where I have no friends/family.


give me some advice.

srs

plz respawn

[vash1789]

can i just come work as a janitor and get paid half a million a year?

[FinanceSwole]

OP do you know any headhunters or recruiters or companies or old contacts that can help a brother out in the marketing field? PM me if you do.

(work right off wall st which is why i ask)

[ChristianBBer]

For those of you in this thread that believe they can follow Ops footsteps,

Look at the way he responds - the depth of his responses, the quality of his words, etc..

OP is extremely smart - that is why he is successful.

[Elavaanil]

how much truth is there to what they say on mergersandinquisitions? I'm going to business school (BBA) in 2016 after I finish serving conscription and I'm hoping to get into IB for a few years then exit into PE

[whitecollarcrim]

Prosconsul,

What do you think of commercial insurance.
Specifically brokers/producers at the top firms (MarshMcLennan/Aon/Willis).
I know it's not S&T but from what I can see salaries can be HIGH.
Honestly thinking of going a route like this instead of traditional high finance (love insurance).

Also your explanation for that M&A Case.. flawless.
Was fun just to read it.