Investment Banking industry Groups
So let’s say you’re working on an M&A deal between 2 pharmaceutical companies – what would the M&A banker do, and what would the healthcare banker do?
- Initial Pitch: The healthcare banker would do most of this, including coming up with the right sets of comps and the correct list of potential acquirers.
- M&A Process: The work here would be split, but not necessarily based on who’s “better” at what – if the healthcare banker is busy, the M&A banker might take over and do more, and vice versa. Yes, the M&A analyst is more likely to get the modeling work all else being equal, but it’s not always so clear-cut.
- Closing Dinner: If the budget allows for it, you both get to go bask in glory – just make sure you don’t try to “share” anything there…
Here’s an example of what the work split might be for a tech company IPO, between the technology industry banker and the ECM banker:
- Initial Pitch: The tech industry banker will supply the comps and do the valuation, also creating the market overview slides; the ECM banker will create slides on how recent tech IPOs have been doing and add in the standard IPO process slides.
- IPO Process – Valuation: The industry banker does most of this, with input from ECM on certain assumptions.
- IPO Process – Due Diligence Calls: This is the tech banker.
- Sales Force Memo: ECM does this since they interface with the salespeople.
- S-1 (or equivalent IPO registration statement): Both groups are involved here.
- Road Show: This is mostly the tech industry banker and his team – ECM is busy with many other deals and doesn’t have time to travel frequently.
Restructuring is a special case because of the specialized knowledge – industry bankers can’t contribute much there.
At most, the industry bankers may weigh in on the comps, valuation, and potential buyer ideas, but the restructuring/distressed M&A team would do everything else (analyzing bankruptcy scenarios, different capital structures, and running the process itself).
The same applies to Special Situations groups (which often include restructuring/distressed M&A) at banks – since the skills are so specific, you won’t share much work with the industry bankers.
The Hours and Pay
At the analyst and associate levels there isn’t a big difference – the one exception is that you do work less (~12 hours per day) in some ECM groups, especially ones focused on IPOs rather than convertibles.
Otherwise it’s fairly close and deciding which group to join based on hours and pay is borderline insane – you’re in the wrong industry if you’re thinking about where you would get the best lifestyle.
Show Me the Exit Opps!
You hear this line of reasoning a lot, but no one has ever collected data on where analysts go afterward – so all these discussions are anecdotal at best.
In general, it’s harder to get into PE from a group like ECM because the skill sets don’t overlap and you won’t know enough about LBOs and more complex models to compete.
But the industry group vs. M&A vs. Leveraged Finance distinction isn’t so easy and some industry groups place just as many, if not more, analysts into PE (e.g. the infamous GS TMT).
If you’re hyper-concerned about getting into PE and you have multiple offers lined up, ask the people in those groups where analysts go – that is more accurate than anything you’ll read online, plus it gives you an excuse to work your sell days effectively.
If you want to break into corporate development you definitely have an advantage if you’re in a closely related industry group, and for venture capital it’s good to know something about tech (or healthcare) companies.