Investment
Banking (Lehman Brothers 2008) really gives me lots of
insights of the industry. Here is something that I find
interesting.
The players in the industry can be
sorted into 4 main groups: analysts, associates, vice presidents,
directors/managing directors (DM). I will quote each of them
a "brief" introduction from the book.
Analysts:
Analysts
are the
grunts of the
corporate finance
world. They
often toil
endlessly with little thanks, little pay (when figured on an hourly
basis), and
barely enough free time to sleep four hours a night. Typically
hired directly
out of top undergraduate universities, this crop of bright, highly
motivated
kids does the
financial modeling
and basic
entry-level duties
associated
with any corporate finance deal.
Modeling every
night until 2
a.m. and not
having much
of a social
life
proves to be unbearable for many an analyst.
Furthermore, when not at the
office, analysts can be found feverishly typing on their
blackberries. Not
surprisingly,
after
two
years,
many
analysts
leave
the industry.
Unfortunately, many bankers recognize the transient nature of
analysts, and
work them
hard to get
the most out
of them they
can. The unfortunate
analyst that screws up or talks back too much may never get quality
work,
spending his days bored until 11 p.m. waiting for work to come,
stressing
even more
than the busy
analyst. These
are the
analysts that
do not get
called to work on live transactions, and do menial work or just put
together
pitchbooks all of the time. The very best
analysts often get identified early
by top performing MDs and VPs, thus finding themselves staffed on
many
live transactions.
Associates:
Much like analysts, associates hit the grindstone hard. Working 80-
to 100
hour weeks, usually fresh out of top-tier MBA programs, associates
stress
over pitchbooks
and models
all night,
become experts
with financial
modeling on Excel, and sometimes shake their heads wondering what
the
point is.
Unlike analysts,
however, associates
more quickly become
involved with
clients and,
most importantly,
are not at
the bottom of
the
totem pole.
Associates quickly
learn to play
quarterback and hand-off
menial modeling
work and
research projects
to analysts. However,
treatment from vice presidents and managing directors doesn’t
necessarily
improve for
associates versus
analysts, as
bankers sometimes
care more
about the work getting done, and not about the guy or gal working
away all
night to complete it.
Usually hailing directly from top business schools (sometimes law
schools
or other grad schools), associates often possess only a summer’s
worth of
experience in
corporate finance,
so they must
start almost
from the
beginning. Associates who worked as analysts before grad school
have a
little more
experience under
their belts.
The overall
level of business
awareness and knowledge a bright MBA has, however, makes a
tremendous
difference, and
associates quickly
earn the
luxury of
more complicated
work, client contact, and bigger bonuses.
Vice presidents:
Upon attaining the position of vice president (at most firms, after
four or
five years as associates), those in corporate finance enter the
realm of real
bankers. The lifestyle becomes more manageable once the associate
moves
up to VP. On the plus side, weekends sometimes
free up, all-nighters drop
off, and the
general level
of responsibility
increases—VPs are
the ones
telling associates and analysts to stay late on Friday nights. In
the office,
VPs manage
the financial
modeling/pitchbook production
process in the
office. On the negative side, the wear and tear of traveling that
accompanies
VP-level banker
responsibilities can
be difficult. As
a VP, one
begins to
handle client relationships, and thus spends much more time on the
road
than analysts or associates. As a VP, you can look forward to being
on the
road at least
two to four
days per
week, usually
visiting current and
potential clients. Don’t forget about closing dinners (to celebrate
completed
deals), industry conferences (to drum up potential business and
build a solid
network within their industry), and, of course, roadshows. VPs are
perfect
candidates to baby-sit company management on roadshows.
Directors/managing directors
(MDs)
Directors and managing directors (MDs) are the major players in
corporate
finance. Typically, MDs set their own hours, deal with clients at
the highest
level, and disappear whenever a drafting session takes place,
leaving this
grueling work to others. (We will examine these drafting sessions
in depth
later.) MDs
mostly develop
and cultivate
relationships with
various
companies in order to generate corporate finance business for the
firm. At
this point in
a banker’s
career, the
job completes
the transition from
managing a process to managing a relationship. MDs typically focus
on one
industry, develop relationships among management teams of companies
in
the industry,
and visit
these companies
pitching ideas
on a regular