Google decides to buy Twitter. Dubai want to raise USD5billion in a landmark capital raise, to build the world’s largest underwater luxury hotel. BMW needs to have its debt restructured. Who you gonna call? The big investment banks (ibanks) where your friends Tyler, Francois and Amit work. Sounds exciting, right?
After spending enough time in an ibank, working on big deals becomes analogous to having the same, bland cup of tea (served free of charge from a machine) for the 7,894th time. Sure, we’re talking headline-grabbing deals here but a lot of the glamour ends at the headlines. Especially for the poor analyst and / or associate who knows the exact moment the mandate has been won that she / he will need to cancel all weekend plans or imminent holidays in the weeks ahead.
Think of an investment bank as a well-oiled machine where a large proportion of processes run on auto-pilot and the people acting as screws take a series of often, very stressful yet pre-determined steps.
This is why most ibankers are easily replaceable (Tyler can simply go push the same set of buttons at bank B, taking over Francois’ job; and so can Amit)
People step into the investment bank and sit in a structure where their roles and every day tasks are for the most part pre-defined. A capital raise is a capital raise. Sure, the company may differ each time and you’ll face particular nuances in each case but in the end it’s the same boring routine. Not every Big Mac has the same exact quantity of ‘special sauce’ but for the most part you can’t tell the difference.
Por ejemplo (for example in Spanish)
For example, let’s imagine you’re an associate in a Debt Capital Markets team and are trying to win a mandate to raise €1.75bn for Telefonica, the Spanish telecom. Given Telefonica’s size and status as a leading Spanish corporate we can rest assured that your bank maintains regular contact with their management. Your team sends Telefonica presentations throughout the year. Most will be market updates, which are simply presentations that regurgitate commentary, analysis, research and more which already exists within the bank. 99.9% (+- 0.00001% margin of error) of the information and data represented in those market updates is already known to Telefonica. Why? For one, they read the news too. Secondly, every bank, not to mention major research company, also sends out market updates which contain the same messages.
Ok, so they receive those updates. Then you send lengthier presentations, which also include a market update section, and try to convince them to ‘come to the market’ given very favourable market timing. Here again, every other bank will have done the same. Oh, and it’s always a ‘great time’ to come to the market or do a transaction…always for the bank :)
Then you fly out to see the management and while you and your superior(s) are eating tapas at a local restaurant outside Telefonica’s headquarters in Madrid, their CFO is listening to your competitor (Bank X) talk about the market, league tables and their glorious position in the league tables.
Fast forward a bit and let’s imagine you win the mandate, along with a few other banks, to raise the capital. Given it’s Telefonica you may not need to go on a roadshow – everyone has already seen her in her undies – but if you did it’s ok because most banks have roadshow coordinators.
So the process begins and you liaise with several people from across your bank and the other banks you’re working on the deal with and then you have a team of people in Sales (masters of the tongue) who call up and schmooze investors and all over the place and get them to commit some money until you reach the targeted capital size.
This is a GROSS oversimplification of the process as it’s not always straightforward. Point is, and what I’m trying to say, there is quite a bit of structure to it. It’s only a matter of time before you’ve done enough and the ‘deal’ loses it’s pizzazz and excitement.
Bigger size -> more danger -> more rules -> more boredom
So why does it get boring? Well, working in any large organization can become routine in time – no startling insight here. But, let’s not forget, banks have to live with the presence of what overweight, bespectacled banking regulators love to throw around called ‘systemic risk’
– > the gist of it is that if a bank tips over for whatever reason then, given the linkages with other banks, we may see other banks fall like dominoes and we end up with a collapse of the financial system.
So large and significant are they that all eyes are fixated on them. Consequently, and typical of those under the spotlight of scrutiny, banks must exercise caution when they tango.
Also, when you’re that big if you trip and fall you tend to hurt not only yourself but a lot of helpless creatures around you.
“Change in all things is sweet” (Aristotle)
So what’s the solution? Change roles? Change team? Change banks? Change jobs altogether? Yes! The clock is ticking and you ain’t ever getting these times back. Change is good. Change is healthy. All ibankers have their own personal/professional reasons for sitting in their seat but do you really want to become the chap – maybe sitting a few rows away from you now – who has had the same role – perhaps at 2 or 3 different banks – for the last 20 years?
With a universe of work opportunities available nowadays how can you stick to the same thing for so damn long? If banking is your life’s mission and you love nothing more than fine but at least try different departments.
You all know as well as I do that very very very few people love working in an investment bank. Most ibankers have simply learned to live with the job.
Smaller and nimbler
–> Mayfair: where the action is!
Sometimes a jump to a smaller financial institutions makes all the difference. Like the ones who practice finance like it’s done a la Indiana Jones. I’m not talking about the flimsy boutiques here – incomparable to the prestigious big-name ibanks. Instead, I mean small and / or medium-sized hedge fund, private equity firm, hybrids of the two, focused corporate finance boutiques or other ’specialised’ finance firm that a) do fantastically well from a profit standpoint and b) do exciting stuff. Where you can witness A through Z of a deal, not just P.p.1 to P.p.2!
Where art thou
The issue here is that most of the time nobody’s heard of them. Sure you can search for them on Google but if you’re lucky you’ll come across a holding page with a telephone and address. Not much else really. I know a handful of single family offices, each managing over USD2bn, that don’t even have a website. When you put in the domain from their e-mails into the URL your browser takes you to a dead page. If you do come across more information then it tends to be generic.
If you’re living in London take a casual walk around Mayfair and pay close attention to the signs on the doors that end with ‘Capital’ or ‘Partners’. A first glance you”ll think you’re passing a small art gallery or antiques shop. Is that a Picasso hanging on the wall, you’ll ask yourselves.
These are the firms that move quickly, don’t deal with big comliance meetings, avoid spending countless hours working on useless 150-page presentations (which we all know nobody reads, and senior members of a team flaunt for personal reasons) and yet play quite a unique role in the financial system.
Many people working in these shops come from the big ibanks yet some never cut their teeth there. The big question is: how does one join one of these outfits in Mayfair, Greenwich, etc?
We’ve all heard about the young lady who advised a member of the Abu Dhabi royal family vis-a-vis a capital injection into a UK bank after warnings from the Financial Services Authority (FSA). She never worked for a big investment bank slaving over PowerPoints & Excels. In fact, she never worked for a bank period :)
Go on then and enjoy some change!