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 bank then working on another large deal feels like you’re having the same, bland cup of tea served free of charge from the machine down the hall for the 7,894th time. Sure, we’re talking headline-grabbing transactions here but the glamour ends at the headlines. Especially for the poor Analyst who knows the exact moment the mandate has been won that she / he will need to cancel all weekend plans or imminent holidays.
Think of an investment bank as a well-oiled machine where a large proportion of processes run on autopilot and the bankers, who are cogs, take a series of pre-determined yet, often, very stressful steps.
This is why most bankers are easily replaceable. Tyler can simply go push the same set of buttons at Bank B, taking over Francois’ job; and so can Amit.
New joiners step into an organization where their roles and every day tasks are mostly pre-defined. That’s because investment banking processes are the same, most times. A capital raise is a capital raise. Sure, the company may differ each time around and you’ll face a different set of nuances 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 the sandwich will taste the same from Texas to Dubai.
Por ejemplo. For example
Let’s imagine you’re an Associate in a Debt Capital Markets (DCM) team and are trying to win a mandate to raise €1.75bn for Telefonica, the Spanish telecom giant. 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, presentations that regurgitate commentary, analysis, research and more which already exists within the bank. Over 99.9% (+- 0.00001% margin of error) of the information and data presented in those Market Updates is already known to Telefonica. Why? For one, their management read the news too. Secondly, every other bank, not to mention major research company, also sends out Market Updates or the like which contain the same messages.
Okay, so Telefonica receives those regular updates from your bank. At some point, you’ll send a lengthier presentation, which also includes a Market Update section, and will aim to convince them to “come to the market” given “very favourable market conditions”. Here, again, every other bank will have done the same. Oh, and it’s always a great time to “come to the market” and do a transaction – always for the bank.
Madrid, here we come
You fly out to see the management.
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 talk about the market and their glorious position in the league tables.
Fast forward a bit and let’s imagine you won 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 fine 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. Next, you have a team of people in Sales – masters of the tongue – call up and schmooze investors and all over the place and get them to commit some money until you reach the targeted capital size.
Note, this is a gross oversimplification of the process. Point is, there is quite a bit of structure to it. And it’s only a matter of time before you feel that you’ve done enough and the ‘deal’ loses its 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 as their heavyweight jowls shake uncontrollably 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 financial institutions 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? Perhaps. The clock is ticking and you won’t get these times back. Change is good. Change is healthy. All ibankers have their own personal and 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, even if 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 then fine; but at least try different departments.
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 real action is)
Sometimes a jump to a smaller financial institution makes all the difference. Especially to practice finance a la Indiana Jones. I’m not talking about flimsy boutiques here – incomparable to the prestigious big-name investment banks. Instead, I refer to small and / or medium-sized hedge fund, private equity firm, hybrids of the two, focused corporate finance boutiques, Family Offices 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 these smaller yet more interesting financial institutions. Sure you can search for them online but if you’re lucky you’ll come across a holding page with just a telephone and address. Not much else really.
I know plenty of single Family Offices, each managing over USD2bn, that don’t even have a proper website. Sometimes, 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 then you should take a casual walk around Mayfair and pay close attention to the signs on the doors. At first glance you may think you’re passing a small art gallery or antiques shop. Is that a Picasso hanging on the wall, you’ll ask yourself?
These are the firms that move quickly, don’t deal with superfluous compliance 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 investment banks yet some never cut their teeth there. The big question is: how does one join one of these outfits in Mayfair or the equivalent in another city?
We’ve all heard about the young lady who advised a member of the Abu Dhabi royal family on 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.
Go on then and enjoy some change!