Investment Bank CEOs: Another one bites the dust

As another investment bank head throws in the towel, another set of investment banking inspired lyrics begin dancing in front of your eyes, sung to the tune of "I Will Survive", but from that vey embattled CEO's point of view.

First I was Chief counsel,
And then the CEO,
I pinned red umbrellas in my suit,
But the shares they moved so slow,
Investment banking was doing well,
ECM made cash to burn,
I was riding the financial markets,
Hoping there’ll be no downturn,

And then the dance,
Began to slow,
All the hedge funds pulled their cash,
nd the institutions began to follow,
And now my share price is in the pits,
Massive writeoffs are what I see,
I don’t want no shareholders,
Can’t they just stop bothering me?!?

They say “go on now go”, “walk out the door”,
“Just turn around now, 'cause you're not welcome anymore”
“ Weren't you the one who tried to stick to the strategy,
That read that if you get advised by us, we’ll throw some debt in there for free”
I should have split the firm apart,
I should have sold it bit by bit,
Like all the analysts told me,
Now it’s all just gone to shit,
At least I’ve got my options when I leave,
Although they don’t amount to much today,
But once I’m gone the price will soar,
And I’ll get my sky high pay day.

Just out of curiosity, how many of you monkeys and monkeyettes out there recognise the CEO and firm in questiosn. Drop the monkey a comment to have your say!

The poetry of investment banking

It's late at night, you're in a cab on your way home and you are paging through you schooldays companion, a book of poetry that reminds you that there are people that have more to say that the overvalued manufacturing arm of the nation's largest conglomerate. As you page through the book, your financial overload of the day metamorphosizes with the words on the page. Before you know it, you are reading Robert Burns' A Red Red Rose and instead of the original verses, a strange collection of the event of the day seems to be lurking between the lines, as if the chief executive of one of the investment banks were himself reading these verses and narrating his view of the world through this beautiful medium.

O my firm is like a pot of gold,
With plenty of cash to spare;
A lawsuit here, a settlement there,
The balance sheet has more to spare.
Those multi -million settlements,
Are peanuts for the house of Merill;
Lose one or two, you lose a few,
But eight billion is cause for peril.
Our balance sheet was hit real bad,
Our investor’s confidence was shaken;
But such is the strength of the Merill name,
And my options were still there to be taken.
Farewell my underling, farewell!
For I will certainly do!
I’m off to retire with my $160 mil,
And wish the best of luck to you.

Stewie Griffin Meets Wall Street

A gem of a video...

Investment Banking Training Video

The monkey's hat goes off to the performing artist in an investment banker's shoes in the video below.



No comment necessary.

Investment Banking Banannas

Courtesy of another monkey...

The investment banker moves on: out with private equity, in with the strategics

So what if the Kruelbergs and Blunderstones of this world are finding it hard to get the kind of cash from their investment banks that they did just a few months ago. It’s an investment banker’s duty to try and then to try harder. Prepare pitches, present profiles, think in the box, out of the box, around the box – whatever it takes to get that damn tombstone. It has to be said,\however, that sometimes, a deal simply doesn’t work. It may be because the client is a dumbass who cannot tell their ass from their elbow, and can’t se a good deal when its staring them in the face. Sometimes, it’s because the deal or idea the investment banker has cooked up is so poor that even a three year old chipmunk wouldn’t look at it twice.

Nonetheless, it’s not an investment banker’s duty to question how or why. When a deal does not work, the investment banker takes rejection with dignity and honour (by telling everyone that the client is a muppet, for example) and goes to pitch the same idea to the next potential client that is willing to take the time to hear him out (it is very important to make sure that the client’s logo at the front of the presentation is changed in the pitchbook, as for some strange reason, clients tend to get rather upset when for example someone at Kruelberg opens the exclusive and unique opportunity that the firm has set aside for him and just him, only to find Blunderstone’s logo on the front page).

So we do live in times when the next client to pitch to isn’t going to be a private equity house. This is most unfortunate for the analyst involved, as it significantly reduces their ability to get headhunted into the buyside by impressing the clients with their knowledge of the art of bullshit. Big deal. Look on the bright side. No need to impress snotty nosed, full of themselves, smug ex-investment bankers who feel the need to overcompensate for all the shit they had to take in their junior days by making the investment bankers who work for them feel even worse. No way. Now that the Kruelbergs, Blunderstones and Crapaxes of this world are no longer in the market to but overpriced assets, in come the corporates, with their warchests of cash, sitting on their balance sheets. Their boards are no longer afraid of being pushed out by a crazy private equity fund (not that those guys have become less crazy, but they simply don’t have the cash nowadays), so there’s no need to worry about returning value through share buybacks. And with no buybacks, all the cash they make just sits idly on their balance sheet. It is in times like these that the investment banker hears his calling.

“Pitch to them!” says the deep voice of investment banking wisdom.

“Make them acquire!” roars the voice of investment banking passion.

“Help them expand their footprint in new markets!” whispers the voice of investment banking sincerity.

“Create the leaders of tomorrow” hollers the voice of investment banking vision.

The investment banker is drawn to the voices, dancing majestically like ballerinas in his head. Their words creating visions of synergies, multiple expansion, consolidation and premia. And as this spectacle of investment banking vision crystallizes before his eyes, the investment banker hears the deep, clear voice that overrides them all. It is chanting, loud and clear, the raison d’etre of every senior investment banker – “fees” sweet, glorious, upwards scaled, beautiful fees.

And for fees to materialize, deals need to happen, so the universe of the investment banking managing director eclipses with that of the humble analyst. They look together into the sunset over the City of London and march on to the next pitch – that next pitch that just might turn into a deal, that just might close. And if it does, oh how sweet those fees will be, and how wonderful the creation of yet another set of lucite tombstones will feel.

The Monkey is back: the New Investment Banking Paradigm

It feels like an age has gone by since you last reflected on you existence as an investment banker. You almost don’t know where to start, what words to use, how to describe the feelings of bitterness, resentment, pride and greed that, in subtle, interwoven overtones, paint the skies of the investment banking universe.

You sit reflecting on what you need to catch up on since the last time you had a few moments to yourself, and as you stop to think, you are immediately frustrated by the time it actually takes you to get that rusty machinery in your head going again. The core skills of investment banking have become innate to you, and as you have perfected these arts of slyness, manipulation, misrepresentation and disguising self-interest, you haven’t had the need to switch off the auto pilot and do some actual thinking.

Damn. That’s hard.

So what’s happened in last few months? Ah, nothing much. Kruelberg came, Kruelberg went, came again, went again, finally quenched a megadeal. Another investment bank advised on it. You worked on the financing. Bigass financing. One of the biggest financings of all time. Ok. It was underwritten by the same guys who advised Kruelberg on the deal, but you at least got a glimpse of the action. You’ll get a tombstone on your desk, and in ten years from now, nobody will even remember who did what. All that the little analysts will se when they enter their MD’s (your!) office will be the triumphant testimony that you were involved in one of the most amazing deals ever. That’s pretty good. Pretty damn good. And it’s all about the tombstone.

Oh. Yeah. One tiny detail being that, there was some more shit that happened in the meantime, and that tombstone is looking very unlikely. Why did the markets have to go sour on your big deal watch. Liquidity gone, spreads widening, the firm decided to pull out of the syndicate for the financing. They might have saved their asses but they sure screwed that tombstone for you. Why? Why? Since when have dividends to investment bank shareholders been more important than investment banking glory?!?

Oh well, Kruelberg and their other adviser, in the meantime, finished the deal. Those other analysts got a tombstone. So the market crashed. Their leveraged finance analysts also got a financing tombstone. So the whole ridiculous amount of debt is on the bank’s books. So what, they’ve got a tombstone. And to top it all, now that the debt market is distressed, Kruelberg looks like it will team up with said bank to create a special purpose entity to scoop up all the debt that it actually borrowed and the bank could not shift on to suckers like the firm. Ok, so Kruelberg not only gets its financing, but also makes a whammy by buying it off the bank at below the nominal value because it’s ‘distressed’! Genius. Kruelberg: 1, the investment bank: nil points. But hey, some little fucker in structuring will get a tombstone out of it for sure. Bottom line – screwing your shareholders over and making Kruelberg richer is a great deal for the bank – the tombstones are well worth the plummeting share price.

Sadly, that bank was not the firm. The firm’s shareholders and partners are richer, and you don’t have a single tombstone to show for it.

Where will this investment banker be in ten years' time?

So, the jury is out. You’ve been running around the bank, asking everyone where they thought you would be in ten years’ time. A great strategy, you thought to yourself, given the fact that you don’t have a clue as to what you will be doing and who you will be doing it for. After all, investment bankers are the some of the (self proclaimed) best brains around - the best and brightest – the world’s leading corporations jump at the opportunities and ideas the investment banking world throws at them, so why not leverage these great minds and let them decide your future for you. After having asked hundreds of keen intellects (well, 422 to be precise) about where you will be in ten years’ time, the results are rather puzzling, if not a little unsettling. Topping the list, one hundred and sixty four of them thought you would end up in a mental institution, ninety two said private equity, sixty four said you would make MD at the firm, fifty seven said you’d end up in a hedge fund (and hopefully one that doesn’t fold) and a generous forty five thought you would be retired.

Hmmm. The majority think mental institution eh? Well, the majority in 2000 also thought the boom bust cycle was a thing of the past. The majority also never saw Long Term Capital Management folding. Grateful as you are for everyone’s contribution, you take comfort in the street’s unprecedented ability and track record in getting things wrong and dismiss the mental institution idea.

Letter to an Investment Bank's Shareholder

From: The firm's management committee


Dear shareholder,

We would like to take this opportunity to provide you an update of the recent trading performance of the firm.

As you may already know, the overall market conditions, both on the debt and equity side have been rather challenging of late. We take this opportunity to explain to you, our fellow shareholder, the firm’s exposure to this market environment as well as the active steps your management team is taking to ensure your investment continues to deliver the high returns you expect.

Over the past twelve months, we have taken active steps to augment shareholder returns and deliver greater returns on your invested capital. We have identified strong growth areas in the market of alternative investments (hedge funds, private equity, etc) as well as augmented our business practices and divisions with strong exposure to these.

We have beefed up the headcount of highly motivated (and thus remunerated) managing directors in our leveraged finance and financial sponsors teams. Whilst this has been a significant short term cost to the firm in terms of hiring costs and guaranteed multi million dollar pay packages, these investments have positioned us to take full advantage of the private equity boom in the market. Unfortunately, the debt markets have not been doing as ell as we hoped, and the clients of our financial sponsors group are not doing any deals, so these expensive teams are now put on hold (the technical term for this is “TTT” – Twiddling Their Thumbs”). Also, our prime brokerage teams are in TTT mode owing to no activity from the hedge funds they were hired to serve.

Despite these temporary setbacks, our other divisions are well positioned to deliver strong revenue growth. Our equities division, for example, is ready to kick in and more than make up for the revenue lost by (and higher costs at) our financial sponsors, leveraged finance and prime brokerage divisions. Only problem is, and we are convinced once again that it will be of a short term nature, is that equity markets aren’t doing all that well, and our clients are pulling IPOs left, right and centre.

However, not to work, as we are a forward-thinking, strategic planning organization, and are actively planning for how we will dominate the market in the imminent recovery. As testament to this, we have this summer hired our largest analyst class for the investment bank, and it is the largest class ever. It might be that these analysts will be in TTT mode for some time now, but still, they will ensure we have the deep bench of associates for the next boom market that we will need to stay number one.

In short, we are happy to report that despite our share price performance (which has tanked, and with it, the retention ability of our rainmaking MDs, whose options are now all but worthless), our missing revenue targets and exceeding costs is of no relevance as we are looking to the future, and the future is indeed bright. Trust us!

Your management team.

Hedge Funds

For your viewing pleasure...

Born to be an investment banker

You wake up all hyped this fine morning, as a revelation passes in front of your eyes. You don’t need to have Rupert by the cojones in order to make your way up the firm’s structure. We live in efficient markets, as you discovered on your coffee break, and there seems to be little you can (legally) do to go round that fine point. But hey, as with all rules, there are even finer ways of twisting them to get them to work to your advantage.

Remembering the priceless advice on posturing you were given, you decide that it’s time to take the game up by a notch or two. This is something that a Mont Blanc pen and a good suit alone cannot solve. This calls for creativity, out of the box thinking, and the use of your entire investment banking skill set. This will be where your financial modelling skills will come into play. All those hours spent sitting in front of your computer screen, negotiating with your excel spreadsheet in order to make a lemon look like a peach. All those hours are finally about to pay off, as you run through your genus plan.

Much like the fact that selling a company has very little to do with the crap shape it may be in today, but the promise of a wonder once the lucky buyer has acquired it (and gets stuck with it), your progressing up the investment banking ladder has nothing to do with you being a good banker. It actually has more to do with the perception that you are a good banker. And good bankers are in strong demand, so you must demonstrate that you, being the great banker that you are, are fighting offers for employment left, right and centre.

Now this has nothing whatsoever to do with the fact that you have none of these wonderful offers, nor are you close to getting one. However, just like a guy in a good suit is automatically an investment banker, a guy in a good suit coming late to the office on a regular basis, must be interviewing left right and centre. By the same token, if said banker is interviewing left right and centre, there must be people calling him for interviews and thus he must be in demand.

And if said banker is so highly sought after by the competition, well, the firm must do everything in their power to retain him and make him happy. The fact that the firm has not really found the said individual to be of such exceptional superstar fabric is of little relevance, as what is more frightening to any investment bank than making the wrong call, is if their competition makes the right call at their expense.

So, cutting a long story short, pretending to interview, and subtly dropping hints in the right place, at the right time, will get you junior support, an early promotion and the ability to cherry pick the deals you work on. All that, courtesy of the firm’s fear of erroneously having thought that you aren’t really that good.

To make it even better, the fact that you won’t really be interviewing, but still will be showing up late to work as if you had been interviewing, will mean that you will have reduced the amount of hours spent in the office! Bonus.

You smile quietly, amazed at the sheer genius of your plan. You also think yourself rather silly for having entertained the thought that you may not exactly be top tier banker material, for anyone devious enough to concoct a deception of this magnitude, was born to be an investment banker.