Ok. It's your first week on the job and it so totally rocks. You get to hang out with some of the best people in the industry, and the firm is so good, that they make these good times last well into the night! On your first day, you went home at 2AM, and there plenty of investment banking megabrains that enjoyed each other’s company so much, that they stayed even longer! Not only do you hang out with such fantastic people, who shape the face of the financial markets with what they do on a daily basis, but the firm also provides you with free food each night, to make this fun filled time even more pleasurable. At 7PM on the first night, your whole floor gets together and you order some Chinese takeaway. WoW! And the whole office sits around a few desks, from Analyst to Director and has deeply profound conversations about the business, colleagues, competitors and the like. How much does this rock! They're all sitting around talking about the financial markets, with you, a day into the job intern, being part to conversations loaded with so much confidential information! How lucky are you to be an investment banker. One of the junior bankers (an analyst 2, how cool) attempts to give you some advice. After telling you how to do this and not to do that, he stresses that by no means should you willingly get in the way of Rupert McMuppet! "Whatever you do, if you see him down the hall, go to the water cooler. If you see him coming to your desk, hide under it. You do not, by any means, want to work for Rupert McMuppet. You just don't!" You cannot understand what he's on about. Rupert is a great guy. He interviewed you. Granted, a bit strange, quirky dress sense, funny accent and all that but a decent guy no? You dismiss the advice whilst politely nodding. What the hell does this doochebag know. He's only a 2nd year. He's not gonna last. If he doesn't like Rupert, he wasn't made to be a master of the universe. You go back to your cubicle, a 2x2 metre box in a remote corner of the floor, where you pick up your mini combo analysis that Rupert actually asked you to do. hehe. If that muppet 2nd year knew that you were already Rupert's boy he'd eat his heart out. "Eat my dust sucker". The mini combo aint looking good. Earlier in the day, your mentor explained to you that the mini combo is one of an i-banker's best friends. It's a banker's way of justifying anything to the nmanagement of a company who are meant to protect the interests of its shareholders. The particular combo you are doing, shows that if Company A (Rupert is advising company A) buys Company B, the shareholders of Company A are worse off. That is, the'ye better off just sitting on Company A. The beauty of the mini combo is, thought, that even though a deal is shit, you can make it look good, by using debt to pay for the company you buy. Yes, you guessed it - OTM. Other People's Money! It's like if you wanna buy your 107th Hermes tie (the new one with the little clouds that are nothing like anything they have come up with before), but you don't wanna cough up the £80. See, bad deal. But if an i-banker comes up to you and says "look dude, you just cough up £20, and get payday loans for the remaining £60" it's a lot sweeter. Except, it's even better than that. When you're the management of the company, it's not you who gets into debt, it's the company. So, if things turn to shit, you bail and they lose. If all works out, you're the hero. See? It's a win, win situation. that’s what i-banking is all about. The only problem with the mini combo you're doing, is that Company A (Rupert's client) is like 20 times smaller than Company B, and no matter how much freaking debt you use, the fuckin' thing won't work. Shit! You can't go back to Rupert and tell him his idea sucks! He’s an MD and a BSD! He's the man and he thinks it rocks. You've gotta make it work man, make it work. What if you don't pay any fees for the deal. Ok, yeah, that makes it better. And, and what if your debt is really cheap, yeah, yeah better as well. And what if the price you offer for Company B is a lowball, aha, this is getting there. Aha, and what if you can get some funky accountants to help you pay less tax, aha, there you go, this baby is starting to fly. Aha, and then what if your company's earnings are say 10% higher each year. Wow, this really works now. You are the man! Rupert is gonna love this. You've just shown that his deal is a slam dunk if you can avoid tax, pay nothing for acquiring Company B, double your earnings at no cost, pay no interest and fund all of the acquisition with debt. Its 2AM and time to go home. It feels good to be in the driving seat of the financial world.
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