A Belated Introduction to Investment Banking

What is it really that is done in i-banking and what is it really all about? You know that you are in no position to claim to be an authority of any kind on the matter, so you set out answer this very important question by asking seasoned professionals within the firm. You do the rounds, sneaking in the question over a coffee or a Friday 5pm beer, as the you feel is more appropriate. The list of answers you receive in the end looks something like this.


Rupert Blunderford
Managing Director
Advisory Group

“Investment banking is the art of advising clients. It is not so much what we say that differentiates us here, but when and how we say it. It’s the business of sensing when the client wants to hear what and then making sure one is at the right place at the right time to say the very thing the client wants to hear.”


Edward Shitton-Crapford
Executive Director
United Kingdom Investment Banking

“Investment banking is about two things and two things only. The Code and the Panel. An investment banker is not there to add value to the client. A good client will know from the outset that expecting an investment banker to add any value whatsoever is amateurish at best. The investment banker’s duty is twofold: ensuring that the client is in compliance with the takeover code at all times, and in the process, ensuring the takeover panel is aware of everything the client does. In short, we’re here to check code and act as a glorified secretary, faxing various documents to the panel“.


Paramjeet Shah
Associate
Median Investment Banking

“Investment banking is the most important job in the transaction process. We are there to hold the client’s hand through every step of the transaction and to make it all happen. We’re there to think of problems they haven’t thought of and before they can think of them themselves, come up with solutions. We’re there to say what they should pay, who they should buy, when they should do it, where they should do it and so much more. We are the ones who run companies. We tell management what to do – they’re simply drones put in place to execute our advice.”


Isabelle de Golas
Senior Analyst
Consumer Investment Banking

“Investment banking is about making sure everything the client gets is perfect. We provide analysis in spreadsheets, valuations in big models and so on, and it is our job to make sure that all the client sees are pretty looking charts in pitch books that have no errors or typos. Mostly we send the clients profiles of potential acquisition targets and it is very important to use colours consistently, to make sure that the numbers match across all pages of the book, that the multiples are close to what the client has seen thusfar and that there are no typos that the client can spot in the meeting.”


Adam Twinklestein
Junior Analyst
Natural Resources Investment Banking

“Investment banking is about delivering 110%, doing all nighters, functioning on full power at no sleep being spot on all the time to make sure your associate is happy. It’s all about making sure there are no fuckups like typos in the book, booking the print room for the presentations to be printed, making sure the cabbie doesn’t ring the MD’s doorbell when you send him books at 4am, keeping a shaving kit in your drawer so you can still look super sharp even if you’ve pulled an all nighter, and eventually making MD and being a master of the universe.”


You realize that a broad generalization on what investment banking is not possible based on these answers. One thing that these answers do indicate is that the force of gravity even applies in a stellar industry like i-banking. How? Simple. It’s like dropping a ball from a window – the higher you drop it from, the more momentum it gains and the harder it hits when it drops all the way down. Banking is just like that, except, instead of a ball, the system drops shit, be it an MD, and ED or associate, all the shit will hit the analyst. The higher the shit comes from, the harder it will hit. And finally, as sure as the ball, will always land on the ground, the shit will always reach the analyst.

The Kruelberg Kretin Saga – Episode VIII: Competence

You’re back at work in the majestic headquarters of the firm, with your feet firmly planted on your desk, as your phone rings.

“Hello”

“Hi Mike, this is Jennifer from HR.”

Shit! They know. How the fuck can they know you’ve seen Blunderstone. Was it a test? Was it a fake interview organised by HR to test your loyalty to the firm? Does the firm have such strong relationships with clients like Blunderstone that they agree to pretend to interview analysts just to help the firm pick out the black sheep?

Erm. No. After a moment of panic, that you realize that your fears are completely unfounded.

Reason No.1:
HR has better things to do. Like go home at 5pm. If they chased every little banker going to do interviews, they would most certainly have to stay far, far, longer, like even until 6pm. As this is truly unacceptable, HR would never do that.

Reason No. 2:
The singling out of black sheep who interview elsewhere is not in the personal interest of HR. The more analysts interview elsewhere, the better the chance that they will move somewhere else, and thus become some other HR professional’s headache. So, HR has no interest in stopping you from moving elsewhere. Actually, the easier they make this, the less people they need to take care of, the earlier they can go home.

Reason No. 3:
Setting up a hoax like this takes time and effort. The first, yes, HR has in abundance, but the appetite for the latter is in tremendously short supply. Why exert effort on something when you can spend that time sipping coffee with your colleagues?

Reason No. 4:
Making it difficult for people to move deprives HR of the fun of the numerous leavers drinks that riddle Friday afternoons after bonus season in the city. Half the revenues of pubs and bars in the square mile are derived from analysts opening tabs for their teams (and HR) to help them selves to anything behind the bar, in a vain effort to make their departure memorable.

Reassured, you answer.

“Hi Jennifer, what can I do for you”

“Mike, there’s been a bit of a mistake with your tax form this month, the system has mistakenly not deducted any tax payments from your salary. We’ll need to rectify that next month, but rest assured, you will not be charged interest. So happy spending!”

You sigh, as you forget reason No.5.

Reason no. 5
HR is plainly and simply no competent enough to pull it off.

The Kruelberg Kretin Saga - Episode VII: Blunderstone

The alarm clock rings and you jump out of bed full of excitement, even though you have any managed to scramble three hours of sleep. It’s 6:35 and you only left the office at three, working on Frank’s stupid precedents (yes, like all things in banking, they took longer to complete than you expected).

You have a shower, get dressed and buy yourself a triple shot cappuccino in the Costa coffee on your way to the tube. You have half an hour to spare and the tube should take only ten minutes, so you’re feeling good. Ordinarily, you would have called a cab, but the problem is, calling one is no guarantee of it arriving on time, specially in the mornings (probable because of all the self respecting bankers who cab into work). So, you decide to take the tube.

There is another reason for taking the tube. Nobody you know would even dream of seeing you in the tube, so if anyone actually does catch a glimpse of you, they will brush it aside as firstly, surely you will not be taking the tube and secondly, surely you would not be up at such an early hour.

You sip on your coffee as you walk from the tube station to Blunderstone’s offices. You pass the buildings that are the home of many a private equity shop and hedge fund along the way. You smile as you enter the lobby, sign in your name and make your way up in the lift, announce yourself again and get escorted into a conference room.

You check your phone, to make sure it’s on mute, and you notice a message form your Rebecca at Assbury Moron:

“You’re meeting Pete Anderson this morning. Don’t give away your contact details. Good luck.”

You first think to yourself how nice of Rebecca to wish you good luck. You then realize that what she’s really interested is that they continue having to deal through her, which is why she doesn’t want you to give them your contact details.

Anyway, your train of thought is broken by the meeting room door opening and Pete Anderson walking into the room. Pete looks more like an insurance salesman than a private equity guy. He’s got a square Amercian jaw and is wearing a button down collar smart casual polo shirt that’s more casual than smart. His chinos are neatly pressed and would have matched his shoes and shirt if he were still in his native New Jersey, Playing ball with his kinds.

“Morning. Pete. Nice to meet ‘ya”

“Good morning” you introduce yourself and wait for him to ask you to sit.

“So, you wanna make the move to private equity” he says with a smug smile on his face. What he’s really saying is “I’m here, you’re there, and you wanna be here where I am, and I have the power to say yea or nay, which makes me very cool”.

“Yes” you give him the whole spiel about how that’s where you want to be long term, that you are driven, motivated, numerically excellent, entrepreneurial, blah, blah, blah, blah and some more blah.

“Great. Mike, you remind me of myself when I was your age” says Pete, as you ask yourself how old is this guy really? He looks thirty five, must have spend a few years as an i-banker, whish means he’s really only thirty. He’s below the age threshold for Botox, so add two extra years to compensate and hey presto, you’re there. So you ask yourself whether it really was that long ago that this joker was in your shoes.

“You’re a great guy and I will recommend that we ask you to come in again and meet more of the folks we have here. One final question: what do you expect to get paid?”

You explain what you’re on now (add a 30% markup of course), and how you would want an improvement on that and a reasonable package of benefits that would come with a job like this. To that Pete smilingly responds:

“Mike, the best way to answer that, is to give you a little comparison. See, when I moved to London from New Jersey, I got the company to pay for my house. Back in the states, I had a huge mansion, with a yard, a porch, pillars, a driveway, a garage for two cars and a SUV, three floors, a pool, and a mailbox. I figured, I’m moving to London, all expenses paid, they’re covering my rent up to 10k a week, so I’ll get a mansion. What do I have now? No yard, no garage, no porch, no SUV, no driveway, no pillars, no mailbox, no pool and only two floors. Yeah, but I don’t live in New Jersey any more!”

Jackass. He wants you to move and take a fucking pay cut just so you can waltz around with a business card that says Blunderstone?

Damn it, you were so close to getting back at Frank. So close, and he’s pulled a fast one again.

Frank fucking Johnson, I’ll get you one of these days!