Industry Groups vs. Product Groups: Got Exit Opps?
“Yo, M&A is the best, right?”
“Why would you ever take an industry group over M&A or Leveraged Finance? Don’t you want to buy entire countries when you move into PE?”
“If you’re not modeling you’ll get bottom-tier bonus!”
Ah, yes: the industry group vs. product group debate.
Just like the debate over cardio vs. strength training, models vs. bottles, and boutiques vs. bulge brackets, there’s so much fervor on both sides that you’d almost think war was about to break out.
Actually, I lied: it’s not quite that heated, but let’s dive right into the debate and see what the arguments for both sides are.
Investment Banking Product Groups
Investment banking product groups always work on a specific deal type, such as M&A or debt, across all different industries – examples include:
So if you’re in the M&A group, you’ll always work on acquisitions of other companies across all industries and you’ll build so many merger models that you may get Excel burned into your retina.
Investment Banking Industry Groups
With investment banking industry groups, by contrast, you work within one industry but on many different types of deals – equity, debt, M&A, and so on. Examples include:
- Natural Resources (Oil & Gas, Mining, and Power & Utilities)
- Technology or Technology, Media & Telecommunications (TMT)
- Financial Institutions Group (FIG)
- Real Estate Investment Banking
Pretty simple, right?
A False Dichotomy
Except that this division is wrong – or at least not 100% accurate. There are several sub-divisions of groups at a bank:
- Origination – These groups market and pitch for new clients, mostly for financings.
- Advisory – You advise companies on buying other companies. M&A. Gordon Gekko.
- Coverage – You do both origination and advisory work here, but you’re focused on a specific sector such as industrials.
When most people talk about “industry groups,” they’re referring to coverage groups.
So there’s more to it than the industry vs. product group distinction, and the notion that industry groups are 100% marketing and product groups are 100% execution is wrong.
This Thing of Ours
So what do you actually do in an industry group vs. a product group?
The main difference is that industry groups focus more on knowledge of the industry, what different companies are doing, and building operating models (3-statement models) for companies.
Product groups, by contrast, get to know specific transactional models – merger models or LBO models – really well, but won’t do much outside that and won’t learn an industry in as much depth.
There’s a lot of hype over product groups because most people assume that you can get into PE more easily if you start out in Leveraged Finance or M&A.
But that’s not necessarily true, and if your bank’s M&A group is lesser-known and doesn’t have much deal flow, you’re better off going to their top-ranked Natural Resources group instead.
Give Me Some Deals, Please
So let’s say you’re working on an M&A deal between 2 pharmaceutical companies – what would the M&A banker do, and what would the healthcare banker do?
- Initial Pitch: The healthcare banker would do most of this, including coming up with the right sets of comps and the correct list of potential acquirers.
- M&A Process: The work here would be split, but not necessarily based on who’s “better” at what – if the healthcare banker is busy, the M&A banker might take over and do more, and vice versa. Yes, the M&A analyst is more likely to get the modeling work all else being equal, but it’s not always so clear-cut.
- Closing Dinner: If the budget allows for it, you both get to go bask in glory – just make sure you don’t try to “share” anything there…
Here’s an example of what the work split might be for a tech company IPO, between the technology industry banker and the ECM banker:
- Initial Pitch: The tech industry banker will supply the comps and do the valuation, also creating the market overview slides; the ECM banker will create slides on how recent tech IPOs have been doing and add in the standard IPO process slides.
- IPO Process – Valuation: The industry banker does most of this, with input from ECM on certain assumptions.
- IPO Process – Due Diligence Calls: This is the tech banker.
- Sales Force Memo: ECM does this since they interface with the salespeople.
- S-1 (or equivalent IPO registration statement): Both groups are involved here.
- Road Show: This is mostly the tech industry banker and his team – ECM is busy with many other deals and doesn’t have time to travel frequently.
What About Restructuring?
Restructuring is a special case because of the specialized knowledge – industry bankers can’t contribute much there.
At most, the industry bankers may weigh in on the comps, valuation, and potential buyer ideas, but the restructuring/distressed M&A team would do everything else (analyzing bankruptcy scenarios, different capital structures, and running the process itself).
The same applies to Special Situations groups (which often include restructuring/distressed M&A) at banks – since the skills are so specific, you won’t share much work with the industry bankers.
The Hours and Pay
At the analyst and associate levels there isn’t a big difference – the one exception is that you do work less (~12 hours per day) in some ECM groups, especially ones focused on IPOs rather than convertibles.
Otherwise it’s fairly close and deciding which group to join based on hours and pay is borderline insane – you’re in the wrong industry if you’re thinking about where you would get the best lifestyle.
Show Me the Exit Opps!
Ah, here we go: surely the exit opportunities in M&A or Leveraged Finance must trump those in those boring industry groups, right? And if you do ECM or DCM you have no options, right?
You hear this line of reasoning a lot, but no one has ever collected data on where analysts go afterward – so all these discussions are anecdotal at best.
In general, it’s harder to get into PE from a group like ECM because the skill sets don’t overlap and you won’t know enough about LBOs and more complex models to compete.
But the industry group vs. M&A vs. Leveraged Finance distinction isn’t so easy and some industry groups place just as many, if not more, analysts into PE (e.g. the infamous GS TMT).
If you’re hyper-concerned about getting into PE and you have multiple offers lined up, ask the people in those groups where analysts go – that is more accurate than anything you’ll read online, plus it gives you an excuse to work your sell days effectively.
If you want to break into corporate development you definitely have an advantage if you’re in a closely related industry group, and if you want to know how to get into venture capital, it’s good to know something about tech (or healthcare) companies.
It’s hard to say which group is “best” for hedge funds because so much depends on the fund’s strategy – overall there’s less of a preference for specific groups than there is with private equity, the only exception being that ECM usually leads to an investor relations/ECM-type role at hedge funds.
Are Product Groups Going the Way of the Dinosaur?
Some believe that product groups – especially M&A – are redundant and that there’s no reason to keep them around since industry bankers can do everything that product bankers can.
There’s some truth to that if you’re talking about a broad, sell-side auction where there’s nothing unusual about the process – you’re simply showing the company to lots of potential buyers.
But it’s less true when you have a more unusual deal or something that requires specialized expertise (e.g. a cross-border divestiture), so M&A groups won’t be going extinct anytime soon.
And it’s even less true outside M&A: with ECM, DCM, Leveraged Finance, and Restructuring, it wouldn’t be practical to consolidate everything.
If you’re learning a client’s business in-depth, it’s hard to also spend 20 minutes here and there updating market slides, running a debt model for another deal, and so on – there’s a reason division of labor has been around since ancient times.
Business School Advantages?
Overall, the names and reputations of the banks you worked at make more of a difference than the group you were in.
Everyone in the admissions committee knows the difference between bulge bracket banks and 2-person boutiques, but not everyone understands the trade-offs between being an energy banker and an M&A banker.
So don’t gravitate toward M&A just because you think it will get you into HBS or INSEAD.
That’s quite a lot to take in, but I’m sure you have even more questions:
What About Interns?
As an intern, the work you do in any of these groups is not much different and you shouldn’t spend too much time stressing about which one is “the best.”
Yes, once in a blue moon half the people in the M&A group will leave and you will get to run models as an intern, but don’t hold your breath waiting for that to happen.
Your group matters mainly because you might end up working there full-time – so if you think you would get bored in ECM, then yes, try for something else.
But if it’s a choice between ECM and not doing banking altogether, um, take the ECM offer.
Wait, So What Do MDs in Product Groups Do?
Great question. If Managing Directors are responsible for winning clients, what would an MD in a product group do on a daily basis? The coverage or industry group brings in the client, so why would you even need MDs in the M&A group?
Usually the product group MD does 1 of 2 things:
- He oversees the deal and is involved with negotiations and execution – much more so than an MD in an industry group would be.
- He still brings in clients and is not heavily involved with the deal even though technically he’s on the execution side.
Scenario #1 is more common when it’s a large and high-profile deal – a $50 billion merger, for example – or when it’s an unusual transaction that requires specialized knowledge.
For scenario #2, remember that Managing Directors still have tons of contacts in the industry even if they’re only “executing” deals – every time they pitch the company to a new buyer, that’s another name added to their Rolodex.
So the division between product and industry group responsibilities isn’t as straightforward as you might think.
Industry MD > Product MD?
But now you have another question: if, on average, product group MDs don’t bring in as many clients as industry group MDs, do they get paid less?
That makes sense in theory, but it’s impossible to say whether or not that’s actually true in practice because no one has the data.
Managing Directors at bulge bracket banks in developed markets might make a few million USD per year, and their pay is almost 100% correlated to their performance.
An industry group MD who only brings in 1 small deal could easily earn less than a product group MD who executes a dozen deals in 1 year.
Leveraged Finance vs. Debt Capital Markets (DCM) vs. Financial Sponsors vs. Financial Institutions Groups (FIG)
These 4 groups are commonly confused – possibly because 3 out of 4 of them have “Finance” or “Financial” in the titles.
Here’s how to think about the differences:
- Leveraged Finance: Bankers here analyze companies’ capital structures, determine how much debt and what type of debt is appropriate, and do a lot of LBO modeling and credit statistic work. The focus is on high-yield bonds and leveraged loans. This is a product group.
- Debt Capital Markets (DCM): This is also a product group, but it’s more markets-based and focuses on investment-grade debt rather than the riskier and higher-yield debt that you see in LevFin. The analytical and modeling work tends to be lighter.
- Financial Sponsors: This is an industry group that develops relationships with private equity firms, pitches ideas to them, and works with their portfolio companies.
- Financial Institutions Group (FIG): This is an industry group that works with financial institutions – commercial banks, insurance firms, investment banks, asset management firms, and so on – and does all types of deals, but exclusively with financial institutions.
Of these, FIG is the most different and you develop more specialized skills there – it can be hard to go from FIG to working with normal companies because valuing and modeling banks and insurance firms is like learning a different language.
There is a lot of overlap between LevFin, DCM, and Financial Sponsors, and at some banks they are effectively the same group.
Exiting into private equity is common from a LevFin (perfect skill set), but less common from Financial Sponsors (less modeling, but you know lots of PE firms) background, and also less common from DCM since you don’t do as much analysis there.
The hours and pay in these groups are not significantly different at the junior levels, so don’t decide which group to join based on that.
So, Which Group Should You Join?
It doesn’t matter nearly as much as you think it does. Yes, if you are 100% set on PE you probably don’t want to work in ECM – but other than that the differences in work/pay/exit opportunities are exaggerated.
If you’re really interested in a specific industry, go for that industry group – you may have a marginal advantage for certain exit opportunities in other groups, but you also need to maintain your sanity and stay alive for a few years, which are both much easier if you’re interested in the work.
Or you could just go for M&A and Leveraged Finance like everyone else – I won’t judge.
Want more? Learn more about investment banking product groups or investment banking industry groups. Or, read this article about Financial Sponsors Groups.
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Great article! Do you know of any resources to look into on where BofA is ranked in each coverage/product group? Thanks
Nope, but you can easily Google “investment banking league tables” periodically and look up rankings in different regions and for different products.
Hey Brian, I was wondering in terms of summer analyst recruiting if it matters whether you network with a product group person or a coverage group person. I know some banks split those two recruiting processes up (capital markets vs investment banking), so I’m not sure if networking with an ECM person would help me in recruiting for a coverage group.
Any insight here would be appreciated. Thanks!
You should ideally try to network with people in the group you want to join, but some networking is always better than no networking.
Great article! I was wondering if you knew anything about Shareholder Advisory Groups. They seem to be small and there’s not that much information out there about them. It seems like an interesting opportunity since it’s more qualitative.
Sorry, no information on that one.
Understand your comment around the hours etc. but in general would you say lev fin / coverage groups be slightly more relaxed than m&a?
Maybe at some banks, but not universally.
What are your thoughts on geographic rotations through secondment within the same firm and product group, e.g. from Europe to US or vice versa?
Which pros and cons do you see?
Thanks in advance.
I don’t think it’s a great if your main goal is to get into private equity or hedge funds because you won’t get consistent enough deal experience, and recruiters won’t quite know how to classify you. But if you want to stay in IB long term, or you don’t know what you want to do, it might be fine.
First of all I am a huge fan of the website and you have been tremendous tool in helping me navigate IB (and other career paths).
I am a junior at a non-target with a 3.5 gpa Majoring in mathematical economics. I had a couple of super days at BB for summer internships but didn’t land any. I’m interviewing at a few middle market and boutique banks now but I think no matter what I’m going to go into full-time recruiting at larger banks.
Do you think it’s better to work at a small IB firm for the summer? Or work for a large company’s corporate strategy’s team and try to pivot into the industry group it’s in (ex. PepsiCo corporate strategy to BAML consumer group)?
Thank you for time.
Depends on your previous experience. If you haven’t had real finance internships before, I think it’s better to work at a small bank for the summer just so you can say you’ve had IB experience now. If you have already worked at a small bank or other finance firm, then the bigger company may be worth it for the brand name and industry experience.
Fantastic review, thanks!
Thanks for reading!
I’m thinking about staying in tech ib my entire career. I really enjoy it so far and think it’s my best opportunity at the moment. What are your thoughts on tech ib for the long run as an industry and for an employee?
It’s a solid group and should be a good long-term career. https://mergersandinquisitions.com/
Which industry group advises companies like Comcast, SkyTV, Dreamworks, etc?
Thanks in advance for your help.
Media and/or TMT (Technology, Media, and Telecom). We’ve covered them on the site in other articles if you do a search.
First thank you for all your work, I am completely new to IB and this is a real pleasure reading all your pieces of advice.
My medium-term objective (within a 5 or 6 years) is to get a challenging position at a top-tier DFI (The World Bank, the IADB, the EIB…), and Investment Banking is a really good school for getting strong finance skills and a strong network that I will be able to use on the long-run. I thus see IB as a really good way for my life objective than my ultimate life objective.
What do you think of presenting a story about getting into the Industrials/Energy team? Or is it ill-seen to present a career objective linked to Development and Social finance?
I would not recommend going into an interview and saying that you want to do IB because you actually want to do something else in the future. Even if it’s not true, you should say that your long-term goal is to work in IB and advise industrial/energy companies because of your previous interest/experience in those fields.
Do banks have both industry and coverage groups? If so, are they separate or do they have every possible combination? For example, someone is just m&a or just energy, or they’re M&A energy, M&A industrials, etc
Curious as well
It is usually not that specific or formalized. If you’re in an industry group, you will tend to work on all different deal types. Maybe some people will focus a bit more on one deal type than others, but it’s not as if one person will only do M&A deals within energy. It’s more common to see specializations by sub-industry, i.e. one Analyst might work on only upstream or midstream or downstream deals within energy.
Do lateral first-year analysts apply to generalist roles or they’re specific by group?
Usually they’re specific to the group because normally someone leave a group unexpectedly, and then they need to hire someone to replace him/her.
Amazing post, congrats.!
Is it possible to understand If the ECM has some correlation with M&A area?
If so, can you tell me about them? I would really appreciate it!
??? Sure, there’s some correlation because clients of a bank often want to do different types of deals, so a company interested in M&A deals might eventually do equity deals… or vice versa.
Hey guys, so I wanted to know what you guys think about working in the M&A product group of an investment bank for the long haul (ie career banker).
I’ve heard from various sources that as one progresses to VP and beyond, coverage bankers tend to make more money than their M&A product counterparts. Is this true? And if so, is this also true at a bank like Morgan Stanley?
I know MS M&A is heralded as one the most prestigious groups on the street, but is this simply because of the modeling experience/exit opportunities available to Analysts or do MS M&A career bankers make comparable bonuses to other top MS coverage teams?
I don’t think you can say that because at the senior level, bonuses depend 100% on deals closed in a year, which varies from banker to banker. There may be higher potential in a coverage group because of the nature of the work (relationships, not execution), but I doubt the difference is significant for the best senior bankers in different groups. Also, keep in mind that bonuses are now mostly in stock or deferred at the large banks. M&A teams tend to be highly regarded because of exit opportunities for Analysts.
Thanks a lot! In your article, you mentioned that a product group MD typically “oversees the deal.” Could you elaborate as to what this overseeing entails? Is it mainly negotiating the counter-party’s banker on the price? Thanks again!
Yes, sometimes, but more speaking with each party, seeing how happy/unhappy they are, and making sure that any problems along the way are resolved quickly.
Dear M&I team, Brian and the rest of you are a phenomenal resource! I’m an Army-vet from India, who’s studying at Columbia Business School, first year, and am right now doing the internship informational interview at 20 plus banks for IBD opportunities.
I have seen your list of courses, but please suggest something that is at par with ‘Training the street’ type of sessions that are run at CBS. Also, I have almost no time in a day, so, I’d ideally like to attack the course on weekends. I would be having interviews soon at most bulge bracket banks, and I need technical knowledge ASAP! Pl guide me!!
We would suggest the Interview Guide if you have limited time. While the written sections are relatively long (around 20-30K words per topic in the latest version), they are comprehensive and will prepare you more efficiently than completing an entire course. You still have to spend some amount of time preparing – it’s not possible to spend 20 minutes looking at questions and then walk into interviews and do well.
In a graduate application would I choose a coverage group at the start. Or would I get a general offer then have the option to choose which group?
Yes you usually have a general offer and then the option to choose the group.
Do you have any insights about regional coverage? There are banks with product & industry coverage, and, along that, they also have country teams.
What sort of insights are you referring to? Yes some banks have a regional coverage team. For example, Wells Fargo has a regional coverage team https://www.wellsfargo.com/com/securities/investment-banking/regional/banking-team
I was reffering in particular to Europe, where you have country teams. Taken into account that a bank has product and industry coverage, would country teams focus mostly on origination of deals?
It depends a lot on the country – in major countries like Germany, that’s not really true and they do both sourcing and execution. Smaller countries tend to be more focused on origination. Please see regional coverage here at the bottom: https://mergersandinquisitions.com/investment-banking/#groups-regions
I have a coverage interview coming up. How technical do the questions get since it apparently has slightly less technical input than the product teams?
They havent specified which industry group it is but the interview is with the head of the division so its hard to feel out if it will be more fit inclined or otherwise.
Should l expect “walk me through a DCF”? LOL!
I think it maybe both. Yes they may ask you technical questions like the one you raised.
Great Article but Gordon Gekko was in HF not Advisory ;) Please..
I have an upcoming interview for a healthcare IB position. My backgrounds in Economics and my spin is that I originally wanted to pursue an economic consulting role after I graduated, but through my internships became more interested in the finance/business side. Now I want to take my finance experiences and pursue my career in the healthcare sector. (previous IB internship in college) I didn’t have much exposure to healthcare through my internship it was more of a generalist role. As a spin could I say that I met other healthcare bankers through my internship which sparked my interest in the industry. Or if I’m not knowledgeable on the industry am I better off saying that I took some bio courses in college which I found really interesting? I’m honestly just more focused about breaking into IB to begin with but this position happens to be for a healthcare group. Thanks!
I would just say at the end you’re especially interested in healthcare because of the courses you took, plus several of the bankers you met through the internship
Kinda weird that i didnt go through this ages ago but finally ive got the difference
So industry group is more about the sector in which the deals are done and product groups are simply the bouquet of services offered by the bank.
If one wants to learn more about the industry and how the factors shape it , its obvious that industry groups will be more preferred
Can I ask if I’ve been asked why choose DCM over ECM, what should I say? Maybe DCM is more technical, has more complex products and thus require more in-depth knowledge?
What about DCM not LevFin?
Yes. You’re more interested in debt vs equity
LevFin over DCM – You’re more interested in structuring, credit analysis, and client interaction vs. tracking market activity and communication with investors
Is M&A team more highly regarded than emc team?
But im quite interested in ipo deals.
Do you mean the exit ops for m&a always better than those graduated from emc team?
Anyways, my ultimate goal is going to pe fund. So will you suggest me to choose m&a team?
If your goal is private equity, do M&A. Working in ECM is a very poor way of getting into PE because you won’t gain relevant deal experience.
I am a Portfolio Associate within a Fudicary Asset Management group at a Financial Services firm. Which product or industry group would be a best fit post MBA for my asset management skills? I assume FSG would be the most compatible because they work in tandem with PE/HF’s firms. Please advise.
Yes you can say so but I would’t pigeon hole yourself.
So I just started training at a BB LevFin Group with focus on Energy clients. After talking to a few second analysts, my worst nightmare is confirmed….ALL MODELING WILL BE DEFERRED TO THE COVERAGE TEAM.
So how can I move into a more model oriented group within the bank? when can I bring it up (after the first year?) or should I leave and work for a competitor?
You can bring it up after a few months at your team. What you can do is to get an offer from a competitor and use that as your leverage.
Thanks for the great article.
As an incoming analyst I would like to ask about IB Sell-day and later transition between banks.
1. If I got the offer from a specific team in the BB, will I still have the chance to state my preferences at the end of training? Will it be perceived normally if the team was happy with my performance? I am talking about London placement.
2. If I am focused on later change to PE, is it worth trying to change industry group to LevFin at the beginning or is it better to switch the bank to top3 later (to LevFin, M&A)?
Thanks for the help!
1. Yes you can still state your preferences, though you may not necessarily be able to get another offer from another team because it depends on the needs of the team. If the team extended you an offer and they liked you, your chances of securing another role at the same bank may be higher.
2. There’s a lot of hype over product groups because most people assume that you can get into PE more easily if you start out in Leveraged Finance or M&A.
But that’s not necessarily true, and if your bank’s M&A group is lesser-known and doesn’t have much deal flow, you’re better off going to their top-ranked Natural Resources group instead. So if your bank’s industry group isn’t well known, I don’t think it is that useful to switch to LevFin in the beginning. The industry group vs. M&A vs. Leveraged Finance distinction isn’t so easy and some industry groups place just as many, if not more, analysts into PE (e.g. the infamous GS TMT) so it depends which group you’re in.
Thanks for the answers.
From Your perspective will it be easier to make this transition during the sell-day in my situation or it is better to work hard in my industry team and try to switch to another bank in a year or so?
In my bank the headcount for Lev.Fin is quite limited so I though it makes sense to get as much modeling exposure as possible during the first year and then network into another bank.
It may be easier for you to switch in a year. However, if you really don’t like your group, I would take the risk and try to switch now. But if you like your group and can get along well with your team, I don’t see the urgency to do so unless your group’s business is really dwindling
Sure, having deal exposure is probably key
Anytime. Thanks for visiting our site!
Generally speaking, what are the relative sizes of M&A, Equity Cap Mkts, and Debt Cap Mkts in terms of employees? What are the relative ratios of employees within each?
Really depends on the bank and the current market – but sometimes you see more people in capital markets because deals can be more labor-intensive.
To me, the quintessential coverage group is natural resources/oil & gas, just because (as your fantastic article on the subject describes) the modelling is so different–depletion, reserve probabilities, replacement rates, etc. are all beyond what you might do for a typical industrial or retail client. So much so that in a number of banks, M&A execution is almost entirely handled by the coverage team.
Since that’s relatively unique, i was wondering if you were planning on posting an article on O&G, M&M, P&P, or natural resource banking groups in general.
I’ll revert your opinions to the team!
Yes, all of those are coming up soon. At the very least O&G and Mining.
Hi, is there going to be an article on the financial sponsor group in the future by any chance?
Yes! Already written, coming up in the next 2 months (by June 2012).
Hi Brian, is the article on the Financial Sponsor Group coming soon, this month?
Thanks, really looking forward to it.
Thanks, it was a really great article!
What coverage groups does Morgan Stanley’s LA office cover?
Readers might have better ideas
Mostly gaming (casinos) and media/entertainment, some healthcare, maybe some tech as well.
How do you calculate the sustainable, optimal, and core growth rate for an industry, product, service or company?
I honestly don’t know there because those are not commonly used terms in investment banking. A Google search reveals:
Are valuation models standard or different for the Info Tech/Computer Hardware Industry?
A bit different – check out our break into wall street website
Do you need to know business modeling/operating modeling to break in? i.e. Mckinsey 7s, Mckinsey Matrix, BCG Matrix, Product life cycle? Or ist this mainly for Management Consulting?
Mainly for management consulting I believe
Thanks for another great article on the website! I’m a long-time reader but this is my first post. My question is how to find out which team is best in a particular bank. I am currently in the recruitment process with Credit Suisse (Singapore) and would be grateful for any tips on how to go about picking a team – or if you know which groups are particularly good!
I’d say network w people in the Singapore office. Try to figure out which team’s culture fit you the most and which team you enjoy working for the most. Your boss and teammates will make/break your experience and perhaps future prospects
Thank you Nicole. I am actually based in the U.K. with no contacts in Singapore. I have an introductory dial in call coming up. How can I go about networking with those in Singapore? Or should I just wait it through the usual recruitment process (four phone interviews followed by a final round interview in New York City.)
I’d suggest you to arrange some meetings either via cold calling or your contacts and fly down to Singapore. Waiting through the usual recruitment process is also an option
First off, really enjoy the site…I have been reading for a year or so now but this is my first comment.
I’m currently in an MBA program, but my background is in a pretty niche field of healthcare (pharmacy benefit management), and while I did not specifically work on “deals” in the M&A sense, my work involved building financial models and developing proposals in support of our bids to win business against other PBMs over multiple rounds.
I am targeting a few boutique banks specializing in healthcare for summer internships, and while I can draw on my experience of dealing with unpredictable deadlines, mistakes that can cost a lot of money, and insane clients, do banking recruiters at smaller firms place more value on this experiential (as opposed to technical) aspect than BB firms? Or am I toast either way without being able to crank out the types of models specific to banking? Just trying to decide how realistic my prospects are and how to spend my time.
Appreciate any help.
Thanks. Yes to your first question. No, I don’t think you’re toast it really depends on your interviewer(s) and what they’re looking for. You just need to spin your story right. You said you built financial models right? while your modeling experience may not be directly relevant you can still try to make a link. furthermore, you can also beef up on your financial modeling skills before your interviews & if they ask you questions on modeling you can impress them. Key is to land the interview. So pitch yourself right. Rest will follow
Got it — I definetely plan on learning some more of the “banking specific” models (as opposed to the very industry specific ones that I’ve used) over the next few months.
Our http://www.breakingintowallstreet.com/biws/breaking-into-wall-street-courses/ should help
First of all, I wouldn’t have some of the options I have in FT recruiting currently without the council of your blog. I am grateful. I was wondering if anyone had any insight on how to best prepare for a FIG interview. I have a second round with a FIG group at a BB soon and I was wondering what some of the best practices were in preparation. How much FIG specs will they expect you to know? I come from a Tech M&A background so I image very little is directly transferable. Thanks in advance.
What questions did they focus on in the first round? I presumed you nailed the why FIG and why their bank question? I don’t think theyll go too in depth in terms of FIG specific questions but I believe you should have a sense of recent FIG activities/landscape as well as deals they have done/their pipeline. I’d imagine some of the quantitative/analytical skills and qualitative skills (focus on this one) are transferrable
Really no FIG technicals at all; mostly the typical valuation questions. With regards to why FIG, I really stressed that I wanted to learn more about the balance sheet and how I was fascinated as a business and political science student by the re-regulation etc etc. I found that the group I am interviewing with is “specialty finance.” It’s not the traditional bank/thrift/depository model. They cover all sorts of stuff from hedge funds to student loan companies. Any ideas?
Spoke to a contact in FIG. He said specialty finance is a broad term. You need to be more specific re the details of your job spec & your bank etc. Given this environment, banks are interested in how FI obtain funding & preserve their capital FYI. Hope this helps!
I know you’re probably bored of hearing this, but this has to be one of the BEST posts on this site…thanks so much!!
Could you give more insight into Real Estate? I know that the valuation metrics used are quite different from “traditional” companies. Other than that, I have heard little about what goes on in real estate groups (within investment banks). Also, it would be great if you can give insight into lifestyle, compensation, etc. (if there are any major differences between RE and other groups).
Thanks in advance
Here you go: http://breakingintowallstreet.com/biws/real-estate-modeling
On the IB side there are no major differences in terms of lifestyle, compensation, etc. – it is really just about working with different types of companies / assets and learning a different industry, then getting more exit opps for RE-focused funds and so on.
Thanks, I actually just signed up for this course. About to start SA internship in the RE group at one of the cdn banks in toronto, and this course has been hugely helpful in prepping me
Could you detail the responsibilities of both product groups and coverage groups? such as screen comps through Capital IQ or build valuation models in product groups?
As mentioned above, the responsibilities are overlapping and not as different as people usually say. The entire point of this article is that product vs. industry is a greatly exaggerated distinction to begin with.
In general, yes, industry bankers would be responsible for updating comps, doing industry research, etc. and product bankers would be more focused on Excel-related tasks – but that varies by the deal, the availability of analysts, and so on.
I started at a big 4 CPA firm and unfortunately moved to backoffice covering alternative asset management at a bulge bracket bank… I guess I’m feeling stuck and a bit lost on what my next steps could be. I did well in school, top 25, strong gpa etc.
I guess my options are controller at a PE fund/hedge fund or investor relations at my current bank on the IB side. PE fund accounting has a lot of technical experience specific knowledge and although investor relations sounds a little more fun i’m wondering if the PE fund controller position would be better? I guess fund controller pays up to $200k or so. I’ve heard investor relations at PE fund or Hedge funds can lead to good pay and opportunities but IB investor relations I haven’t heard much about. Any insight on IB IR?
Could you help me please decipher between the less worse option… or any better alternatives I should look into.. any insight appreciated..
Not really sure about IB IR as I don’t know much about it. I think HF/PE investor relations is a better bet so personally I would go for the controller position and then try to move into IR from there.
I got into contact with a director at a mid-sized bank and he has asked for a phone interview on Friday; would it be rude to ask them to reschedule for a later day? Would that piss them off?
I would not do that – change your schedule to accommodate or you might be sending the wrong message.
Yes, banks like Goldman don’t have M&A groups
Thanks a lot for your article, it’s extremely informative. It’s interesting how the ‘war’ between the product groups and industry groups plays out. Just my 2c as well – While I do agree that teams like GS TMT routinely place analysts into some solid funds, the difference between the exit opps in a product group vs industry group is more defined in a lower-tier BB (think Deutsche, UBS, Citi). At the place that I work, the only kids with PE offers are from the LevFin group, analysts from industry groups haven’t even started recruiting yet. Makes me think twice about my decision to stick it out in an industry group..
That’s very true, although I hate ranking banks/groups so don’t think I will address that issue directly…
I understand, thanks anyway for the article
The biggest/most high profile deal my group has done while I have been here was cancelled in my first month, so I hardly did more than update the team with news articles and random research, which doesn’t count for much. However I think it will be helpful to mention the brand name on my resume since it was announced we advised them and think I can talk about what happened proficiently. Should I still include it on the resume or is it a bad idea? I’m looking at lateraling after my first year so I’m trying to improve the resume.
Yes still include it on your resume but in the interview itself focus on deals where you did more.
Hey Brian, great post.
Just a question maybe a bit out of topic. Is it really that hard to have a decent family life? I mean do you actually know of anyone that was able to withstand the workload of IB while having a family?
Maybe at smaller banks you can do that, at bulge brackets most of the MDs are crazy / have dysfunctional or nonexistent personal lives
great article. think i just want to add my 2cents on the LevFin and Financial Sponsors group. The actual responsibilities of these groups varies from bank to bank. While some levfin teams actually run the lbo model etc, and is involved more with the execution, some levfin teams do more pricing type work and the sponsors team will be the one running the model, executing the transaction throughout.
Yup definitely agree with you there – I was actually going to add in something about that but thought it would just make things more confusing. The lines are definitely blurry with FSG/LevFin/DCM and as you said it depends on the team/deal and so on.
If possible, could you list the differences by BB in New York? It would be really helpful to not only know that there are differences but also know what those differences are.
Do you mean cultural differences? I’d suggest you to go to the banks’ websites & annual report because their websites provide you a lot of details!
Hey, so I’ve posted here before, but this article is perfect for this question: I’m doing an internship at a new BB in DCM FIG and then a short rotation(2 weeks) rotation in LevFin, does it make sense to hope/expect the LevFin team to give me a full-time if I do well? I don’t want to stay in DCM FIG, since I think it’s too narrow (and a friend who worked there agrees) and want to leave my options open for PE. It’s such a short rotation in LevFin, so it seems as if even if I work myself to death they’d never extend an offer…
They may, but if you spend most of your time in DCM you are more likely to get an offer there. So it really depends on how well you bond with the people in LevFin and you’ll have to go out of your way to get an FT offer there.
how would I go about going out of my way with them apart from the obvious being ultra-interested, lots of face-time, having coffee with them whenever they ask? are there any things i need to think about especially?
Not really, just be cool and don’t annoy them too much… make sure you’re always interested and happy even if they ask you to do really stupid or annoying things
fantastic, thanks for your help.
I interned in the London office of a BB but am working full time in the NY office. As such I have basically no connections there. As groups aren’t assigned until the end of training (I think you rank your preferences after exams) I’m not sure if there’s anything I can do to make an impression before then. Is it worth reaching out to groups I’m interested in now? What’s the best approach?
Sure you should reach out beforehand – see some of the tips here: https://mergersandinquisitions.com/investment-banking-sell-day/
Great article as usual! smart and full of interesting info to have in mind.
But I wanna correct something. In ECM, at least in London bulge brackets, you work as much (90-100 hours…) as any M&A group within the bank. From my own experience, When it comes to corporate finance, I can tell that it depends more on the team/bank you’re joining that on the product your covering (ECM/M&A/LevFin).
Thanks for that clarification. I have actually heard mixed reports on ECM in London, but as you said I think it does depend a lot on the team.
What do you mean by mixed reports on ECM in London? What is the average hours per day there?
As in, some people claim that hours are better than normal banking groups (i.e. going home before midnight) and others claim it’s the same or worse. So it’s hard to say and probably dependent on market conditions and the amount of equity deals being done at any one time.
I’ve occasionally seen people put on IB resumes that they financed XX% of their education through scholarships, part-time jobs, etc. What do you think of this?
Is there a way I can indicate on my resume in a similar manner that I was first in my family to graduate college? I feel this could make my accomplishment smore impressive.
I don’t think it makes a huge difference but I suppose it helps a little; I would just list that accomplishment as a bullet under Education.
Thanks for a great article and a great website.
I recognize that I may be way of base with this notion but please entertain me.
Is there any validity to the idea that LevFin is superior to a group like M&A because in LevFin you are encouraged to give objective advice that potentially adds value.
In other words, M&A is typically value destructive for a company but bankers are likely prone to push acquisitions regardless because of fees or whatever.
Whereas with LevFin the service you are offering may be required for a PE acquisition or for a company to attain a superior capital structure.
Also, how would the two compare if you knew you wanted to investment money for a career?
Thanks so much.
That’s an interesting point and way to look at it, but I don’t know that it’s really true. In LevFin you could make equally destructive choices, e.g. by recommending a debt structure that results in higher fees but more risk to the company. And it’s not as if all M&A bankers are set on destroying the world just to make money (despite what I write on this site).
Either one works for investing, but LevFin is better if you want to do debt investing and M&A is better for investing across industries or doing merger arbitrage.
Can you join a “regular” financial institution after working in FIG(say in an upper management level, if not C-level)? Or are you stuck in FIG banking forever with no exit opps?
If you want to run a financial institution, then go into consulting for financial institutions not FIG.
What Adam said. Doing banking doesn’t prepare you to run a company – maybe you could do BD or corp dev at a financial institution but not general management.
If I’m applying to a group such as leveraged finance as an analyst, is it appropriate to mention my interest in PE and how that group would be best for me to get in or would it not be smart to mention exit opps during an interview?
You can but you need to be careful in how you do it… don’t say you want to go into PE, just say you’re interested in it and in learning how it works, who the key players are, and how they acquire companies. But you don’t want to sound like you’re joining just to jump ship as soon as you can.
Don’t you choose both, say a product group >and< a industry group?
e.g.: M&A+TMT or ECM+Healthcare???
No, most banks are divided into product groups and industry groups and you only work in one (GS does not do this exactly, maybe a few others as well).
Great article, Brian.
1) I’m in a weird situation: going into banking but want to trade. Any thoughts on which groups are best? I’ve heard there’s a lot of DCM–>bond-trading, maybe a group that helps hedge risk using certain products (FX, interest rates, etc.) Any ideas here would be great.
2) I’m meeting with a few of those markets-based groups and am trying to get a leg up so I maximize my chance of getting into one of them. I’m doing background research so I’m knowledgeable/conveying interest but am worried there won’t be anything to talk about.
Me: Hey, I really like your group
Staffer: OK. Do you know what we do?
Me: Only at a basic level.
Thanks for the help!
To answer you would take too long as a comment on this post, so Brian since you see both of our mails can you give Karl mine? I have a few comments that will give him a big leg up when talking to the markets groups.
Feel free to leave a comment here – Karl’s email address is extremely personally identifiable so I would need to get his permission first before sending it over as everyone is concerned with privacy here.
Hence give him my address and tell him to get in touch.
1) Probably ECM or DCM, those are the closest to the markets. Anything else is quite distant from trading.
2) Just focus the questions on them and re-frame the conversation… you don’t need to know all the in’s and out’s of everything, if they ask a question like that just say, “At a high-level, you advise on debt offerings and help companies assess which capital structures best suit their needs” (e.g. for LevFin). And if they want more detail they can ask for it… but otherwise ask them the questions and make them personal/specific.
ECM/DCM will be better as they deal with valuation issues and market conditions for the paper. That said they are still quite distant from trading. ECM/DCM is certainly better than M&A etc for moving into trading but it’s not nearly enough. Hence, get in touch.
First year analyst in coverage here. Except I don’t cover an industry- I cover a country, and my bank gave up its M&A and ECM during my first month of work so I’m stuck with Lending, DCM and, yikes, Transaction Services.
Ideally want to get in PE but would need a hand in understanding how to parlay my experience into that kind of job, even if it means switching banks altogether for an M&A / LevFin gig in the interim.
Any help would be much appreciated.
Yes you may want to move to a levfin/M&A role. Debt-related/financing experience may not be as useful as LBO modeling. You can then draw more attention to your M&A experience by elaborating on LBO modeling you did and perhaps write about potential IRR from that type of deal and/or anything you did to move the process along.
I always ask myself wheter financial sponsors is the best place to be when you are 100% focused on getting a PE job.
Arguable, it probably helps more than something like ECM but it doesn’t always give you a huge advantage vs. M&A/LevFin/good industry groups.
Great article. Looking forward to an article on DCM!
Great article, always useful to know the subtle differences between groups especially when interviewing. But I wanted to clarify something about role of the SYNDICATIONS GROUP within Investment Banking Division of BB’s.
As an analyst we are primarily responsible for assisting with origination, structuring and execution of all the syndicated loan products. How does this fit into a typical Investment Banking Division in a Bulge Bracket firm.
Would you say this is part of DCM ? What would the typical exit opportunities be for the above role ? Thanks !
I’m actually not sure on that one but it sounds similar to DCM / sometimes it is officially a separate group. Exit opportunities would probably be DCM, Leveraged Finance, or maybe moving to a HF that specializes in those types of investments.
Bear in mind that loan origination and syndications aren’t actually things that your classic monoline investment banks enjoy doing. DCM and ECM are largely agency businesses (an ECM ‘underwrite’ tends to be an overnight / couple of days job) whilst loan guys take serious risk with the balance sheet. Underwriting major acquisition loan financing is capital intensive (think about the $45bn BHP bid etc.), and given the long lead time between commitment and syndication (often months) is risky – ie a market move will stick that chunk of capital to one borrower on the bank’s book possibly until maturity.
Net net, what I’m saying is that the best places for loans aren’t necessarily the best IBs. JPM and Citi can just about play in both. GS and MS frickin hate loans. While at some of your bigger commercial banks, you’re a hero and compensated as such.
DCM would be very much a sideways move – you’re far more likely to go coverage, or to a corporate itself, if you want to move.
This is the post I’ve been waiting for all my life.
Haha is that sarcasm (I’m assuming)?
No, it’s the post I’ve been waiting for too, thanks so much Brian
Solid article, thanks for the read. Good to read more about Sponsors, that was something I’ve always been least informed on going through recruiting.