Updated: Feb 19, 2021
One of the first thoughts which often comes to mind when there's a mention of investment banking, its about the pressure, the hard deadlines, chaotic days etc. To a certain extent this indeed is a little more than a figment of imagination of a wannabe banker. There are days when an investment banker is required to slog it out working long hours through out the day and also burn the midnight oil. And in terms of industry lingo if I may use, this is more rampant during the "Live Deal". A live deal is a scenario wherein your investment banking firm has beaten its competition to win a mandate.
This mandate can be a potential M&A proposal wherein your bank would be advising to hunt for target companies to acquire or look for cheaper assets to meet your client's expansionary goals. Or it could be fund raising through a private equity or debt restructuring of a company which is fast sinking under the burden of unsustainable leverage repayments. So you are in a situation where your bank has won this mandate by outperforming its peers, trust me winning a mandate is not at that easy. Delivering quality services at this phase and that too in relatively lesser time is the differentiating factor which determines the strength of any investment bank. So this is why and how the pressure factor enters into this profession.
A deal is driven mostly by the Senior Directors who have powerful network in place. A transaction is structured mostly by multiple discussions with senior management of the client company, legal advisors if any. Multiple scenarios get created and presented in these discussions, and the ground work has to be done before the director enters these discussions. This is where the relatively junior member of the investment banking firm toils in. The analysts along with the vice-presidents or team managers work on the models which includes multiple scenario based analyses. We would have heard of the famous "Base Case, Pessimistic Case, Optimistic Case, Management Case (and any other case that deem fit the situation)" in a model.
The different scenarios backed by the assumptions and facts have to be presented in a crisp layout considering the fact that both your director and your client does not have the luxury of time in their hands. Your model has to be dynamic, robust to factor in different cases and give correct outputs.
So a lot of data would be staring at you and you are expected to be that artist which carves out, handpicks the useful information and make meaningful conclusions out of it.
Not to be overwhelmed
The situation becomes overwhelming at times but if you follow some mental tricks and techniques, the challenge gets diluted and you can be in control of the work. It is of immense help to keep yourself organized not just in terms of workplace arrangements but in terms of the priorities of the tasks that are in your hands.
Write down the tasks you need to complete in the day in your diary, trust me this technique works wonders. This is the first step in getting things under your control, you need to have a visibility of the stuff that you need to. The mind if burdened continuously by the chasing tasks would dive into a state of worrying. The worst part of worrying is that, it makes you loose your decision power, you end up running in circles and eventually becoming more worried. A vicious cycle! The moment you list down your to-do tasks, you elevate yourself into the next phase of problem solving which is the planning phase where you can factor in the time, effort and priority each task would demand from you. Trust me a proper planned day is a lot easier to execute than an unplanned one.
If you are required to create a valuation for a target, its best to keep some templates in hand which you might have worked upon previously. I am not asking you replicate your old templates but these would definitely help you get a quick start. Templates for comparable comps, precedent transactions, LBO models etc. can be used with few modifications depending on the sector for which you need them. This saves a lot of time and you free yourself to invest your time into more critical activities like identifying the correct peer group for your comparable comps or screening the right set of precedent transactions etc.
Identify your own strengths.
You are the best judge of yourself, nobody knows you more than yourself. Identify when your brain works the fastest- is it when you start your day or does it need some time to boot up and get to speed after a couple hours and then it becomes unstoppable! The idea here is to plan the activities which require more mental energy to coincide with your brains wavelength. The critical and more taxing activities like developing some strategy slides or working your way around the working capital assessment etc. can be taken up during the strong brainy periods while the less critical ones like hard punching the financials into a model from financial statements, creating tombstone slides etc. can be taken up when your brain is not expected to be at its peak.
I always suggest in my lectures to keep a print of the excel short cuts pasted in front of your work stations. You need to incorporate the excel into your lives like another limb, there is no short cut to this. Excel is the canvas on which you would lay down your master piece in the form of the financial model. So if you haven't done this till now, do it ASAP!
Drink more water! Yes, not trying to sound like a physician here but my dear reader, water is the drink of life. It helps you sooth those nerves, neutralizes down those acids which build up inside your system when tension builds up. Often I see people needing a smoke to calm down their nerves, instead they end up burning their lungs. Periodic water consumption sends an impulse which triggers normalization of the worked up organs like the heart, lungs and muscles. The by-products of pressure like heart burns, stomach ulcers, posture related muscle cramps due to those long working hours at your desk, breathlessness etc. can be addressed to a great extent by drinking more water.
The reason why I have laid some best practices above is due to the fact that though you would learn how to create a DCF or comparable comps table but rarely anyone speaks about when, how and under which pressuring situation you would be expected to perform this analysis. Absence of such best practices is like running a Ferrari on a rough terrain, all that horse power would simply be burnt out if we don't know how to adapt to the conditions.
There is a power of 21. So, this is a psychological phenomenon that a habit can be created if we do it consistently for a period of 21 days. Do a self analysis and try incorporating the correct habits in your lives which will not only help you attain a successful professional life but a healthy and happy personal life as well.
Do watch out for my next posts, I will be writing on topics like valuation methods in M&A (Comparable comps, precedents, DCF), general topics like conglomerate structures if they are good or bad in reality and many more in near future.
Keep working hard and stay healthy!