Bank on Banking

For all of the aspiring corporate finance bankers (read: industry, not product groups) you will need to learn to love this task (or at least be very good at it and hopefully not find it mind-numbingly boring), as it will be your primary responsibility for the next two years. Sure, product groups will absolutely do more than their share of pitching as well, but it is the senior guys in the industry groups who are on the road 4-5 days a week, every week, pitching, trying to win new deals, new clients, and new opportunities, and, if the senior guys are on the road making these presentations, someone has to put them together. Also, remember that just because you are working on a live deal, it does not mean that pitching stops – on the contrary, the live deal may take precedence when there are fire drills (emergencies that require quick turnaround on materials for a deal), but in general, a live deal is a process, and while the process unfolds, the senior bankers are on the road trying to win new business for the bank – and around and around the carousel goes. Furthermore, don’t think for a second that a live deal is all modeling and investor memos with zero presentation work – every deal or market update, any regulatory changes, any big moves, or simply just getting in front of the client after a little quiet time will often warrant a fresh pitchbook.

Pitches come in many shapes and sizes and are used to communicate a wide array of messages in the investment banking world. Pitches range in size from a handful of slides, to 70, 80, or even 100-slide books (and trust me, you don’t want to be the analyst in charge of carrying those books for a meeting). Pitches are used for countless tasks including:

• follow-up to a previous meeting;
• presenting an update to a deal such as investor sentiment or where in the process you are;
• market updates;
• introducing a new product/ idea/acquisition opportunity;
• introducing the bank, the group or a new bank group; and
• summary analysis regarding the deal, comparable deals or regulatory issues such as government or environmental.

I know it probably sounds like a lot of fluff (and believe me, this is but a few of the tasks covered by pitchbooks), but hey, you’re a banker now and we as bankers pride ourselves in our ability to take what seems like a straightforward point and reshape it, expand on it, and complicate it so that no less than a full deck of slides are now necessary to explain it.

So we’ve gotten into who will be doing the most pitching and what pitches are used for, but what kind of analyst work actually goes into a pitch, and, if pitching is, for argument sake, what analysts primarily do, then why are we working so late so often? Assuming you are more of a seasoned analyst (read: an analyst who has proven him/herself and is given a bit more freedom in terms of putting together slide materials), creating slides will include all of the following (in no particular order):

• copying and pasting;
• constructing data tables;
• gathering market research;
• spreading comps;
• building charts and graphs;
• drafting slides regarding the specific opportunity (deal);
• compiling slides from other groups needed on the pitch (example if the Energy and Power group is putting together a pitch for a deal involving one party buying a portfolio of projects from another company, the E&P analyst will probably have to gather slides from his/her group, M&A, possibly Leveraged Finance or High Grade, depending on rating, and possibly something like a Project Finance group);
• drafting the analysis for and verbage explaining and expanding upon deal models and sensitivities; and
• formatting, formatting and more formatting.

That was definitely a mouthful, so let’s take a step back and break this down a bit. In general, when putting together a pitch, the first step will be to gather some stock slides on your bank and on your group, as well as any other slides that you have been asked to pull together by your associate or VP (case studies from other pitches for example). Depending on the type of deal it is, you may have to start tearing into 10ks to spread some comps (we’ll get more into this in the next installment, Research), upgrading market data tables such as treasury pricing or deal pricing/spreads in a specific industry as gathered from Bloomberg or the like (more research). If, again, you are a seasoned analyst, you will probably be given some freedom to draft the language around other slides that involve the aforementioned market update charts and tables, as well as analysis of the financial modeling that has been done for the deal that now needs to be described, and even recent events, whether involving the deal itself, other relevant closed deals, legal rulings or any other newsworthy events that can impact the project. There will definitely be pitches that involve much less than this, but there will also be pitches that involve much more than this – this is just an example of what kind of analyst work can go into a pitch. After all is said and done, you as the analyst will then make your first run through the book to check for blatant formatting errors, and then send it up the chain to the associate who will pass it on.

It is in this “passing it on” that we touch on the second question: why analysts work such long hours. Sure a pitch can definitely take many hours to pull all of the information and put it together into a neat booklet, and drafting the language (and model analysis if necessary) for several slides can (especially in the beginning) absolutely take a hell of a long time, but you will spend a great many late nights in the office not because of this, but because of the “passing it on.” It would be a wonderful world if your director asks for a pitch, and provides some initial thoughts to the VP, who builds on these thoughts and passes the task to the associate who explains everything to you, the analyst. You, as the diligent analyst, attack the pitch, put everything together, check for formatting errors and pass it up the chain. Everyone loves it and the books are printed, bound and ready to go – I’m sure by now you have realized how far this example actually is from reality (pretty damn far).

In reality, here is a sample (fairly short) back and forth pitch process:

• the most senior man (usually director/MD) on the deal team decides that it is time to pitch a company;
• the director describes what he needs to the VP and associate;
• the VP and associate then break off and decide how best to tackle it themselves;
• the associate then tells you (although sometimes you will be part of the meeting) what needs to be done, and you get running with it;
• long story short, you finish it and send it up the chain;
• after a few days of doing nothing with the pitch (since in banking everything is done last minute and pushed off for more time sensitive issues), it is now dusted off, and before the VP even sees it, the associate will proof it;
• The associate no longer likes a lot of what is in there and discusses it with the VP, which results in half of the 35 or so slide book requiring changes;
• after the changes are finished, you pass it up the chain again;
• now the VP takes a fresh look and decides that one of the sections sucks and should be removed then replaced with a new, far more valuable section;
• you dig in and make the changes – it is then sent to the director to take a look first thing in the morning;
• upon looking at this beautiful book of relevant and essential deal-closing information, the director has several edits and has decided that it would be wise to get M&A’s slides into the book as well (he’s decided that while we’re there, we will pitch an M&A opportunity in addition to, for argument’s sake, a bond offering);
• now you track down the M&A analyst to get his slides, updated of course, and sit quietly as you are reprimanded for not giving proper notice to him (the M&A analyst/associate);
• finally, hours later, everything is done, checked and edited;
• one last run up the chain returns a few more changes and edits which you eagerly take care of; and
• there you have it, a finished pitchbook ready to be printed and bound for the meeting a few hours away.

I know it sounds like a whole lot of back and forth, but keep in mind that this is probably a middle of the road pitch. There will absolutely be stock pitches that are much easier (just some editing, name changes, and chart updates), there will be pitches that are much harder (90-slide books with extensive project and comparable analysis and market updates, spanning 6 or 7 groups, each of which has to be properly formatted and seamlessly transitioned as you flip through), and on many occasions a significant portion of this work will be split between the analyst and the associate, vs. falling primarily on the analyst’s shoulders.

Pitching is what it is, and as tedious as it can sometimes be, it is equally essential and, frankly, how bankers do business. Attention to detail is essential, as is strong written/grammar skills, patience, persistence, and an eye for formatting. It is not the most glorious part of the job, but if you make an effort and show some initiative with it, you can definitely become far more comfortable with the language of the banker.

Stay tuned for future articles on Applying the Business School, Interviewing the Banker, the next 2 parts in this series covering Financial Modeling and then Research, Etc, and much more coming soon!