Investment Wanking

Not Long Now

2005-02-13T06:28:00.000-05:00

I've recently landed at a new bank across the street. I'll tell you more once I've settled in a little. Looks like we're back on!

Transmission Difficulties

2004-10-28T16:29:00.000-04:00

Due to the bank recently changing its IT policy, I have been unable to make any posts for the last few months. I'm currently working on a solution that doesn't involve getting home at 5am and then logging on, but you'll have to bear with me.

Thanks,

IW

Google Poogle

2004-08-20T05:26:00.000-04:00

I don't want to blow my own trumpet, but however the press spin it, the Google IPO failed to meet its number one objective: To maximise the value for existing Google shareholders.

The shares rose 18% in the first hour. That tells us that the price of the IPO was too low. Which tells us either the Investment Banks screwed up, which is pretty unlikely given the size of the deal and the number of banks, or that the mechanics of the Dutch auction process are flawed.

Google Up in Market Debut After Bumpy IPO

The Best Seats in the House

2004-08-19T06:19:00.000-04:00

I am getting very accustomed to flying in seat 1A on aeroplanes. It's the front window seat, and is usually seperated from the next seat 1C, as 1B is usually too narrow for someone to sit down in. It has more legroom and a groovy swing-out-from-the-arm table.

Still, I can't believe the Firm pays up to 10x the price of an economy ticket.

Terror in the Skies, Again? Part 2

2004-08-16T16:00:00.000-04:00

Thanks to cutehinano for this link:

http://www.pandagon.net/mtarchives/003123.html

Taken from Terror in the Skies, Again?

For Ignorant Journalists

2004-08-16T05:19:00.000-04:00

With the recent interest in IPOs, in part due to the high-anticipated Google Initial Public Offering, I just thought I would correct some of the insights into Investment Banks.

1) We do not make fees of 7% on IPOs any more. Sure, that may have happened in 1999, but today fees are around 2 - 4%.

2) We do price the offering in order to give institutional clients a first day gain. We price it where the market can support it. If we were to overprice a stock, and it bombs in the first day, people lose confidence in both the bank and the stock.

A Brief guide to M&A: Sellside Part 2

2004-08-11T16:45:00.000-04:00

So you’ve managed to convince your client (or the more likely scenario, the client approached you for advice) to sell one of its subsidiaries. What do you do? Well, as an investment bank, you have to earn your 60 basis points (or 0.6%, which, in the case of a $1.0bn sale is worth $6.0m) and what typically happens is that you fabricate work that you have to do in order to justify the expenses and fees you will claim.

We’re trying to sell a public company. That means it is listed on a stock exchange, and shares can be freely bought and sold. It also means that it has regulatory requirements to provide certain information. At the bare minimum a Company will have to publish an annual report and usually interim reports (quarterly or semi-annually).

So our public company A, has public filings available on the internet. It has several research brokers who follow the company and publish research it. These guys are usually part of large bank and make money by giving their opinions on the future of companies and publishing research notes for other people to see. If they like the information, they could use that particular bank to execute the transaction. I don’t really understand it.

But sufficed to say, there is ample information on the Company in the public domain. However, we have to write an Information Memorandum (Info Memo or IM) in order to justify our fees. It’s bloody stupid, and basically cutting and pasting sections from publicly available sources. It is basically a 50-100 page guide to the company, it’s business, the market and the proposed transaction. A banker’s sales pamphlet. And I’m stuck writing the 23rd revision right now.

A Brief Guide to M&A: Sellside Part 1

2004-08-05T05:53:00.000-04:00

So you're an investment bank, and one of your clients has asked you to sell one of their subsidiarys.

There are two kinds of buyers: Strategic and Financial. A Strategic buyer will be looking to acquire the asset for a strategic purpose, will usually be a player in that industry or a similar industry already and will be able to extract some synergies from the business. Strategic buyers are therefore usually able to buy a higher price. However, usually the fact that the asset is up for sale in the first place can mean that there is little strategic value so a financial purchaser may be sought. A financial purchaser, also known as a private equity fund is looking to hold the business for three to five years, improve the business and make a substantial amount of money. Returns in the range of 25% a year are the absolute minimum to be considered due to the high risk nature of the investment.

Private Equity funds are the holy grail of the career path of your typical investment banker, but we will save that for another day. The method used to maximise the returns of these financial buyers is to leverage up the company. One of the most misleading things I used to read in the papers before I because financially astute is the headline of the form: "Company X owes $10 billion". It's misleading because that may be a healthy debt level for the company. Companies are funded through debt and equity. The equity value is also known as the market cap for public companies and is the value of all the shares of that company.

Lets say that I want to form a company. I will put in $10,000 of my own money, and I will own 100% of the company. The equity value is therefore $10,000. I ask the bank to lend some money, and it lends $30,000. The company now has $40,000 to play with, so its enterprise value is $40,000. At any stage, I, the shareholder, does not owe the $30,000 to the bank. The company owes this money. But of course, it has the $30,000 it borrowed and usually it will be invested to generate more money.

So lets take a simple leverage scenario. The company buys assets and pays employees, etc. and generates profits. Some of the profits are used to pay off the interest payments to the bank and the rest are used to grow the business. In three years' time, some Japanese business men ask to buy the business at $50,000. The debt owed is still $30,000 as I have only been paying off interest. That means that the equity is now worth $20,000. I have doubled my money over 3 years. That's a healthy return. It's known in the industry as an LBO or Leveraged Buy Out.

We're all going on a summer holiday

2004-08-04T04:55:00.000-04:00

Whoops. I forgot to tell you that I was going on holiday for two weeks. I'm afraid that I must have forgotten, having had to arrange a last minute trip to Spain for a 10 hour meeting yesterday, missing my flight back to London and thus missing my connecting flight to go on holiday. All is not lost, however, as I will not be able to go now for 3 weeks due to the capacity of the associate on the deal to only write in pidgeon English.

Still, you've got to laugh don't you, especially as my girlfriend has an exam and then starts her new job in 3 weeks, meaning I will not be able to go on a holiday with her now for 6 months or so. At least I will get to rewrite the associate's bs into good old regular English.

You know I hate this Spanish deal, but at least I got to meet the management. Interestingly enough, the VP and Director were meeting the client this morning, and seeing as I had missed my flight to London last night, and told not to leave for 3 weeks, you would have thought that I would have been invited to the client. It's probably because of the huge workload I have. I guess that they haven't told me to do any work because it's so much. And the associate doesn't get back from his holiday until Monday. Meaning that I can't translate anything for a few days. And then the VP gets to go on his holiday.

I really love this deal.

How To Steal From The Poor

2004-07-30T11:23:00.000-04:00

Sometimes, the public markets get it wrong. And when it does, it usually makes big news.

Mr. Green's recent bid for Marks & Spencer highlights the massive profile takeover bids have for companies. Not least because shares that were worth x 1 day ago suddenly increase in value by 40% overnight.

I'm working on a P2P (Public to Private) transaction at the moment that could easily make some public shareholders very wealthy very quickly. Of course, if anyone was to act on this information, it would be a clear violation of insider dealing.

The question is, by now, hundreds of people know about this transaction. It is still confidential, but you have lawyers, investment bankers, company employees, certain shareholders, accountants, secretaries, industry consultants and interested bidders all with inside information.

They all know that in a month or so, someone will make a bid for the Company, and the share price will jump like a flea at a circus. So, lets say someone with this information decides to buy $50,000 worth of stock. Will they be investigated?

It's hard to imagine when $1,000,000 worth of stock trades on a quiet day. Is it ethical? I find it hard to imagine why not. If someone gave you a hot tip for a horse race, is that illegal?

Terror in the Skies, Again?

2004-07-26T05:13:00.000-04:00

I wonder, if 19 terrorists can learn to fly airplanes into buildings, couldn't 14 terrorists learn to play instruments?

Taken from: Terror in the Skies, Again? - WomensWallStreet

Is it Polite to be Rude?

2004-07-20T05:25:00.000-04:00

I become more and more intrigued with C every day. C went to Eton and has never had a girlfriend. He's posh, but sweet in an innocent kind of way. For example, when he sent an email to the firm's analyst contingent asking for any tender offer presentations, he began, "I apologise for the intrusion of a gloal email..."

It just seems unsettling having a real gentleman around. I feel more at home with the backstabbing corporate ladder-climbers.

Equal Opportunities II

2004-07-16T08:13:00.000-04:00

R, a good friend who joined as a lateral in the year above, hardworking and top-ranked, and I were drinking coffee this morning. He said,

"You know what I really want to see in this job?"
"No."
"A really hot chick at a really senior level."
"Yeah?"
"And one that everyone respects because she's so good at her job. But also one that looks hot."

Equal Opportunities

2004-07-15T12:01:00.000-04:00

I've always wondered. Do girls do well in this business because they are great bankers, or because they are great in bed? In every institution, there are always rumours about the female members of staff, usually the gorgeous ones. K, another one of the interns next to my cube came out to lunch with me today. C tagged along too.

K doesn't dress like an investment banker. She wears vests to work. And has hideous underarm hair. I haven't decided if I should tell her yet. Still, she isn't unattractive, and I swear she was making moves at me over lunch. We even made eye-contact a few times. My reviewer would be proud.

Snake Eyes

2004-07-12T05:26:00.000-04:00

At my review, one of the things that came up was eye contact. Apparently, I'm not that hot at it. That's pretty weird, as I've never felt it was an issue, and all the girlies say what pretty eyes I have. Still, I'm making a conscious effort to look at people's eyes not shoes or breasts.

Help The Aged

2004-07-10T11:13:00.000-04:00

It's unbelieveable how quickly you age in this business. Here I am, one year on from university, worrying about electricity bills, mortgages, which shirt maker makes shirts that fit my build better...

I just met up with an old friend from school, who's main concern is his next videogame fix. Eating baked beans and living in a caravan just doesn't compare.

Also, here's a quick tip for any budding investment banker. Don't go back to university. Even to visit. G and I both agree. It makes you feel incredibly old. You just don't know the same people, and the people you do are still stupidly doing every drug under the sun, and partying until the next day. Don't they know there's a whole world out there if you just get out of bed during AM hours?

Your turn, intern

2004-07-09T04:48:00.000-04:00

The traditional summer lull has hit me rather bad this year. That is to say, it's a good thing. I've been spending the last few weeks being staffed on a couple of slow live deals, so I don't really have too much work to do (around 60 hours a week) but I can't be staffed on anything else in case of these bad boys decides to explode and take over my life.

Meanwhile, the summer interns have reared their ugly collective head and my cube is surrounded by them. It's hard to imagine I would have acted the same but a year ago. C, a public-schooled brown nose, has been ruffling feathers by calling all the senior bankers sir and madam.

The craziest thing happened on Friday afternoon. C, having joined just this week, must've been feeling left out. Word spread quickly that C was bored, and wanted work to do, but because of the summer lull, there wasn't anything for an intern to do. It must have been 3 senior guys came over and told him that it was Friday afternoon, and he should seriously chill out!

Positively unheard of in this institution.

There is no way in HELL am I flying in economy

2004-07-02T11:52:00.000-04:00

Ahhh, business class. Where would we be without you? In with the rest of the scum, I tell you.

So, following a minor disaster at the airport, our British Airways flight was cancelled, and as the airport was in chaos, they couldn't guarantee us a seat on the next flight, despite us paying more than 10x some of the economy seats. We trundled over to Air Portugal, and who do we find but Metallica in the same situation, without a flight! Unfortunately, we appeared to nab the final two business seats, so Metallica were stuck with the masses. Time to use the considerable leverage we bankers have. We smuggled them into the lounge whilst their minders "arranged" extra business seats. Talking to Metallica, suddenly one of them leans in and whispers,
"Don't look now, but Angelina Jolie just walked in!"

Courier's Delight

2004-06-24T05:31:00.000-04:00

Having spend my Friday night working on a presentation, I called up the courier company around 1am to deliver the book to the director's home. The deadline was 9am, so the courier guy said they would pick it up at 7:30am. I don't really know what the traffic will be like in 8 hours time, so I said why don't you just pick it up now. The guy had the cheek to argue with me for 10 minutes. He went so far as to suggest that the courier pick it up now, go home and sleep with the package, and then deliver it in the morning. When I ask for it to be picked up now, I don't need a lecture telling me how ridiculous I am. I need a bike to pick it up now. When I burn out, I'm going to start an Investment Banking support company. I know I could make millions, by just doing what I am asked to do. Take a package to Dundee? Consider it done.

Comparable Company Anaylsis aka Comps

2004-06-18T10:22:00.000-04:00

Comps (comparable company analysis) are the bane of an investment banking analyst. Imagine that you are purchasing a new TV set. How would you know how much a widescreen TV would cost? Well, most people would look at widescreen TVs by all the manufacturers, and different sizes and different models, and get a feel for the market.

Investment bankers do this for companies, as one of the methods for evaluating a company's worth. But for the analyst, this an onerous task. In an inspired effort to reduce the workload for a heavy pitch, someone suggested that analysts have a set of comparable companies that they maintain with public valuations. What this means is that the analyst has to be up to date on a set of companies (lets say, for example, TV Free-To-Air Broadcasters) including up to date financial results and pro forma any acquisitions or new offerings. But, as is the case, the order of work is in order of deadlines, and comps often come bottom of the pile (not least because they are bor-hor-horing!). You try and update your comps every week, but the only time there are ever required is when they haven't been updated from 6 months and you have ten thousand other things more important to do. It feels like other people asking you to do their work!

So, it's coming up to 2:30am, and there's no one on the floor save little old me. Alone with my thoughts, I got to thinking. I often spend the small hours of morning in the office. And to what avail? Tomorrow, I will be flying business class for a closing dinner. So it doesn't make a difference if I do this work or not. Except in the morning, someone will expect it, and if it isn't done, my reputation will get hammered, but I won't, as I'll be on a plane.

But, to be more precise, I could have finished this work by 10pm. Possibly even earlier. But I am the king procrastinator. And knowing that I will be working late, I push the work back thinking, what the hell, I'll be here late anyway. This is not a healthy attitude, but a common one.

Sufficed to say, the work is stupid. Comps! Bloody comps! And I could have done it earlier.

You can get a lapdance here for free

2004-05-26T19:39:00.000-04:00

I just had my first lapdancing experience. The girls were fine, by mortal standards, but I just didn't get it. Sure, I had a few table dances, but it was so typically Investment Banker, I just couldn't find myself interested.

I left two colleagues in the bar. Such a shame, because I'm wasted to fuck. Oh well. Better not explain it to the gf - a couple of breasts never hurt anyone. What was interesting was that they ripped off my credit card, and they didn't seem to have a back room. The girl that was nice I didn't get a dance from. I kind of feel bad. I guess I need to learn stripclub etiquette. Oh well, McDonalds for dinner for me.

2004-05-25T05:32:00.000-04:00

When people want you to do something for them in this world, flattery goes a long way. And you get an elevated sense of selfworth. Once you do it, you go back down to earth faster than last year's black.

It was, however, quite nice to be, it seems, at the centre of a political storm when I was deciding to change groups. Senior people would stop by my desk, take me out for a coffee, and impart their worldly experience onto my impressionable soul.

I finally decided to join the new group, and spoke to the group head.

"If the offer's still open, I'd love to join your group."

"Yes, it's always open. We'd love to have you."

"..."

"..."

"...er..."

"Thanks for coming on board."

"..."

Oh - the door. Got it.

Nobody Likes Saturday's Child

2004-05-22T09:22:00.000-04:00

It's difficult to write about my experiences here because there aren't that many investment banks out there, and I don't really want to get fired. I'm only days away from my first annual review, although it's called a six month review because of the pay structure - as a junior, you are recruited in summer and get your bonus in summer. Once you turn senior, you get your bonus at year end, like the rest of the world, you are given dignity and your first bonus comes after only six months.

But, it's Saturday, and the rest of my floor is empty. I think I will have to speak to my staffer on Monday - this is the second weekend in a row that I've been the only stupid guy stuck in the office. I'm not bitter that no one else is here, it just feels like a kick in the teeth - the better you are, the more work you get. The generally accepted crap analyst on the team almost never works weekends. And he pretty much gets paid the same as you.

Still, I'm moving teams shortly. I just told the group head.

"You know, I'm not the kind of guy to stand in the way of someone's career. You just have to think about your support base here. You do have a strong base of supporters - of which, I am a member - and you will be joining a team where you will have to build your reputation again. And don't kid yourself that you'll be doing the same kind of work. It'll be totally different. If it wasn't, there wouldn't be a point in having that team."

My old group head's secretary suddenly "left" the bank a few days ago. Maybe I'll try and join him across the road.

Monkey Business

2004-05-20T04:59:00.000-04:00

Oh preacher, wherefore art thou?

On the bus into work today, I bumped into G. This G has worked for the bank for 4 years, and is a definite dude. Hard working, but a big talker. I was continuing my journey into the murky world of trading at Salomon Brothers. I got slammed by the book for being a "corporate financier" and I got slammed by G for reading a "stupid trading book".

"That's not investment banking."
"It's nice to see how the other half live."
"Yeah, but it's stupid. You should read Monkey Business. That's real investment banking."

Still, Liar's Poker has proved a good read so far. Even if it's just his insight into the stupid world of investment bank... I mean, "corporate finance". (Of course, if you ask anyone in IBD, investment banking is just IBD, none of this equity / debt capital markets rubbish.)

"...we angled for lower paying jobs in corporate finance. The starting salary was about twenty-five thousand dollars a year plus a bonus. When all was said and done, the pay came to around six dollars an hour... Analysts didn't analyse anything... Analysts photocopied, proof-read, and assembled breathtakingly dull securities documents for ninety and more hours a week. If they did this particularly well, analysts were thought well of by their bosses."

Yup, pretty accurate.

Stab You In The Back Week

2004-05-17T05:09:00.000-04:00

It was final submission for reviews on Friday. The smart thing about the review system here is that it's all online and you can see exactly who has and who hasn't completed their reviews of you. G, who comes from a different team to me and who I have worked with extensively on a live deal out of the country, has not even started my review, according to the monitor. I cannot believe it. Never trust anyone in the bank.

The multiple choice questions are my favourite though. I learnt long ago when I applied, and was subsequently rejected from, to certain American universities that above and beyond any other situation, Americans lose the ability for rational thought when provided with multiple possibilites. How else can you explain the election of President Bush?

And so, as an American, or wannabe American bank, you have to shoot the shit and give everyone top marks. The harsh thing is, if the banker in question is a well-regarded individual, you are almost compelled to give full marks otherwise it will be noted on your file that you are not a nice guy. Reversal of roles.

Here are some excerpts from my self-review:

I now consider myself much more an investment banker now rather than a student lost in the world of investment banking.

I am pleased with how I have developed my project management skills but am frustrated by how far I still have to go.

I am still as eager to learn as when I joined the firm, but I have tried to manage other people’s expectations more realistically.

I have enjoyed promoting firm-wide product initiatives and meeting with senior bankers and learning about creative structures.

I can sometimes find the stress of investment banking slightly overbearing but I need to temper this because I do not want this to affect other people.

I wonder if writing a diary helps?

Lessons in Lifemanship - Chapter 22: The Art of Negotiation

2004-05-14T12:50:00.000-04:00

Taken from Lessons in Lifemanship - Chapter 22: The Art of Negotiation:

The art of negotiation is a valuable skill to teach members of a family, including children. Take a simple example of family members trying to decide about evening plans. Challenge each person to suggest an idea which would, as much as possible, be something to which everyone could agree. It may not work out just as one would like every time (what human endeavor does?), but if the idea is reinforced, if people try to sensitize themselves to discern the needs and emotions of others, and if they really listen, desirable solutions can be achieved far more frequently. What may seem at first completely adversarial positions can be worked out so that the opposing parties become allies in achieving a mutual goal.

It is very gratifying when you can find a solution which meets everyone's needs whether it is in relation to buying an apartment house or deciding which movie to attend.

Finance for Math Geeks

2004-05-12T18:12:00.000-04:00

Taken from Ridiculent.com:

"Google is trying to raise e Billion dollars from its IPO...

Another flourish involves [Google's] allegiance to its geeky roots: The amount of the $2.7 billion offering contains an inside joke for the math-minded. The exact offering, $2,718,281,828, is the product of "e" and $1 billion, where "e" is the base of the natural logarithm--a logarithm especially useful in calculus--and equals about 2.718281828."

I Am A Musical Superstar

2004-05-12T17:58:00.000-04:00

The life of The Investment Wanker is a daily rollercoaster ride. Today, for example, started as a good day. I have two full days of training booked in to help me express myself. Jolly good, no other Corporate Finance types around, just regular people (oh, nirvana to mingle with the proletariat), time to act myself and leave the corporate facade behind. In order to better portray the image we choose, it made sense to figure ourselves out. "Who do you think you are?" was the question put to the group.

I am a musical superstar trapped in the body of an investment banker.

Get me outta here! You should try examining yourself once in a while. You need to abstract yourself for a moment, look in the mirror, and really question where are you are where you want to be.

I certainly don't want to be here. So, training's over around 5ish, and I've done two presentations, been filmed twice, and am generally all round exhausted. But the day is only beginning - back to the desk to get crap from pretty much everyone. I'm finding it increasingly difficult to deal with all the stress. Firstly C, another analyst, expects me to do her work for her. I mean, seriously, get the fuck out of my face. People love to dump shit on other people in this industry. So beware. Anyway, I manage to fob her off with some stupid excuse. And all this happened during my lunch break. (yes, I spend lunch at my desk. fun-oh!) Well, I get back after training and she's like, well this this and this was wrong, but don't worry, I didn't change your file. Ho. If it's wrong, change it. Don't tell me about it. New motto for the day: DIY.

Also, for 6 weeks, I've been working on a tombstone for my first major deal. Well, trying to get more than 2 people to agree on something in this bank is something they should only make you do as punishment. Finally, after 6 weeks, I get it all OK'd by the powers that be and the sample gets shipped over. Well, call me Pop-Eye and blow me an Olive, J decides she doesn't like it at all, and wants a complete redesign from scratch. Hello? You've been watching the plans develop for a month now. Couldn't you engage that pea-sized brain of yours a little earlier? So I now have no time to make 100 of these buggers. Life just keeps getting better.

And on top of that, I'm working with N. Top ranked, but top prick. He's making me do the most random stuff, and he just cannot explain how to do anything. Put him in a dairy, and you certainly won't be getting milk, that's all I can say.

Building Financial Models

2004-05-11T14:44:00.000-04:00

The Building Financial Models Blog looks like it has the potential to be a useful resource for budding analysts, unlike this POS.

Liar's Poker

2004-05-11T13:15:00.000-04:00

A client I went to see in sunny Spain last week blabbed to the press today. It's got the whole company excited. Interesting to note that we haven't actually been hired yet, but we seem to have acquired a role in the process courtesy of quality researching by the reporter. You've got to love traditional media.

Speaking of which, I popped down to the corporate library today. You know how it is, you have to try to look busy, otherwise you'll be staffed up to your eyeballs. I self-borrowed three books. Self-borrowing as a concept I find ridiculous. The number of times I've tried to find a book there only to find that it isn't checked out, merely stolen from the library would make your eyes water. What's even more stupid is that there is a librarian (of course, that isn't her real title, but she effectively is) who sits outside the library, and says pleasantries when you walk in and out of the room. I don't think it would be too much to ask for her to check that people are borrowing and not stealing the materials. But that kind of common sense has no place in an investment bank.

But, as I was saying, I borrowed Liar's Poker and Dot.Com. Both fairly interesting diatribe of the investment banking world and the dot com bubble respectively. I hope to waste many a sleeping hour reading these books. More interestingly, or stupidly, I also rented XML for Dummies . What will I need that for? Well, it was brand new, and I wanted to be the first person to borrow it. One-up-manship still reigns supreme in the giddy heights of Investment Banking!