Eight Habits of Top Bucket IBD Summers
When I was starting out in finance a while back, WSO was an amazing resource and really helped me so I thought I'd give back. This is my first real post on WSO and I don't think I've seen one of these posts recently so I thought I'd put it up.
With the start of the summer, I've received a lot of emails recently from incoming summers (analysts and associates) about how they can best do their jobs. Over the years, I've worked with some great analysts and associates and I've noticed some good habits they've had. Some of these may be obvious, but sometimes it's nice to hear someone else say them out loud so here goes:
1. Mark-up My Mark-up
When you get a mark-up, nothing bothers the mid-level bankers more than simple misses (auto-ding to bottom bucket). Make a point to highlight or cross off items in the mark up as you go through them. Often I see people say to themselves "I'll fix this later" only to get swamped / jammed and forget. Senior banker time is precious and they need us to focus on the details so they can win business. Help them out, don't get in their way.
2. Always Ask for a Deadline
Nothing sucks more than "miscommunication" about deadlines, whether thinking it was sooner (seems like an ASAP fire drill) or later (getting serious heat because something needed to be finished and isn't). Make sure you understand when the person above you wants to see it, NOT when the meeting is happening. As perfect as you think the deck is when you return it, I have never seen a summer / incoming junior banker produce work that didn't at least need a few turns. And if asked how long something will take: Under-promise and over-deliver. Leave time for the fact that you probably aren't as fast as the person asking for the work. Leave time to check for errors. Leave time to correct the errors (it will always take longer than you think). Having said that...
3. Check for Errors - Pt. I - Tick and Tie
Print out materials you are about to submit and go through them. Are the share prices all based off the same date? Does your valuation say 8.0x EV/2015E EBITDA on one page and 7.8x in another? You should probably find out why and fix that. Also, compare against previous versions if you're updating. Did the multiple jump two turns since the last time because you forgot to PF for a recent transaction (use "CACS" on Bloomberg) which increased forward estimates but were not reflected in your EV calc? This is the easiest way to avoid mistakes. If you are new to a book, check your comps against previous comps (best), recent research (price adj. to current price), and CapIQ (worst). Check to make sure your footnotes are updated and show up on the page ("Oh the footnote is behind the chart because the CapIQ refresh is covering it" is not a great answer).
4. Check for Errors - Pt. II - Simple Calculator Math
Since you've printed out the materials you should pull out a calculator and go through the pages. Does net debt 2016E = net debt 2015E - LFCF2016E? Are there any weird numbers? EBITDA is growing, but EV/2016E is higher than EV/2015E? Also, compare to pre-turn numbers. After the changes in assumptions, would you expect key numbers to go up or down? If there is a significant change that makes sense, put together a reconciliation (because I promise you, the senior bankers will ask, and it will help you check to see if you're right or not). Ex. Did the multiple go up two turns legitimately? Why? Well, the share price has been trading up on market sentiment. The market believes that the management team can actually achieve its plan, so despite the fact that forward estimates haven't changed, valuations have gone up dramatically increasing the mulitples. The shares are up to $20 from $15 since the last time we did these comps. With an FDSO of 100MM, the EV increased by $500MM. EBITDA is $250MM so the multiple went up two turns from 10.0x to 12.0x.
5. Check for Errors - Pt. III - Try To Understand What the Hell is Going On
Why are we putting this page together anyways? This is one of the last steps to being a better banker (and maybe one of the harder ones). We spend so much time grinding and are so tired afterwards that it's tempting (especially at 3 am) to just fire it out and try to GTFO. Some of the best analysts take the extra 10 to 15 minutes to go through the page (better if done at the start rather than the end) and ask "why would I care about this page? What's the point?" This also helps find errors as well. "We thought this deal would be LFCF Accretive because of the attractive EV/EBITDA multiple, why is it dilutive? High capex program in 2016."
6. Summarize Key Points
Related to #5. You invested so much time in building a model. Treat your Directors / VPs / Associates as clients. Don't just shoot them a model saying "Done!" Instead, highlight key points they might want to know about: "Just wanted to highlight that LFCF is low in the near term because there is a large capex program, as a result leverage spikes above the 3.0x the client said they wanted to try to stay below", "Wasn't sure how to think about synergies so I modeled in 10% of opex, but we can flex to whatever you think is appropriate".
7. Be Organized
90% of this job is being organized. Often senior guys are so focused on the client at the meeting they don't take notes and have trouble recalling specific details. You can be a hero if you take good notes during the meeting and send shortly after. Send emails with meaning full headings, not just "Model Update" but "[Client / Project Name] Model Update for 6% Growth Case". Your mid-level bankers have a multiple responsibilities and making it easier for them to digest is HIGHLY appreciated.
8. Summer / Incoming Associates: Earn Your Title
Summer / Incoming Associates: for all intents and purposes, you are an analyst. You aren't a proper associate until you can check analyst work. And you can't check analyst work unless you understand how to do it. And you can't possibly understand it until you've done it (and done it well). Respect the senior analysts because they have a lot they can teach you IF they like working with you. Good senior analysts run circles around MBA Associates. Respect them and don't be a douche.
This is hardly a comprehensive list, but it's a good start. Would love to hear any other suggestions from other bankers. Wouldn't mind some advice myself (SB's for good suggestions). Can always be a better banker.
Hope you find this helpful and best of luck. It's a jungle out there.