M&A – Come check out the wares

Project “Sell the Dream” was off to a decent start. No bake-off/beauty contest was needed as the CEO of the company was a close, personal friend of one of the senior bankers. Couple that with the fact that our bank’s proprietary investment arm had taken a stake in the company and we were in business as shoe-ins for sell-side advisory work. (NB: bake-off/beauty contest in bankerspeak is the process in which a seller/buyer gets proposals from competing investment banks for business. It’s often no more than ‘bullshit bullshit bullshit’ in which bankers give preliminary valuations, subject to change and market conditions of coursed, based on some hardcoded numbers provided by seller/buyer. Basically, the bankers picked are often the ones with the prettiest powerpoint and most attractive team…just kidding. sometimes).

As my direct group was more interested in providing the sell-side financing, we were working with our M&A counterparts quite closely to make sure everyone was on the same page on the numbers. My team had been assembled: Douchebag Associate was taking point on this, with Wasp MD doing some overseeing. The M&A team had their one senior banker, one VP who did nothing, an associate who did everything, and another first year analyst who became a good friend. At this point, Mr. Burrito had dropped a bomb on us, telling everyone that he was moving back to the west coast for that coveted job in private equity. At about the same time, we learned that Outcast was also leaving, for a hedgefund, the Mormon was leaving to get married and move back west, and finally, that our group was receiving summer interns. Between all the personnel changes, I was the only analyst left from my team, and the lone analyst tasked with the aforemetioned project with no help. Douchebag Associate was trying to climb the corporate ladder, and given his background in law, he was sent to London and Nigeria with a few senior bankers to take on some high-level meetings. He would of course have his blackberry and laptop, and would “review” my work on the road.

M&A bankers, above all, try to turn lead into gold. They attempt to “hit” the market just at the right time, finding some buyer who is so desperate to do a deal in which they grotesquely overpay, or they didn’t do enough diligence to really understand the risks. It’s very much a “buyer beware” mentality (but that’s why as buyer, you hire an investment bank to advise you..right?). Everyone needs to wear their big boy/girl pants and do their own diligence. M&A bankers are basically putting lipstick on a pig. The reason why M&A bankers are paid so well is that they are excellent at what they do. Each banker has his/her own style, but ultimately, his/her ability to get a potential buyer to drink the kool-aid is what gets them paid. In my few years of finance, I’ve seen many different approaches – kiss ass / bendover backwards for the client, being an asshole and blunt and telling it like it is, sterile but good work and smart, slimey but providing good intel on competition, etc. They attempt to create real rapports with their clients to instill trust. At the end of it though, there’s very limited loyalty as there are always bigger fish to fry. I learned that first hand as a private equity client.

Project Sell-the-Dream was no different. Without real tangible assets, the company was looking to sell a pipeline of projects that theoretically could turn into something real, assuming the buyer wanted to put some capital to work (i.e. spend money). Even as a naive, 1st year banking analyst, I knew that the company had nothing. I seriously began to hate my life when we started to draft the Confidential Information Memorandum, or CIM for short. This is basically a research report that gives an overview of the company, investment highlights, market/industry facts, and instructions on bidding.  For the first time in my short career, I was working in M&A, and I hated it. Countless hours of status update meetings with the management team (at least the client cookies are good), changing “moreover” to “in addition to” in text, adjusting the colors on graphs, creating graphs, formatting, turning comments from senior bankers, etc. – all of these things sucked the life out of me. The CFO of the company, along with his trusty sidekick (aka their business development associate), felt that adding value to the process was moving around a bunch of periods and commas, and continuously mentioning the “secret sauce ” that their company possessed. In my opinion, there was no sauce, and it certainly wasn’t a secret. The only things keeping me somewhat sane were that I had my counterpart analyst in M&A, and I had the illusion that the high visibility nature of what I was doing was going to get me a top bucket bonus come late June.  On the former, misery loves company. On the latter, Douchebag Associate had told me that given our firm’s personal investment with this company, all of the big executive committee guys would know the team by process’ end. of course, he failed to mention that the glory would only come if we were successful. Oops.

Did I mention that it was the summer of 2008?