From afar, mergers and acquisitions (M&A) divisions of investment banks look extremely glamorous for job-seeking graduates. M&A is also one of the most difficult area to break into at the graduate level. What are the qualifications required? What about specific skills that banks seek?
But first, what does the M&A team of an investment bank do? M&A teams advise clients on mergers (two companies joining together as equals) and acquisitions (a company taking over all or part of another company). Along with mergers and acquisitions, “disposal” is also sometimes advised, as it may be in a company’s interest to sell a part of its operations. The advice handed out by M&A teams can have a big impact on the future of their client companies, points out efinancialcareers.com.
An entry-level M&A analyst needs a bachelor’s degree in accounting, economics, finance, or mathematics. In addition, they need to have some prior experience in investment banking. Many M&A professionals, especially at higher levels, have MBAs. Some have law degrees.
Advanced degrees may not be essential, though some universities and schools offer postgraduate and executive education programs that focus on M&A, though the latter are meant for senior executives.
Certifications such as Chartered Financial Analyst (CFA) or Certified Public Accountant (CPA) can open a few doors. In the US, there is a mandatory licensing exam through the Financial Industry Regulatory Authority (FINRA). The licensing need to be maintained and renewed at regular intervals.
Expert-level proficiency in accounting, business, finance, law, and strategy is a must. Candidates should have knowledge of business valuations; ability to identify the position of a target company through an analysis of balance sheet, income statement, and cash flow statement; and awareness of company acquisition strategies and financial business law.
Key skills include analytical skills, problem-solving skills, global market knowledge, business understanding and business sense, and sound judgment. An advanced knowledge of mathematics; communication, leadership, and negotiation skills; ability to work with others and in high-stress environments; decision-making ability; and knowledge of the merger process, electronic market trading, and marketing forecast software programs add sheen to a candidate’s profile.
Of course, there is no substitute for a proven track record of the candidate’s skills. A Quora user writes that financial modeling is a necessary skill for M&A as well as other financial sector jobs. An internship in a M&A consultancy will help students learn more about the field and improve their job opportunities either at the same firm or in others. If you have an MBA in Finance, you may even land an M&A job without experience, says this Quora user in his post.
Academic shine: Banks receive hundreds of applications for every M&A position, so yours will be considered only if your academic record outshines or matches that of the other candidates, points out emoluments.com. So, start planning for an M&A job while in college. Your grades are going to matter.
Financial talent: Be up-to-date with the current market trends and build knowledgeable opinions on them. Make a habit of reading online or print news sources.
Passion: If M&A is really what you want, be passionate about getting into it. Show your enthusiasm to your interviewers.
Networking: Keep up with your networking to connect to an investment banker. Your relatives or friends may know a couple of them or at least know someone who lives next-door to a banker. Establish a connection and try job-shadowing and an informal interview to see if you really want to get into investment banking and M&A and what opportunities exist.
Internship: If you’re offered an internship at an investment bank with the M&A team, take it, even if it pays only a pittance. Your experience will come in handy and you may get to see the M&A process at close quarters. That’s a huge benefit.
Interviewing skills: Put your best foot forward at the interview by practicing for it. Perfect your resume and be ready to answer points that may come up from it.
An M&A professional’s mission is to create shareholder value but also to enrich the association of customers and employees with the company after a merger or acquisition.
He/she needs to answer such business questions as, will the merger create shareholder value? Are the deal assumptions reasonable? What is a fair price to pay for the target company? Do the rewards merit the risks involved?
An M&A professional’s duties involve identifying target companies, examining deals (pricing, target company’s orientation, policy, and culture), conducting due diligence, performing valuation and appraisal, and completing the integration of two entities.
Especially in large investment banks, newbie M&A analysts usually get allotted to industry-specific teams, such as financial services, manufacturing, transport, FMCG, food, information technology, and engineering.
M&A analysts do most of the groundwork for potential deals. They examine industry prospects based on growth, competitors, and market share, and evaluate companies based on their financial statements. Senior managers go by analysts’ reports to take decisions on mergers and acquisitions. Small, mid-sized, and large banks all hire M&A analysts. At small banks, analysts are more involved with each deal than their counterparts in larger banks, which have larger staff and can deploy people in each specialization.
There is a hierarchy within the analyst position, from entry-level college graduate to second- and third-year analysts. After three years, analysts may be promoted to associates. Then, associates may be promoted to director or principal (median director salary is $145,000, and the total pay range is $100,000-$259,000 in the US, according to payscale.com).
At the top is managing director or partner, where duties change from analysis and finalizing a deal to bringing in lucrative deals and making money for their company. At that level, excellent sales-skills usually combine with relationship building and communication skills, notes investopedia.com.
The median salary for entry-level M&A analysts can be between $67,000 and $92,000. This can vary, depending on the company and location, to between $55,000 and $102,000. Bonus is an integral portion of the compensation and may be between 7 percent for an entry-level analyst and 14 percent for an experienced analyst, according to Investopedia.com.
Is it worth getting into M&A? You bet, it is. The money is great, even though you may not always find the time to enjoy it. Wise people make good investments in order to pursue higher dreams, such as do a top-tier MBA, acquire property, or become partner in a promising startup.
As an M&A analyst, you will get used to handling stress so much that it will build your stamina and resilience. Working with people in high-pressure environment will give you people skills. You will become a perfectionist, with great attention to detail, which could be an asset in any future job. You will also learn to make sense of complex data rapidly and intuitively, which is an asset if you plan to continue in the financial services industry, askivy.net points out.
You will get to see the forging of corporate strategy at close quarters. Having to handle multiple deals at the same time will make you a master in multitasking. An M&A job is like a training ground that produces extremely competent project managers. M&A experience will make you an ideal candidate for any future job in investment banking and the rest of the business world.
Competing companies and tight deadlines can make for stress and long hours. There will certainly be quite a bit of travel. At the end of the routine tasks, there may be disappointment, as not all proposals go through to completion. Junior bankers spend hours researching and assembling financial information and legal documentation only to see their work going waste. So, this job is not for the faint of heart.
Worse, a deal that goes through to merger or acquisition often fails because of poor strategy or inadequate due diligence. However, they must maintain their optimism: they may strike gold with the next proposal. You would need to persevere. If you’re the type that tends to give up easily, M&A is not for you.
All the pressure will likely tell on you before long. If you are unable to keep your feet on the ground, your personality will be affected, and you will be an egoist and a greedy person who only thinks of money. You may start to measure your life achievements in deals completed and bonuses received.
Of course, you can find the time to avoid this by pursuing a hobby, maintaining a healthy lifestyle, having friends other than your colleagues, and maintaining focus on long-term goals. If you do that, you can have both an excellent career and a fulfilling personal life.
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References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11