After putting in all that time and effort, you feel like you’re back at square one.

Unfortunately, it’s also quite common: in some years, over 50% of interns fail to get a return offer.

And in periods where deal activity is terrible (e.g., 2008 – 2009 or 2022 – 2023), the percentage may be even higher.

While it may feel like the end of the world, you are not actually back at square one.

But if you want a good outcome, you need a solid plan and honesty about why you didn’t get a return offer. I recommend the following steps, detailed below:

1. Step 1: Figure Out Why You Didn’t Get a Return Offer
2. Step 2: Pick Your Best Next Move
3. Step 3: Network and Prepare for Interviews
4. Step 4: Reevaluate Your Options If Nothing Worked

What is a “Return Offer”?

All the large investment banks – bulge brackets, elite boutiques, and middle-market firms – use internships as a recruiting tool for Analysts and Associates.

Effectively, the internship is an 8-10-week interview where you must prove yourself on the job by helping full-time employees with their tasks.

If you perform well and the bank has enough spots, you’ll get a “return offer,” which means you can start working full-time at the bank the following year after graduation.

These internships matter because the large banks make most of their full-time job offers to interns who perform well.

To succeed in your internship, please see our guide to investment banking internships.

This guide will focus on what to do if you did not perform well or if something outside your control resulted in no return offer.

Step 1: Figure Out Why You Didn’t Get a Return Offer

You need to start by asking why you didn’t get a return offer.

Sometimes, it was because of something outside your control, such as the firm not hiring anyone, the group shutting down, or a bad market.

But in many cases, it was because you made specific mistakes, didn’t perform well, or didn’t “fit” with investment banking.

If you’re in this category, there’s no shame in admitting it.

It’s mostly the banks’ fault for accelerating recruiting so much that they hire many students who are not good fits for the job.

There are ~5 main reasons why you might not have received a return offer:

1. Poor Soft Skills – For example, maybe you made off-color comments, didn’t dress appropriately, or didn’t communicate effectively with full-time bankers. Or maybe you came across as weird or anti-social.
2. Poor Hard Skills – Maybe you could not use Excel or PowerPoint effectively, made math mistakes, or failed to check your work before turning it in.
3. Bad Market and Very Few or No Return Offers – Maybe deal activity was so bad that the bank didn’t need to award many return offers. Finance firms are notorious for under-hiring and over-hiring, so this happens a lot.
4. “No Return Offer” Policy – Some boutique banks hire interns but never plan to bring them back full-time. If you’re in this category, at least it’s easy to explain in interviews!
5. “Special Circumstances” – For example, maybe you had to start the internship late due to scheduling issues, or you had to work remotely for part of it, and these factors made it difficult to get to know the team.

You must understand which category best matches your situation because it determines your next move.

If it was something “beyond your control” (categories #3 – 5), it makes sense to give it another go and recruit for full-time IB roles or off-cycle internships.

But if it was “your fault” (categories #1 – 2), you may want to consider non-IB roles or give yourself time to improve by staying in school longer.

Step 2: Pick Your Best Next Move

Once you’ve determined why you didn’t get a return offer, you need to plan your next move.

In most cases, you have 6 main options, depending on your region and level:

1. Delay Graduation – This one no longer works well due to the accelerated internship recruiting timeline in the U.S. But if you can somehow delay your university graduation by ~3 semesters, you could use the extra time to apply for summer internships once again, ~18 months in advance.
2. Do a Master’s in Finance Degree – This one is best if you need to fix multiple issues in your profile, such as a low GPA and poor technical skills; it’s similar to delaying graduation but more realistic for the recruiting timeline.
3. Do an Off-Cycle or Post-Graduation Internship – This one is more viable in Europe because off-cycle internships are more common there. You don’t need to pay extra to stay in school, but many of these internships never turn into full-time offers, so it is a bit of a gamble.
4. Recruit Directly for Full–Time IB Roles – Banks hire most of their full-time Analysts from their summer intern classes, but you can always find a few firms and groups that under-hired or had terrible interns.
5. Aim for Non-Banking Roles in Finance – Maybe you discovered that investment banking is not for you because you don’t like the hours, the work, or dealing with sociopaths all day. But you could use the experience to aim for other finance roles, especially ones like equity research or corporate banking with less structured recruiting.
6. Aim for Non-Finance Roles – Or maybe you learned that you hate finance and never want to work in the industry. Great! You saved yourself years, and now you can find another job that’s a better fit (tech, consulting, marketing, startups, etc.).

At the MBA level, options #1 – 4 are not available, so you usually need to look for other full-time jobs outside of banking.

(Addendum #1: There’s a small chance you can find a full-time Associate role at a smaller bank, but I would be very cautious about these roles.)

(Addendum #2: Occasionally, an MBA student will fail to get a return offer and still find something else in banking, so it’s not impossible – but it is a lot more difficult than at the undergraduate level, so “not widely available” may be a better description.)

So, which of these options is best for you?

If you failed to get an offer because of your performance, you should consider options #2, 5, or 6 (Master’s degree, non-IB roles, or non-finance roles).

You need to be honest and ask yourself a simple question: “Do you want to work in banking but simply need to improve, or is it not for you?”

If it’s the former, consider another degree and how to use the extra time to improve your profile and get more experience.

If it’s the latter, read our guides to equity research recruiting, asset management internships, corporate banking, or product management (for example).

If you failed to get an offer mostly because of external factors but are still very committed to IB, you should consider options #3 and 4 (another internship or full-time recruiting).

Even if you’re in Europe or another region with off-cycle internships, I recommend networking to look for full-time roles first.

Yes, it’s difficult, and your chances aren’t great in a terrible market, but spots sometimes appear – and if you can win a full-time offer anywhere, that’s much better than interning again.

Step 3: Network and Prepare for Interviews

If you’ve decided that investment banking is not for you, please search this site for recruiting guides to other industries.

In short, you need to be a lot more proactive if you aim for something like equity research or asset management; there is less competition, but there are also many fewer spots.

If you are still aiming for full-time investment banking roles, this interview about how a reader won an IB offer at the last minute has some useful tips.

The short version: Aim for roles outside of major financial centers, target smaller banks (middle markets, in-between-a-banks, etc.), and do a ton of networking.

You can reach out to your existing contacts, find new ones, and send a message like the one below via email or LinkedIn:

“SUBJECT: Investment Banking Intern at [Bank Name] – Positions at [Name of Person’s Firm]

Hi [First Name],

I’m a student at [University Name] with a [XX] GPA and investment banking internship experience at [Bank Name] and [Describe Previous Internship Experience]. I’ve attached my resume here. I’m seeking full-time investment banking roles and just wanted to know if your group is hiring.

Thanks,

[Your Name]”

There is no magical secret to getting a response. Find people, email them, and follow up after 5-7 days until you get an answer.

If you eventually make it through to interviews, the #1 question will be:

“Why did you not receive a return offer at [Bank Name]?”

I recommend telling the truth, but not the whole truth, and spinning the reason slightly more positively.

If you say something like, “Deal activity was bad, so the group didn’t give out many offers,” the interviewer’s follow-up response will be:

“OK, but they did give out some return offers, correct? Why did some interns receive return offers while you did not?”

You can keep going back and forth like this forever unless you admit a weakness or mistake.

So, similar to the “Why is your GPA low?” question, it’s best to say that you made mistakes initially and improved over time, but it wasn’t quite enough to put you among the top few interns.

For example, you could say that you made some mistakes in email communications or office protocol at the start of the internship.

You received feedback that you had to improve, which you did, and your final review said you were much better.

However, they only brought back 1-2 interns due to the market, and because of these mistakes in the beginning, you didn’t quite make the list.

Besides this, investment banking interview questions will be the same: Expect to walk through your resume, answer technical questions, and discuss your deals.

Similar topics will come up even if you target off-cycle or summer internships.

So, if you’re already well-prepared for standard interviews, you mostly need to plan your explanation for why you didn’t get a return offer and discussions of your deals and internship work.

Step 4: Reevaluate Your Options If Nothing Worked

If you go through everything above and fail to win a full-time offer or another IB internship, return to Step 2 and reevaluate your options.

In most cases, the best choice is to aim for non-IB roles because you don’t want to spend much time without a full-time job.

So, consider related roles such as corporate banking, Big 4 firms, business valuation firms, corporate finance at normal companies, etc.

The #1 point is that you need to line up something post-graduation, even if it’s not your ideal role, it’s in a bad location, or it has below-market pay.

If you’re still 100% committed to IB and unwilling to compromise, your best option is to do a Master’s in Finance degree – but the timing may be tricky if you’ve already spent months recruiting for other roles.

No Return Offer: The End of the World?

It may seem like the end of the world if you complete an investment banking internship and fail to get a return offer, but it’s a common outcome.

The key is to be honest about why it happened so you can plan what to do next.

If you hated the internship and decided that IB is not for you, great – move on and start applying for other roles.

If you like “the idea” of investment banking but couldn’t perform well or tolerate the long hours, fine – think about something like corporate banking with better work/life balance.

And if you are 100% committed but failed to get an offer because of factors outside your control, start pounding the pavement and looking for full-time roles or internships.

In the short term, “no return offer” hurts, but in the long term, it can lead to more fitting careers if you handle it properly.

The post No Return Offer from an Investment Banking Internship: What to Do appeared first on Mergers & Inquisitions.

“If you’re not Chinese, don’t even think about it, and even if you are Chinese, it’s best if you have great connections within the CCP and want to stay in China long-term.”

I could stop this article here at ~50 words, but sometimes it’s fun to indulge in a fantasy, so I’ll continue with the topic and cover:

• Deal types, investment strategies, and top firms.
• Recruiting and whether you can break in without “donating” your kidney to Xi Jinping.
• Careers, including the lifestyle, salaries/bonuses/carried interest, exit opportunities, and differences at domestic vs. international firms.

Private Equity in China: Deals, Strategies, and Top Firms

Traditionally, China has had the 3^rd highest level of private equity activity worldwide, after the U.S. and U.K., and slightly above countries like France and Germany (source: Statista).

“Private equity activity” here is based on the dollar volume of PE deals involving domestic target companies in the country:

You might look at this data and think private equity in China looks promising… until you read the fine print.

In China, traditional leveraged buyouts represent only 9% of deal activity, while “growth deals” represent 74% of all deals (source: Bain).

As with PE in many other emerging/frontier markets, it’s more like growth equity than traditional roles at middle-market PE firms and mega-funds in the U.S.

This may change due to factors like the “decoupling” with the U.S., poor stock-market performance, slowing growth rates, and an aging population.

But even if buyouts tick up, growth deals will still dominate the market into the 2030s.

In terms of industry focus, technology (especially “general IT,” Internet, and semiconductors) and healthcare have always accounted for a high percentage of deal activity.

But you’ll also see manufacturing, cleantech, consumer, energy, real estate, and financial services deals.

Here’s a good summary from this BDA report on Private Equity in China:

Tech still accounts for a huge percentage of deal volume in the U.S., but private equity activity is more diversified because growth deals represent a smaller percentage of the total.

Private Equity in China: The Top Firms

You can divide private equity firms in China into two main categories:

1. Domestic vs. International: Was the firm founded in China or another region, such as the U.S. or Europe?
2. RMB vs. USD: Does the firm raise capital in China’s currency (the RMB), or does it raise USD from Limited Partners overseas?

You might think the pairing is always Domestic/RMB and International/USD, but that’s not true.

For example, Sequoia is an international firm with USD and RMB funds in China, while domestic VC firms like Qiming Ventures have raised USD funds abroad to invest in China.

The general difference is that USD funds tend to have a broader focus, such as pan-Asia investing or all industries within China, while RMB funds might invest in one specific industry or strategy.

Traditionally, domestic firms did ~1/3 of all deal volume in China, but this has ticked up over time as international firms have become more cautious.

Some of the top firms, both international and domestic, include Blackstone, Boyu Capital, BPEA EQT (formerly Baring Asia), Carlyle, CDH Investments (formerly CICC PE), CITIC Capital, FountainVest, General Atlantic, GLP China, Hillhouse, Hony Capital, Hopu, KKR, Qiming Ventures, Sequoia, TPG, Vivo Capital, and Warburg Pincus.

You could add a few other names to this list, such as Xiaomi (its PE arm), Huaxing, and BA Capital for RMB funds, and Macquarie and Bain in the USD funds.

If you extend the list to venture capital groups, the VC arms of Tencent and Alibaba will appear, as will dedicated firms like DCM and DST.

The international firms in China have not been performing particularly well because the government wants to encourage domestic investment and help Chinese people, rather than foreigners, make money.

Domestic firms usually have better connections and are heavily involved in politics with the Chinese Communist Party at all levels, which gives them a big advantage in executing deals.

Carlyle may be the one international firm that’s an exception to this trend, but I could not find performance data for its Asia/China funds, so I’m not sure if this is true.

Recruiting: How to Break into Private Equity in China

The most important qualities for getting into PE in China include the following:

1. Pedigree (University/MBA) – PE firms always value your university degree and whether you attended a target school, but it’s even more important in China because of the “cultural values” around education and exam-taking proficiency. Also, many people report that a Master’s degree is a prerequisite to win interviews at some firms.
2. Investment Banking Experience at Bulge Bracket or Top Domestic Banks – As with PE anywhere, you need a few years of IB experience to be competitive in most cases. Working at the bulge brackets or elite boutiques is better for international funds, while IB experience at the top Chinese banks (CICC, CITIC, Huatai, Haitong, etc.) is better for domestic funds.
3. Government/Political Connections – Connections always matter in finance recruiting, but they are far more important in China because the government can make arbitrary decisions with no warning (see: Jack Ma).
4. Communication Skills and Some Technical Knowledge – Since most PE firms do growth-oriented deals, financial modeling and technical skill are a bit less important than communication skills – as you’ll need these skills to source deals and meet local entrepreneurs.

I don’t think we even need to state this, but you must be a Chinese citizen with native language skills to have a good shot of getting into PE in China.

Occasionally, there are a few exceptions, such as at international funds with a “pan-Asia” focus.

Also, you can sometimes win roles in fundraising and investor relations as a foreigner if the firm targets overseas investors for its Limited Partners.

But you have almost no chance for front-office, deal-based investing roles, even if you speak/read/write the language perfectly.

The international mega-funds tend to use something closer to the on-cycle recruiting process in the U.S., with headhunters, structured interviews, modeling tests, and case studies.

Smaller/domestic funds tend to follow the off-cycle process, so recruiters will contact you randomly based on open positions.

Interviews and case studies will be more open-ended, and since most of these firms focus on growth and VC-type deals, expect to pitch a market, industry, or specific company as part of the process.

One final difference is that the domestic and RMB-denominated funds may ask about your knowledge of China-specific rules and regulations, such as those in Chinese Company and Securities Law.

Target Schools for Private Equity in China

Degrees from the top target schools in the U.S. and U.K. are all highly regarded in China, so you can’t go wrong with any of them.

Ideally, you studied up through high school in China and then completed your university education at one of these institutions.

But you don’t necessarily “need” to attend a top U.S. or U.K. school because there are well-regarded, highly-ranked schools in China, such as Tsinghua University, Peking University, and Fudan University.

How to Network Your Way In

Unfortunately, most of the advice on this site about investment banking networking doesn’t work in China due to the many cultural differences.

As one small example, it’s less acceptable to cold email people – even HR staff or administrators – without going through the proper “channels” first.

Also, the standard process of conducting informational interviews to pitch yourself and learn more about firms is much less common.

These strategies may work if you find someone who worked overseas, moved back to China, and is familiar with the business culture elsewhere.

But if you’re targeting domestic PE firms, don’t hold your breath because you won’t find too many of these people.

Many professionals in private equity break in through personal and family connections.

“Family events,” such as birthday parties, graduations, picnics, etc., are typically the best way to get to know people and expand your network.

Other options include events such as the AVCJ conference in Hong Kong and the SuperReturn China Conference; these tend to be better if you have an international background.

Finally, private equity headhunters offer another route into the industry, but more so if you’re targeting the PE mega-funds or pan-Asia funds.

These firms tend to hire investment banking Analysts each year from abroad and prefer Chinese citizens who studied and worked in the U.S. or U.K. for a few years.

Private Equity in China: Salaries, Bonuses, and Carried Interest

Salaries and bonuses are significantly lower than in the U.S., but the discount is higher at domestic firms than international ones.

The source for this information is Robert Half’s China PE salary survey, which includes only the base salaries – no bonuses.

All the figures are in RMB, and, unfortunately, it does not separate compensation at domestic vs. international firms.

If we take the numbers in the Robert Half report and assume that bonuses are 75% of base salaries, the 25^th – 75^th percentile ranges for total compensation look like this:

• Analyst: $70K – $125K USD
• Associate: $90K – $175K USD
• Vice President: $140K – $280K USD
• Director: $230K – $420K USD
• Managing Director: $280K – $840K USD

Overall, you should expect a 25-50% discount to U.S. compensation at domestic firms (with the international firms paying closer to global standards).

China is still cheaper than major U.S. cities, but it’s not that much cheaper, and rent can be quite high in places like Beijing and Shanghai.

Also, you don’t have nearly the same tax advantage you’d get in Hong Kong; the effective rate is in the 30-40% range, like the U.S.

Some of the major PE firms offer carried interest, but this becomes more of a factor when you reach the senior levels.

Carry is far less standardized than in other markets, and you’ll see everything from the Founding Partners taking all the carry to MDs clawing it back from juniors who leave.

If your firm performs well and you stay for 10+ years and you survive all political issues at work, carried interest can potentially multiply your compensation at the senior levels.

But don’t hold your breath because most people switch firms or leave the industry before reaching the Director level.

Careers and Lifestyle

The “on the job” part of private equity in China isn’t that much different, but note the following:

• Domestic vs. International: You’ll close more deals at domestic firms, but you’ll also get less structured training and lower compensation. International firms offer a better brand, training, and pay, but you have a lower chance of closing deals.
• Hours/Work Ethic: Expect 12-14-hour days at many firms with less time off on weekends and fewer holidays. It is a “sweatshop” culture, which is common in China even outside the finance industry.
• Hierarchy: Domestic Chinese firms are very hierarchical, so key decisions get made at the top and then passed down to everyone else. As a result, mid-level managers are not always held accountable, and people can get away with underperformance… if they have the right connections.
• Government Relationships: Expect to deal with local CCP officials on everything from land leasing agreements to tax credits.
• On-Site Work: More so than in developed countries, you’ll often travel to portfolio companies or prospective portfolio companies because verification is very important in China. You can’t necessarily trust documents at face value, and there are issues with multiple versions of “the books” and other key data. You’ll often evaluate deals based on the people before even looking at a CIM.
• Deal Structures: Because of these trust/verification issues, many PE deals have “ratchet” or valuation adjustment mechanisms where the company grants the PE firm more shares if it fails to meet a financial target.

That said, there are some positives of the culture and lifestyle.

For one thing, it’s easy to visit other places in Asia since it’s just a few hours to Seoul, Hong Kong, Tokyo, or Manila.

It’s a great place for short trips if you have the occasional weekend off.

Also, working in private equity in China is a great way to expand your network since you’ll meet all sorts of entrepreneurs, executives, and other investors.

It’s much more of a “Wild West” environment than the U.S. or U.K., so people often leverage the experience to move into very different jobs based on the connections they’ve made.

Private Equity in China: Exit Opportunities

On that note, the exit opportunities are similar to private equity exit opportunities anywhere else: an MBA, a different PE/growth equity/venture capital firm, credit firms, hedge funds, family offices, portfolio companies, start a company, etc.

The main differences include:

1. Prevalent Industries – Some of these firms, such as hedge funds, are far less common in mainland China. You’ll have better luck aiming for HF roles if you go to Hong Kong.
2. Skill Transferability – Since most PE firms operate more like growth equity or VC firms, you might have trouble moving to one that does traditional leveraged buyouts.
3. Leaving Hotel California China – Recruiters in other regions will tend to discount your experience, so if all your work has been in mainland China, don’t expect to leave and find an equivalent job in the U.S. or U.K.

Finally, some finance professionals in China also leave and join the Securities Regulatory Commission (the equivalent of the SEC) and even take a pay cut to do so – since this can lead to very powerful positions in the government.

These roles may not pay much “on paper,” but if you leverage your role properly, you could still become wealthy (use your imagination).

Private Equity in China: Final Thoughts

So, if you’re a plausible candidate for private equity roles in China, should you recruit for them?

Is there a reason to turn down opportunities in the U.S. or Europe and work in China instead?

My answer would be “no” – but with a few exceptions and caveats.

The basic problem is that you’ll usually earn less in China while still working the same amount (or more), and you’ll get more limited deal experience that doesn’t translate well to other regions.

And if you’re not a Chinese citizen, it’s not even worth considering these roles in most cases.

Back in 2000 or 2005, some foreigners got into the industry and rode the wave to great success – but 20+ years later, this no longer happens.

That said, private equity in China could still make sense if you have the right background, want to live in the country long-term, and can leverage the experience into something else.

For example, it might be a good career move if you use it to win a high-level government role, start your own company, or launch your own PE fund.

And if you have great connections with CCP party officials, even better.

Just make sure you keep a close eye on both your kidneys before diving into the recruiting process.

The post Private Equity in China: The Worst of Both Worlds? appeared first on Mergers & Inquisitions.

This week, though, I am posting a public service announcement.

Please stop using ChatGPT for email – or learn to use it correctly so you don’t write horrible emails that sink your career.

Over the past few months, I’ve seen an uptick in AI-generated messages from students, customers, suppliers, and random people asking me for favors on LinkedIn.

In ~99% of cases, I can tell within 1 second that these messages are AI-generated because tools like ChatGPT add useless words and awkward phrases that no human would ever use.

The tone is also completely inappropriate and sometimes borders on comical.

If you send these emails to bankers in your networking/recruiting efforts, they will notice, and your chances of winning interviews and job offers will decrease.

Also, if you send short emails – which you should in any networking effort – these AI tools are pointless because they barely save you time.

I will make a few recommendations here, but I’ll start with the fun part and show you some examples of clearly AI-generated messages:

ChatGPT for Email: Horrible Examples

I’ve deleted names and email addresses from these examples for privacy.

And to ensure I wasn’t going insane, I plugged each message into Copyleaks (the most accurate free detection tool) to verify that it was AI-generated.

Example #1: How to Write 1 Page When 2 Sentences Would Do

Here’s a long email from a student that is obviously AI-generated.

In case you cannot bear to read it to the end, I’ve summarized his question below:

His Question: “Can I purchase just Module 1 of your Real Estate course?”

This one baffles me because it probably took several sentences to prompt ChatGPT to write this message, given its details.

In the time it took to enter these prompts and tweak the message, he could have written a 2-sentence email to ask the same question:

“I’ve found your courses helpful. Is it possible to sign up for just Module 1 of the Real Estate course or to upgrade to the course at a lower price since I already have courses X and Y?”

Example #2: An Email Even with More Fluff Than the Average Cat

This one isn’t quite as bad, but it’s still clearly AI-generated:

Again, this person could have asked the same question in 2 sentences:

“Thanks for sending me the quick reference guides. I have an upcoming technical/modeling-based interview at the same real estate firm, and I wanted to know if you had any suggestions on the case studies I should complete to prepare for this.”

Example #3: The Student Who Requires “Assistance” from the Teacher

This one is short but also the worst example because of the tone.

If a professor, MD, or client got this type of message, they would reconsider their relationship with you:

Not only is this too wordy, but the last paragraph is nonsensical.

Have you, as a human, ever written “aligns with your query”?

Oh, and why would a student ask if the teacher needs “further assistance”?

Again, you could ask this same question in 2 sentences:

“Quick question – with the financing fees, you’re not factoring in the refinanced debt if the acquirer repays and replaces the target’s debt. Do you need to do that, or is it a simplification in this version of the model?”

What’s Wrong with ChatGPT for Email?

I’d sum up the main issues as follows:

1. Overly Verbose – These AI tools add way too many useless words to messages, and they use awkward, robotic phrases.
2. Tone/Style – The tone in these messages is inappropriate. If you already know someone, you communicate one way, but if you don’t, you say things differently. You also communicate differently with co-workers vs. clients vs. bosses.

ChatGPT for Email: What Should You Do Instead?

I do understand why you might want to use AI tools for emails.

Maybe English is not your first language, or you’re writing in another language you’re not 100% comfortable with.

Or maybe you feel intimidated by any writing, and a blank screen is the equivalent of Thanos.

But the problem is that most AI tools are bad at writing.

It goes back to what I stated in my article about ChatGPT and investment banking in January: it’s good for summarizing code/documents and can sometimes help with writing code.

If you use AI to generate code or write a formula, it just needs to work correctly.

The “style” and length don’t matter because clients will not see your code or formulas; they just need the correct output.

But as soon as you use AI to communicate with a real human, you’re gambling that it will use the correct words, length, and tone.

Here’s what I recommend instead:

1. Short Messages – Do not bother with these tools if you can ask a question in 1-2 sentences. They’ll cost you time because you’ll need to refine your prompts until you get a shorter message.
2. Longer Messages – If you need help with longer messages or documents, please take the time to learn how to use AI tools properly. You can find online guides, but you need to get comfortable with prompting them, reviewing their output, asking them to fix it, and continuing until you get what you want.
3. Get Better References and Help from Friends – If you’re unsure about an important email you just wrote, ask a native speaker friend to review it. If you don’t have time for this, find some good templates (see our cold email templates and informational interview templates) and learn how to modify them to fit your needs.
4. Always Personalize Your Networking Emails – Even before ChatGPT, plenty of students copied and pasted the same message in hundreds of emails. This is a terrible idea that will yield almost no responses. You need to spend at least 15 minutes reviewing the person’s background on LinkedIn to customize your message.
5. Improve Your Communication Skills – Finally, if you want to advance in industries like investment banking and private equity, you must improve your communication skills.

These industries are built on personal relationships.

No AI tool will ever let a banker skip 10 years of relationship-building and win a pitch just because their second sentence was strong.

If you have no interest in improving your communication skills or building relationships with clients and executives, you should rethink your career goals.

Quant finance, prop trading, or certain types of hedge funds might be a better fit for you.

ChatGPT for Email: What Next?

Networking channels such as LinkedIn and email may become less effective because of the flood of “content” generated by these AI tools.

The phone, Zoom, and in-person meetings and sessions could become more important as the only way to “prove” that you are human.

I also predict that bankers will become increasingly hostile toward AI-generated emails.

They already get flooded with terrible emails written by students who don’t know what they’re doing, and now they’re getting flooded with even more terrible emails.

And these AI-generated ones are even worse because they’re longer and full of useless words.

But if you can learn to communicate effectively and write specific, personalized messages that show you’re a real human, these developments might be good news for you.

After all, if a banker gets an average of 99 terrible emails per week, you can stand out quite easily by sending one non-terrible message.

And if you don’t want to learn how to write simple, personalized emails, please ask ChatGPT to limit your messages to 1-2 sentences the next time you use it.

Additional Reading

You might be interested in Will ChatGPT and AI Kill the Investment Banking Industry and Other “Knowledge Worker” Jobs?.

The post Public Service Announcement: Please Stop Using ChatGPT for Email appeared first on Mergers & Inquisitions.

But over the years, they morphed into a well-known topic and then a commonly derided topic – as many people argue that search fund experience is worthless, while others claim it’s “just as good” as working in banking or private equity.

As usual, the truth is somewhere in between.

A search fund internship is not as “good” as a true IB or PE internship but is far more relevant than many other internships.

It’s helpful primarily for early university students, while it’s far less useful for career changers or anyone with significant work experience.

Search fund internships are often easier and less competitive to win, and even if you have a bad experience, you can still spin it into sounding relevant.

But these internships are often unpaid, you might end up doing menial work, and you must do a fair bit of networking to line them up, so they have significant downsides.

Before delving into the details, I want to start by explaining the industry:

What is a Search Fund?

You can think of a search fund as a private equity firm meets a SPAC, minus the celebrity sponsor who’s there to swindle retail investors.

Like a PE firm, a search fund raises capital from outside investors and aims to multiply that capital by investing it – but like a SPAC, it makes only one acquisition.

Its “portfolio” consists of that single company, assuming it finds and acquires one.

Search funds target much smaller companies than PE firms, with average EBITDAs in the low millions USD, and they require far less experience to launch.

Many search fund founders are relatively young (35-40 or less) and come from banking, consulting, or general management backgrounds; many also have MBAs.

Search funds often raise some initial capital to find potential deals, and they do a second, larger raise once they’ve decided on a company and submitted a Letter of Intent (LOI) to acquire it.

This strategy allow risk-averse banker-MBA-grinder types to “operate” a company without taking the risk of starting the company.

OK, So Where Does the Search Fund Internship Come into Play?

Search fund founders need interns for countless tasks: filtering/screening companies, conducting due diligence, reviewing company documents, and, once the deal closes, reviewing the company’s financial performance.

Because search funds raise little capital to acquire these small businesses, most search fund internships are unpaid.

Some search funds hire only undergrads, some focus on MBAs, and some do a mix of both; they might offer summer or off-cycle internships during the school year.

Often, these internships require 15-20 hours of work per week, so don’t expect to juggle them with an intense class schedule or other large commitments.

Why Do a Search Fund Internship?

There are two main reasons to do a search fund internship:

1. As an undergraduate, it gives you highly relevant experience that will be useful when you apply for investment banking internships. And you need early experience to get internships that convert into full-time offers at large banks.
2. At the MBA / experienced level, it helps if you want to start your own search fund later.

Search fund internships tend to be less selective than IB/PE internships, and they might compensate for a lack of work experience, a low GPA, or a non-target school.

What is the Search Fund Experience Like?

As with most IB and PE internships, you’re unlikely to get much “real work” at a search fund.

In other words, don’t go in expecting to run deals, do complex analysis, or make major hiring/firing decisions for an acquired company.

That said, your work may span a wide range of tasks, including:

• Finding companies via online searches and “outreach” (cold emails and cold calls).
• Reading CIMs and other marketing materials to evaluate companies.
• Helping with the deal process, such as getting NDAs signed, requesting data, and finding potential red flags in target companies.
• Researching industries and finding sectors that might match your fund’s areas of interest.

Try to avoid search fund internships that are 100% cold calling or cold emailing because these are boring and do not give you many transferable skills.

If you do end up in an internship like this, there are ways to spin the experience (see below), but you’ll have better luck if you avoid it in the first place.

How to Find a Search Fund Internship

Before you look for any search fund internship, you should review your LinkedIn profile and ensure it’s polished since you’ll be repurposing it.

Once you have your LinkedIn profile set up reasonably well, you should create a profile on searchfunder.com based on a shortened version of your LinkedIn.

You can look at job postings there, make a short post introducing yourself and explaining your internship search, and cold email people who post positions at their search funds.

As with all cold emailing strategies, you should be as direct as possible, which means “Attach your resume and put ‘Unpaid internship’ in the subject of your email.”

You can take the templates in our cold emailing article and tweak them for the specific search fund(s) you apply to.

Besides searchfunder.com, another good source is searchfunds.net, a PE firm that invests in search funds.

You can find plenty of current funds there on the “Current Searchers” page.

You can also find search funds via LinkedIn and Google searches, but dedicated search fund sites tend to produce better results.

Before sending a message, you should take at least 10-15 minutes to research each person and their fund so you can explain why you’re interested in them.

The Interview Process for a Search Fund Internship

You are unlikely to get traditional “technical questions” unless you’ve marketed yourself as having financial modeling experience.

Instead, most search fund founders will ask how you’d look for and evaluate companies and how you could save them time and money.

These questions are straightforward if you know how internships and deals work, but if you’re confused, look at our coverage of investment banking internships and the private equity case study for an example of how to screen for companies.

In most search fund interviews, asking the interviewer the right questions is more important than answering questions yourself.

Their answers can tell you whether the fund will offer a good experience and where it ranks among other options you’re considering.

Good questions to ask include:

• Are you an independent sponsor or fully funded? –> This will affect the acquisition size and the relationship between the outside investors and the operator. An “independent sponsor” can start operating more quickly but might fail to close a deal because it raises capital specifically for that deal.
• What specific target companies are you seeking, beyond the high-level criteria on your website or marketing materials? –> You can use this to determine whether the fund is likely to go anywhere, i.e., if it has realistic targets.
• What will my role be, and how many other interns are you hiring? –> You can use this question to tell how much “real work” there will be. Your chances of doing substantial work increase if you’re the only intern.
• Do you plan to use business brokers or investment bankers in your search process? –> If the answer is “yes,” you have a higher chance of getting to evaluate documents like the Confidential Information Memorandum (CIM), which is relevant when applying to IB roles later.

You don’t need favorable answers to all these questions, but more positive answers mean the internship is more likely to be useful.

How to Spin a Search Fund Internship into Sounding Useful

If your internship devolves into endless cold calls or cold emails, I recommend doing work outside the job or during your downtime to make the experience look more useful on your resume.

For example, you could take one of the companies you found in the screening process and build a simple 3-statement model and DCF model for it.

You could then list this work on your resume as part of the “deal process” you went through for this one potential acquisition target.

If you don’t have the company’s financials, find a public company in the same industry, and scale down its numbers to “simulate” what this private company might look like.

There are limits to this strategy – no one will believe that you modeled 15 different deals – but it’s fine to do it for 1-2 companies if the internship lasts a few months.

Should You Complete a Search Fund Internship?

The usefulness of a search fund internship depends heavily on your age and experience level, but I’d summarize it like this:

• If you are in Year 1 or 2 of university and need experience, YES, a search fund internship is worth it.
• A search fund internship is usually better during the school year than the summer unless you need to earn money from another part-time job (see below).
• If you have already graduated or have at least 1-2 related internships, a search fund internship is much less useful, especially if it’s unpaid.
• At the MBA level, it’s useful mostly if you want to launch your own search fund after finishing the degree. It might also work as a pre-MBA internship, but you still must win a traditional IB summer internship during your program if you want to pursue IB full-time.

University students sometimes dislike search fund internships because:

1. They are often unpaid, so completing one is an option only if you have another job, family money, or savings from previous internships/jobs.
2. They might require 15-20 hours per week during the school year, which could be tough with a difficult class schedule or other commitments such as sports.
3. The work is often boring or repetitive.

On the first point, you can’t do much if you need the money and cannot afford an unpaid internship.

In this case, the best option is to ask to complete the internship during the summer so you can work another part-time job to make money.

With the issue of time, I always recommend arranging your class schedule to finish the easy classes early in university.

Doing this not only boosts your GPA in the years when it’s most important, but it also gives you more time for internships and leadership roles.

Finally, with the repetitive/mundane work: to be blunt, you have to accept this to some extent with your first few internships.

You can try to find a search fund that offers more interesting work, but if not, think of it like hazing when joining a fraternity or sorority.

Over time, search funds have become much better known, and some people argue that bankers don’t take these internships seriously anymore.

There is some truth to this – bankers are more likely to dig into your experience if they see a “search fund” rather than a traditional bank, PE firm, or Big 4 firm on your resume.

But this claim misses the point: you do a search fund internship to leverage it into better internships in the future.

If you have no work experience, a search fund is much better than listing only student groups or activities on your resume.

And if you want to do investment banking, private equity, corporate development, or even venture capital or hedge funds, it’s a better experience than anything outside a direct internship in one of these fields.

References and How to Learn More About Search Funds

If you want to learn more about the field, I recommend:

• The Stanford (GSB) Search Fund Site – See the primer and recent studies.
• The IESE Search Fund Site – See the recent reports and conferences.

We’ve covered search fund jobs in a previous article but will expand that one and add more coverage in the future.

The post The Search Fund Internship: Perfect Pathway into Investment Banking and Private Equity Roles? appeared first on Mergers & Inquisitions.

“How can a hedge fund hold only long positions? Doesn’t that contradict the term ‘hedge fund’? Why would investors pay high fees for what is effectively a mutual fund?”

These are all good questions.

The short answer is that there is no “formal” requirement for the strategies a hedge fund must use.

A hedge fund is defined by its structure: the split between Limited Partners (LPs) and General Partners (GPs) and the fees paid to each group.

Most hedge funds use leverage, short-selling, derivatives, and other strategies to manage their risk, but some non-hedge funds also use them.

If you’re interested in long-only hedge funds, you should ask a different set of questions:

1. Do these long-only funds offer any advantages over strategies like long/short equity?
2. And if you are interested in this strategy, should you even target hedge funds, or would a long-only asset management firm be better?

I’ll answer both questions here, but I want to start with a few definitions:

What is a Long-Only Hedge Fund?

Long-Only Hedge Fund Definition: A long-only hedge fund buys securities to earn a profit when they increase in price, and it does not bet against securities by borrowing to sell them in advance; the fund might invest in stocks, bonds, derivatives, structured products, and almost anything else.

Long-only hedge funds come in four main variations:

1. “Best Of” Lists from a Long/Short Strategy – For example, a hedge fund might produce 10 – 20 long/short ideas and then pick the top few “long” ideas for a long-only fund.
2. Long-Only with Derivatives to Hedge Risk – For example, a fund might only buy stocks, but it could use put options or other derivatives to hedge its risk and justify the fees.
3. “Long Bias” – Some hedge funds mostly buy stocks but maintain a few short positions to hedge their risk and justify the fees. Technically, these funds are not “long only,” but many data sources group them together.
4. Non-Equity Funds – Finally, it is difficult to “short” certain securities effectively, such as distressed debt and many types of credit (especially structured products). So, many distressed funds that pursue control strategies are “long-only” even if they market themselves as “distressed” or “deep value.”

This last category is the most common way hedge funds qualify as long-only.

Theoretically, an equity fund could be long-only and manage its risk by buying stocks that are negatively correlated with the market.

But this is extremely difficult because very few sizable companies have negative Betas – and when they do, it’s usually due to an anomaly or special situation.

So, in practice, many long-only equity funds outperform the market in good years and underperform in bad years.

What Makes Long-Only Hedge Funds Different?

I’ll use my favorite data set here to summarize the key differences:

Equity funds generally use moderate leverage, have moderate liquidity, and have a moderate time horizon (several months up to 1 year).

But if you consider long-only or “long-biased” funds, the liquidity and Beta are often higher:

A fund that holds only stocks can easily sell them, and the lack of short positions makes it easier to unwind trades.

Also, many long-biased funds tend to have more concentrated portfolios since they often aim to become one of the top shareholders in each company.

Long-Only Hedge Funds vs. Long/Short Equity Hedge Funds vs. Long-Only Asset Management

With the definitions out of the way, let’s return to the more interesting questions:

1. What are the advantages and disadvantages of joining a long-only hedge fund rather than a traditional long/short equity (or other) hedge fund?
2. And if you are interested in long-only investing, should you target asset management firms instead?

If you compare long-only hedge funds to traditional long/short equity funds, the main differences are:

1. Recruiting/Numbers – There are far more long/short equity funds than long-only or long-biased funds, so you’ll have an easier time finding jobs. Turnover is also high, especially at the large multi-managers.
2. Investment Style – Long/short strategies depend more on timing and getting individual quarters and events right, while long-only strategies often use longer holding periods and require deeper dives into companies.
3. Products and Strategies – Certain strategies, such as “control”-based distressed investing and activist investing, mostly work on the long side. So, if you want to pursue one of these, it might have to be at a long-only fund.
4. Skill Transferability – Moving from long/short to long-only is easier than doing the reverse because shorting requires a different skill set and more of a “trader’s mindset.”

Compensation doesn’t vary much and depends mostly on the fund size, performance, and structure (single-manager vs. multi-manager).

More differences emerge when you compare long-only hedge funds to long-only asset management:

Investment Analysis and Financial Modeling

You complete similar analyses and financial models at any “fundamental” firm (long/short equity, long-only, activist, event-driven, etc.).

Think: a deep review of companies’ financial statements, 3-statement models, and DCF-based valuations.

The difference is that hedge funds have far more latitude in what they buy and sell, how long they hold positions, and much work they do for each position.

For example, a long-only hedge fund might do a deep dive into one company, acquire a 10% stake, and hold it for 5 years.

Or it might see a company that’s about to have a good quarter, acquire a ~1% stake, get a 20% bump when it reports positive results, and then sell the stake in 2 months.

This second trade would be much less likely at a long-only asset management firm.

These firms often plan to hold stocks for 3 – 5 years, and they often acquire much bigger stakes than hedge funds, which makes selling more difficult.

The hurdles to buy and sell are higher, so you spend more time researching each company, and there’s less portfolio turnover.

Compensation and Work-Life Balance

You will almost always earn less and work less at a long-only asset management firm than at any type of hedge fund.

This is mostly due to the higher fees that hedge funds charge and because the investment strategies depend more on specific catalysts.

You might think you’ll have a more relaxing lifestyle if you work at a distressed hedge fund that’s “long only” and has multi-year holding periods…

…but this is not really the case because anything distressed is incredibly sensitive to catalysts.

So, you must pay close attention to the markets, earnings, and any events that potentially impact the company’s debt covenants.

By contrast, these factors are much less important at a long-only asset management firm because you’re holding stocks for multiple years, not thinly traded bonds whose value might suddenly fall by 50%.

A single quarterly result might change the stock price, but it probably won’t change the 5-year profile by a whole lot.

To give specific numbers, at many long-only AM firms, total compensation for Year 1 “Research Associates” is around $150K USD, with some firms paying a bit lower ($120 – $130K range).

At many hedge funds, the entry-level pay is more like $200K – $300K or more, depending on fund size and performance.

These numbers increase at the MBA level (see the mutual funds vs. hedge funds article), but hedge funds still pay a significant premium.

The senior people at long-only asset management firms can still earn in the high-six-figure-to-low-seven-figure range, but they’re unlikely to go far beyond that.

At hedge funds, though, the sky is the limit if you reach a senior position and perform well.

In terms of work-life balance, the average workweek in long-only AM is ~50 hours, while it’s closer to 60-70 hours at many hedge funds.

Recruiting and Interviews

At both long/short equity and long-only hedge funds, most recruits come from equity research or investment banking backgrounds.

You need financial statement analysis and valuation skills for these roles, and ER and IB provide the most direct paths.

At long-only funds focused on certain credit strategies, people also join from areas like direct lending or distressed debt, restructuring, or turnaround groups.

Equity research and investment banking backgrounds are still common in long-only asset management, but you’ll see more variations.

For example, some consultants get into AM via MBA programs, and some firms like to make “industry hires” in areas like healthcare (e.g., hiring MDs to analyze biotech companies).

Some people also join from buy-side research, other asset management firms, and hedge funds.

The main difference is that there are many fewer spots at these firms (dozens vs. hundreds) because the turnover is lower, and there’s less of a structured “path.”

Interviews are similar in both: you need several high-quality stock pitches, and you can expect many questions about the markets and how you think about investment ideas.

The main difference is that long-only asset management firms test you on broader but shallower knowledge.

They might ask less detailed accounting/valuation questions, but they could go outside finance and ask you about economics, trade policy, or regulation.

Exit Opportunities

People often say moving from a hedge fund to an asset management firm is easier than doing the reverse because AM is perceived as a bit “sleepy” (i.e., lower intensity).

There is some truth to this, but once you gain a few years of experience in either hedge funds or asset management, you tend to stay there.

Jumping between them is trickier than you might think because they tend to attract candidates with different skill sets and career goals.

If I had to “rank” each firm type by exit opportunity breadth, it would look something like this:

1. Long/Short Equity – You have the most potential exits here since you’ll have experience on both the long and short side, and most hedge fund strategies outside of global macro relate to equity in some way.
2. Long-Only Hedge Funds – You won’t have as many opportunities at other hedge funds since you get no exposure to shorts. But it may be easier to move to a long-only asset management role since the skill sets overlap so much.
3. Long-Only Asset Management – Finally, you have the fewest exit opportunities here because the strategies and skill sets differ from most hedge funds and even from equity research at banks. But you can still move to other AM firms or consider “corporate” roles at normal companies.

You do not have a good shot at exit opportunities such as private equity, investment banking, venture capital, or corporate development because they all require deal experience.

If you want to go into one of these, your best bet is to gain deal experience before you join any hedge fund or asset management firm.

The Top Long-Only Hedge Funds and Asset Management Firms

There aren’t that many long-only hedge funds, but the best-known one is probably Baupost Group, led by legendary investor Seth Klarman.

Other names include Abrams (long-biased and more than equity), BloombergSen, Brave Warrior, ESL (Edward Lampert), Falcon Point (also uses long/short and high-yield strategies), and Lansdowne and Egerton in the U.K. (both also do long/short equity).

You can add more names if you also count long-only credit funds, “control”-based distressed hedge funds, and activist funds, but we have (or will have) separate articles for these.

On the long-only asset management side, the biggest firms are your best bet because most do structured recruiting at the MBA and undergraduate levels.

So, on the equities side, consider names like Fidelity, BlackRock, T. Rowe Price, and Wellington (Vanguard does little active management, so it’s not on this list).

In credit, PIMCO is the giant, but other notable firms include DoubleLine, TCW, Nuveen, and PGIM.

Final Thoughts on Long-Only Hedge Funds

Outside of a few areas (credit, distressed, and activist strategies), there just aren’t that many long-only hedge funds.

So, if you’re thinking about this topic, you should probably reframe your questions:

1. Is there any reason to target long-only hedge funds rather than long/short equity or other strategies? Probably not – unless you’re interested in an inherently long-only strategy. Otherwise, recruiting will be more difficult because you won’t be able to find these firms easily.
2. Should you join a long-only asset management firm rather than a long-only or long/short hedge fund? – It could make sense if you’re fine with lower compensation, more difficult recruiting, and a murkier career path in exchange for reduced hours/stress and a longer-term investment style.

If you have a clear preference and job offers from comparable firms, this question should be an easy decision.

It gets trickier if you have offers from very different firms.

For example, let’s say you have two offers: one from a $5 billion long-only asset management firm with a solid 15-year track record and one from a $200 million long/short equity hedge fund that has only been around for 2 years.

I would recommend the long-only AM offer because you’ll almost certainly get a better experience there, even if your initial compensation is lower.

Plus, the firm is more likely to keep operating for the long term, whereas the failure rate among small hedge funds is quite high.

As with the investment banking vs. private equity debate, many of these questions depend on the specific firms involved.

It’s almost always better to start at a brand-name firm, even if you want to switch industries later or even if it means lower entry-level compensation.

If these firms were closer in size and history (e.g., $3 vs. $5 billion and 10 years vs. 15 years), it would come down to your lifestyle/investing/career preferences.

Once you know those, you can resolve this contradiction – or find that nice middle ground.

The post Long-Only Hedge Funds: A Cozy Career, or a Complete Contradiction? appeared first on Mergers & Inquisitions.

There’s plenty of information online about case studies in finance interviews (IB, PE, etc.), but the venture capital case study remains a bit mysterious.

Depending on your source, a VC case study might consist of a “cap table” exercise where you calculate the company’s ownership over many investment rounds and the proceeds to each group upon exit…

…but it could also be a qualitative discussion of a market, an evaluation of a specific startup, or even a simple 3-statement model.

But if you’re interviewing at an early-stage VC fund (i.e., Seed and Series A investments), the most common type is the “Evaluate a startup and recommend investing or not investing” one.

The VC firm might give you a short investment memo or slide deck for the company, ask you to read it, and then say “yes” or “no” based on your analysis and interpretation.

We’ll go through a short example for a fictional startup called PitchBookGPT, which comes directly from our new Venture Capital & Growth Equity Modeling course.

This is a summary version, but it should be enough to give you some practice:

The Video Tutorial and the Files

If you prefer to watch or listen to this tutorial, you can get the 14-minute video walkthrough below:

If you prefer to read, you can continue with this article.

You can get the files, including the company’s pitch deck, here:

• PitchBookGPT – Seed Round Pitch Deck (PDF)
• Venture Capital Case Study Prompt (PDF)
• Venture Capital Case Study Solutions and Investment Recommendation (PDF)
• Case Study Walkthrough and Explanation – Slides (PDF)
• SaaS Valuation Multiples and Historical Data (PDF)

Video Table of Contents:

• 0:00: Introduction
• 1:58: Part 1: What to Expect in VC Case Studies
• 3:10: Part 2: What Do VCs Want in Early-Stage Investments?
• 4:51: Part 3: “The Numbers” for PitchBookGPT
• 8:16: Part 4: The Market, Product, and Team
• 11:45: Part 5: Recommendation and Counter-Factual
• 13:04: Recap and Summary

This Venture Capital Case Study Example: PitchBookGPT

In short, this startup is riding the AI hype train and plans to offer a subscription service that will automate parts of the pitch book creation process at investment banks.

It won’t replace Analysts or Associates because it can’t create entire presentations with all the correct details.

But it speeds up the process by generating slide templates based on your queries, presentation data, and free examples on the sec.gov site.

For example, if you type in “SPAC vs. IPO” or “Market overview slide with monetary and fiscal factors,” the software will generate sample slide images, and you can click the one you want to get an editable PowerPoint version:

The “artificial intelligence” part comes in because simple keyword searches do not work well when searching for specific slides; a slide’s purpose often differs from its text.

Also, machine learning could work well for a problem such as converting slide images into editable PowerPoint templates.

This is much trickier than it sounds for moderately complex slides, and a rules-based system is less efficient than using huge data sets for the image-to-slide translation.

This startup claims that its service can boost Analyst productivity by 30% and generate millions in extra fees for the average bank, and it plans to sell it to boutique banks for $2,000 per month.

They want a $2 million seed investment at a $20 million post-money valuation, meaning that we (the VCs) will own 10% if we invest.

So, should we do the deal?

What Do Venture Capitalists Look for in an Early-Stage Investment?

To answer this question, you need to think about what early-stage VCs look for in deals.

Most early-stage companies do not have revenue, but they do have markets and teams.

Since early-stage investing is so risky, VCs seek opportunities with the potential for very high cash-on-cash multiples, such as 10x in Series A rounds or 100x in Seed rounds.

To be clear, these are the targeted multiples.

Most startups fail, and even the ones that succeed do not come close to a 100x multiple in most cases.

Since this failure rate is so high, early-stage VCs need to aim high by finding companies with the potential to serve huge markets.

Here’s a summary of the different stages:

Since the asking valuation is $20 million, we can reframe this case study as:

“Could this company potentially reach 100x that valuation, or $2 billion? If not, what about something like 10 – 20x, for a $200 – $400 million valuation?”

You can answer this question by doing some quick math and qualitatively evaluating the market, product, and team.

Venture Capital Case Study, Part 1: The Numbers

In its slide deck, this company claims that there are ~4,000 boutique banks worldwide with 1 – 20 employees and that these banks alone can support a $100 million market size (since 4,000 * $2,000 / month * 12 months = $96 million).

They plan to target these smaller and mid-sized banks because they’re easier to reach and they have fewer resources for pitch book creation.

But this company makes a common mistake with this claim: it assumes it will capture 100% of this market.

That never happens in real life, even in a narrow niche like this one – because there are competitors and many firms that don’t need the product.

In large markets (tens or hundreds of billions of dollars), capturing even a tiny percentage might be a good result.

In a narrower market like this one, something like 10 – 20% might be plausible if the company executes well.

That means a more realistic revenue estimate is $10 – $20 million.

Startup / SaaS Valuation

Subscription software companies are usually valued based on a multiple of annual recurring revenue (ARR), and this multiple is typically between 5x and 10x for public companies:

If we apply these multiples to the company’s revenue estimates, we get a valuation range of $50 million (5x * $10 million) to $200 million (10x * $20 million).

This is a great result for the company, but it’s far below what most seed-stage VCs want.

A $50 million exit value would be a 2.5x multiple, while a $200 million exit value would be a 10.0x multiple.

And these numbers represent the potential outcomes and assume that everything goes well.

Also, these numbers do not account for the dilution in future funding rounds.

This 10% ownership will likely fall to 7%, 5%, or even 3% as the startup raises money in the Series A, B, and C rounds, which means even lower returns multiples.

You might say, “OK, but couldn’t this company’s revenue go much higher? They should charge per user, not per firm, for this service.”

And that leads us to the next point about the qualitative evaluation of the market, product, and team.

Venture Capital Case Study, Part 2: The Market, Product, and Team

I wouldn’t say this company’s product is “terrible” – I’ve seen much worse startup ideas.

But it faces a “no man’s land problem” because the ideal customers differ from the reachable customers.

Boutique banks tend to be much more cost-conscious than large firms and don’t necessarily want to add a $2,000 monthly expense for multiple employees.

If a boutique bank needed this service for 5 Analysts, $2,000 per user per month would mean $120K per year, which is about the cost of hiring a full-time Analyst.

Many small banks would look at this and say, “OK, it speeds up presentations… but for that price, we could hire another Analyst and get client support, Excel work, and more.”

Also, small banks depend far less on long and detailed pitch books than large banks.

Most new deals come from longstanding relationships, not inbound inquiries or bake-offs / beauty pageants.

PitchBookGPT could target large banks (the bulge brackets) instead, as they are more willing to pay for training and productivity tools.

This service would be more useful for large firms because they tend to produce the 100+ slide pitch books where automation tools could save time.

However, it’s also much more difficult to close deals in this market, and compliance concerns mean these banks are less willing to share their data with external parties.

Could you imagine Goldman Sachs or Morgan Stanley uploading all their pitch books and slides to a VC-funded startup that may not even exist in a year?

Here’s my summary of the product/market fit problem:

Other Points in This Venture Capital Case Study

We don’t have time to analyze the team or the expected use of funds for this $2 million investment, but you would consider both in real life.

In short, they’re “fine but not amazing” – some of the budget numbers seem a bit too low (e.g., for the engineers), while others are on the high side (sales & marketing), but nothing seems completely crazy.

Similarly, the team (all fake names and bios) has relevant experience but looks a bit “junior,” so we’re neutral on them.

Our Final Decision

In short, we’d say no to this deal because we think a 100x multiple in any reasonable time frame – such as 5 or even 10 years – is implausible.

A 5 – 10x multiple might be feasible, but that’s not a great “stretch goal” for a seed-stage deal.

To reach a $1 – 2 billion valuation, the company would need hundreds of millions in annual revenue, and we don’t think that’s realistic for its business model and market.

The company could develop a different product or offer higher-end services to larger firms, but it doesn’t even have a “Version 1.0” yet, so that would be putting the cart before the horse.

You can view the full recommendation here.

What Would Change Our Mind?

If a few factors were different, we might be more inclined to recommend this deal:

1. Per-Seat Pricing – Maybe they can’t charge $2,000 / user / month, but even something like $1,000 / user / month could increase potential revenue at many firms.
2. Lower Asking Price – While a $2 million seed investment at a $20 million post-money valuation is not unheard of, it is aggressive. If the asking valuation were only $5 – 10 million, the deal math would be more feasible (maybe not for a 100x multiple, but something like 20 – 30x).
3. Higher-End Product – For example, banks might be willing to pay more if this product could replace employees rather than just boost their productivity. But that would require far more capital to develop and might require technology that doesn’t exist.

The Venture Capital Case Study: Final Thoughts

In short, unlike many startups, this PitchBookGPT idea isn’t necessarily “bad.”

There are proven markets for productivity tools, slide templates, and reference models in both PowerPoint and Excel.

But the problem is that this isn’t a great early-stage VC idea – at least not for the deal terms the company wants.

That’s not great news for this fictional company, but it is reassuring if you’re a junior banker worried about getting replaced by AI anytime soon.

It probably won’t happen – and in the near term, these new tools might even improve your life.

The post The Venture Capital Case Study: What to Expect and How to Survive appeared first on Mergers & Inquisitions.

“Investment banking league tables us healthcare [20XX]”

For faster results, use Image Search to scan the results and find relevant-looking tables.

Plenty of mainstream sites and services like the Financial Times, Wall Street Journal, Bloomberg, Refinitiv, and Merger Market publish these league tables in different formats each year.

This article is not about specific league tables but the motivation behind them and when they’re useful and not so useful.

These tables come up in online discussions/arguments about ranking the top investment banks, but people often take them too seriously.

League tables have their uses, but you should interpret them as marketing – mixed with some real-world data and support:

What Are Investment Banking League Tables?

Investment Banking League Tables Definition: IB league tables “rank” banks over specific periods based on their involvement in a certain industry, region, or deal type, such as M&A transactions or equity offerings.

Here are a few examples, which took approximately 1.6 seconds to find via Google Image Search:

Sources: Seeking Alpha | Australian Financial Review | Private Banker International

These “rankings” might be based on deal value (e.g., $50 billion in total announced deals), deal count (e.g., 50 transactions), or fees (e.g., $200 million in advisory fees)

League tables also exist for law firms to show their involvement in deals, but we’re focusing on IB league tables here.

Why Are Investment Banking League Tables Useful?

You might think that league tables are useful for answering questions such as:

• Which industry group or product group should you join? Industrials at DB or healthcare at MS? Aerospace & defense at Jefferies or restructuring at Houlihan Lokey?
• If you get multiple offers in different regions, which one should you accept? BofA in NY or GS in Chicago? JPM in London or MS in NY? Guggenheim in NY or Qatalyst in SF?

To some extent, league tables can answer these questions.

For example, if Bank A hasn’t made the top 10 in the past ~3 years, while Bank B has consistently been #1 or #2, Bank A likely has more deal flow in this region or industry.

That translates into a better experience as a junior banker and more deals you can discuss in future interviews.

But investment banking league tables are not designed for you, the job seeker.

League tables are primarily marketing tools for banks.

These tables exist so that banks can state in their pitch books: “Look! We’re #1 in Deal Type X or Region Y.”

To set up the data for these claims, IB Analysts often spend hours “cutting the data” to make their bank look better.

The usual approach is to start with league table data from external sources and figure out screening criteria to eliminate deals that don’t support the narrative.

Here are a few examples from an Inovalon pitch book by JPM:

These specific examples are reasonable since the screens are minimal: year and industry.

But you’ll also see plenty of contrived cuts with the criteria selected solely to make the bank look better:

• Healthcare M&A Deals Worth Between $400 Million and $1 Billion Over the 17 Months
• Industrial Equity Offerings Worth Between $100 Million and $500 Million with > 50% Domestic Institutional Buyers Over the Past 9 Months
• SPAC Deals Worth At Least $300 Million with A-List Celebrity Sponsors and Over 1,000 Retail Investors Who Lost Money

(OK, the last one is a joke, but I think you get the idea.)

Why Can’t You Take Investment Banking League Tables That Seriously?

For marketing purposes, the flaws are obvious: you can always cut deal lists a certain way to tell whatever story you want.

If you see a league table with a contrived screen like the ones above, you should take it even less seriously than the rest of the pitch book.

But the flaws may be less obvious with league tables produced by 3rd party services.

Here are just a few of the many problems:

Problem #1: Disagreements Over Deal Counts and Volumes

If you gather league table data from different sources, you can find cases with 20 – 30% discrepancies, which is enough to shift the rankings.

There’s a specific example of this issue in the AFR article linked to above.

This happens for various reasons, but most of it comes down to the search and “credit” processes.

For example, one service might rely on publicly announced deals with clearly stated deal sizes, while another might dig deeper or use bank-provided data.

And with large deals with multiple banks involved, the standards for “crediting” banks vary.

The easiest solution is to credit each bank equally, but this is problematic when the banks play very different roles (see below).

Canceled and heavily modified deals create even more issues with the deal count and volume stats.

Problem #2: Undisclosed or Ambiguous Deal Sizes

This one is especially an issue in restructuring because many deal sizes are undisclosed, and even when the information is public, the exact price may be ambiguous.

For example, if a bank advised a $1 billion Enterprise Value company on restructuring $600 million of Senior Notes, should the deal size be $600 million? $1 billion? $400 million?

If there was a debt-for-equity swap, should the deal size be based on the debt balance or the estimated value of the new equity?

Undisclosed deal sizes are also an issue in middle- and lower-middle-market league tables because plenty of small companies get acquired for undisclosed prices.

Earnouts also present a challenge: if a company gets acquired for $1 billion, with an additional $500 million if it achieves its financial goals, do you use $1 billion or $1.5 billion for the size?

Or do you split the difference and say $1.25 billion?

Problem #3: Deal Count, Dollar Volume, or Advisory Fees?

The most common approaches in IB league tables are to rank banks by either deal count or dollar volume.

So, if JPM announced $50 billion worth of M&A deals last year, while GS announced $45 billion, JPM ranks #1, and GS ranks #2 based on dollar volume.

But if JPM advised on 15 deals while GS advised on 17 deals, and you use deal count rather than dollar volume, GS ranks #1.

You can see the problems with ranking banks by deal count if you look at a table like this one for middle-market deals:

Yes, PricewaterhouseCoopers is #1, but would you ever want to work in investment banking at PwC over Houlihan Lokey, Rothschild, Jefferies, Lazard, BofA, or UBS?

No, of course not – because they mostly advise on small deals and issue Fairness Opinions rather than executing full deals.

Because of these issues, it’s always better to go by dollar volume, not deal count.

That said, both these methods are flawed because they do not account for the fees.

The fees give the best indication of how much work the bank did and, therefore, the experience you got by working on the deal.

Unfortunately, finding fee breakouts for individual deals is difficult, so region and industry-specific tables based on fees are rare.

Problem #4: The Advisers’ Roles

A bank can act in different capacities in a single deal, and not all roles are created equal:

• It might be the “lead adviser” in an M&A deal, or it might just issue a Fairness Opinion near the end for a small fee.
• It might advise on all aspects of the transaction, or it might just provide the debt financing required to close the deal (e.g., Leveraged Finance).
• In an equity deal (ECM), the bank could be the bookrunner or a co-manager.
• In restructuring deals, the bank might advise the debtor (the company) or the creditor(s).

Issuing a Fairness Opinion or co-managing a deal requires far less work than executing the entire deal from start to finish.

So, banks that act in these lesser roles should receive less credit in the league tables…

…but that’s typically not how it works.

Banks do everything they can to “jump into” large deals at the last minute and get at least some credit, since they know they can claim the entire deal value.

Problem #5: The Senior Banker Shuffle

Finally, while league tables can be decent guides over short periods, they tend to be less accurate over long periods (5-10+ years) because turnover is so high.

Some senior bankers stay at one firm for a long time, but most move around a few times in their careers, and when they do, their clients come with them.

Sometimes, large banks even hire entire teams from other banks to get these client lists.

Banks like to pretend that clients are loyal to their brand, but decision-makers at companies are more often loyal to individual bankers, whom they’ve gotten to know over many years.

So, When Are Investment Banking League Tables Useful?

League tables have their uses, but they are not oracles of truth because of all these issues.

If you want to use them to decide on a bank, group, or region, I would recommend the following:

1. Review the Past ~2-3 Years of Data – Results in a single year or quarter are not always representative, so you want at least a few years of data. But I don’t think it’s useful to go back 10 or even 5 years because the landscape changes too much over that time frame.
2. Be As Specific As Possible – For example, find tables that screen by at least industry or region rather than “global” rankings. Maybe you can’t find a “European tech M&A” league table, but even a European M&A or tech M&A league table would be far more useful than a global, all-industry table.
3. Don’t Use League Tables to Make Close Decisions – If Bank A has been #5 over the past few years, while Bank B has been #3, you should not pick a Bank B internship offer on this basis. These numbers are so close that you’d be better off using the team, cultural fit, and other factors to decide.

Further Reading About Investment Banking League Tables

If you want to learn more about the uses, drawbacks, and effects of investment banking league tables, please see:

• M&A investment bank rankings are in a league of their own for flaws (Financial Times)
• The Effects of Investment Banking Rankings: Evidence from M&A League Tables (Academic Paper)

And if you ever meet someone who relies on league tables to argue for a specific bank ranking, run far away and ignore everything else they say.

The post Investment Banking League Tables: Neutral Arbiter of Bank Rankings or Marketing Manipulation? appeared first on Mergers & Inquisitions.

Effective June 30^th, 2023 (Friday), we are splitting the main financial modeling course (“Financial Modeling Mastery”) into 3 separate courses: Core Financial Modeling, Advanced Financial Modeling, and VC / Growth Equity Modeling.

You can read the full details here, but the TL;DR is that you get a much better deal if you sign up before Friday, June 30^th because you’ll gain access to the 3 courses for $397.

If you sign up on or after Friday, you’ll pay about twice that for all the courses separately.

If you need only one of these courses, you’ll get a better deal on or after June 30^th because each one will be less than $397.

And if you already have the current financial modeling course from a previous purchase, you’ll also have access to these 3 new courses, so you don’t have to do anything here.

We are moving to shorter, simpler, and cheaper courses everywhere, and I expect to split up our other training over the next 6-12 months.

I also plan to shorten the videos, make the certification quizzes shorter and easier, and better align the training to a world of falling attention spans induced by TikTok addiction.

If you’re short on time, you can stop reading here and make your decision (sign up now, sign up on Friday, or do nothing).

If you want more details and context around these changes, you can keep reading:

Why Now, and Why This Course Split?

The current Financial Modeling Mastery course is far too long and detailed for most students and professionals.

There’s so much content that it’s difficult to navigate, and most students complete only a small percentage.

Not only have many users complained about this, but some of our institutional clients, such as JP Morgan, have also asked for shorter training.

The main BIWS financial modeling course has been too long since about 2015, so I am finally taking this chance to fix it.

The course’s current length is a direct result of several bad decisions, including:

1. Listening to a Vocal Minority – In 2010 – 2013, many people on WSO, Analyst Forum, Reddit, etc., complained that our courses were “too basic.” I overreacted to this feedback and went too far in the opposite direction over the next ~10 years.
2. Creating Too Much Content During COVID – When everyone was locked down and stuck inside, demand for video-based training skyrocketed… but then it fell as the world normalized. 100 hours of video suddenly seemed less appealing than going outside to get sunlight.
3. Not Splitting Up New Content Appropriately – For example, there was no reason to add an advanced LBO model or a granular SaaS model to the main course. These should have been in separate products from the start.

A Long Time Ago, in a Financial Modeling Course Far, Far Away…

The initial version of this financial modeling course, first released in 2009, had about 10 hours of training and featured the same company in each module.

You could finish it in a week, and many students did.

But then people started complaining and saying it was “too simple” – even at its lower price – so I caved in and added material.

With the second version in 2010, the course length increased to ~20 hours.

But the online complainers were still unsatisfied, and I made a bad decision in response to these complaints in 2014.

I spent that entire year redoing the course and basing each module on a different company (EasyJet, Netflix, Chuck E. Cheese, etc.).

In theory, this was a reasonable idea.

In practice, I executed it badly because I had no idea how to do it efficiently.

I repeated too much content, the videos became too long, and the 2-hour modules turned into 8-hour modules.

As a result, the course expanded to nearly 80 hours.

People started complaining about the length, but sales were still increasing, and most students were still getting results by finishing smaller portions.

In 2017, though, these problems worsened, and I began working to shorten and simplify everything.

I simplified a few case studies and cut some material, but it was still too long.

And then COVID hit in 2020, and I made 2 good decisions and 1 very bad decision:

1. Good Decision: I removed the old “Advanced Financial Modeling” course because it was outdated, the models and videos were bad, and no one used it.
2. Good Decision: We changed the BIWS Premium package and replaced this older “Advanced” course with the PowerPoint Pro course since PowerPoint is approximately 10x more useful for interns and new hires.
3. Very Bad Decision: Instead of just dropping the “Advanced” training, I created and updated it within the main financial modeling course and added new topics, such as spin-off M&A models.

I felt people would be “disappointed” if the older Advanced material disappeared.

But hardly anyone even used that course, so I was not thinking about this rationally.

Rather than shrinking, the financial modeling course got even longer, and now there was a new problem: each module consisted of multiple case studies.

The version from 2014 was also long, but at least the content was clear: Module 1 covered Company A, Module 2 covered Company B, Module 3 covered Deal C, etc.

But this new setup with multiple case studies per module made it difficult to find specific topics and skip around.

A Better Approach: What I Should Have Done

A much better approach would have been:

1. Remove the old Advanced course and replace it with PowerPoint in most course packages.
2. Update and simplify the entire “main” financial modeling course to ~30 hours, focusing on 20-hour completion plans. Limit all videos to 10-15 minutes. Cut anything not directly related to entry-level interviews and case studies.
3. Create some advanced content but turn each major topic into a separate 10-hour course (e.g., Private Equity Modeling, Credit Modeling, Hedge Fund Modeling & Stock Pitches, etc.).

We are now moving in this direction, but finishing points #2 and #3 will take time. The changes this week are the beginning of this process.

What Happens Next?

The most immediate change happens in a few days, when the main course is split on June 30^th.

Again, if you want the best deal on the most content, sign up before then, and you’ll gain access to these 3 separate courses for 50% less.

In the future, I expect to release shorter, separate courses on Credit, Private Equity, Hedge Funds, and Advanced M&A Modeling.

Each one will be about 10 hours and target a 1-2-week completion time.

The Private Equity and Advanced M&A Modeling ones are actually “done” and could be released today, but I want to see how this initial course split goes.

The Project Finance & Infrastructure course is coming, but I expect to keep it short and simple (~10-15 hours of training with maybe ~5 case studies).

We will also likely split Real Estate & REIT Modeling and Bank Modeling into shorter, more focused courses.

It would make more sense to offer one course on just properties for $200 – $250 and another on just REITs for $200 – $250 rather than one long course.

I also plan to shorten and simplify all the certification quizzes and any video longer than ~10 minutes.

I can’t promise a specific date because these changes are more complex; I’m also trying to balance this with new topics and training.

But you should see at least some changes within the next year.

Questions?

In the spirit of streamlining, I’ll end this announcement right here.

As always, if you have any questions, comments, or feedback, please leave a comment below or reply to the email newsletter.

The post Major BIWS Course Package and Price Changes Coming on June 30th, 2023 (Friday) appeared first on Mergers & Inquisitions.

You’ll find influencers on Instagram, TikTok, LinkedIn, and other sites constantly praising Dubai and claiming it’s the best place to work or start a business.

It’s almost like the city has its own PR department and never-ending marketing campaign.

If you’re interested in the Middle East or have connections to the region, all this hype has probably made you wonder about finance careers there.

Specifically, should you aim for entry-level investment banking roles in Dubai rather than London, New York, or other financial centers?

Are the tax benefits, safety, and diversification worth the drawbacks of less deal activity, smaller intern classes, and somewhat “random” work?

The short answer is that, like other smaller regions, Dubai is best in very specific cases; the average student would still be better off starting in NY or London.

And if you want all the details and some sports analogies to sum up everything, read on:

Investment Banking in Dubai: Hub of the Middle East

Dubai acts as a hub for transactions in the Middle East and North Africa (MENA) region, which includes ~20 countries.

The most prominent three countries by deal activity are the United Arab Emirates (UAE) itself, Saudi Arabia (KSA), and Egypt:

The “Others” category includes countries like Algeria, Jordan, Lebanon, Qatar, Morocco, and Oman.

And while Dubai may be a hub for this region, deal activity across MENA is fairly low.

There are usually a few hundred M&A deals per year for $50 – $100 billion of total volume:

For context, that’s less activity than Canada in an average year, and it’s about 5-10% of the deal volume of the Asia-Pacific (APAC) region.

That doesn’t make Dubai “bad” – it just means it’s smaller than many think.

Industry-wise, oil & gas and power & utilities are huge, but sectors like healthcare, financials, and telecom are quite significant as well:

Technology has been growing, but it’s still less developed than in regions like London or NY.

You’ll also see a fair number of deals in the financial sponsors group due to the many sovereign wealth funds in the region.

The bottom line is that while there is a lot of energy-related deal activity, Dubai is more diversified than you might expect, and many bankers work as generalists.

Another selling point is that when other regions are doing poorly, Dubai often performs well and acts as a “counter-cyclical” finance center.

This happened back in 2008 and, more recently, in 2022, when deal activity fell almost everywhere except for the Middle East.

But I would be careful about reading too much into this because Dubai doesn’t necessarily defy long-term trends for long.

For example, total deal activity held up better than in other places in 2008, but it fell substantially in 2009, following the rest of the world.

Investment Banking in Dubai: The Top Banks

The usual U.S. bulge-bracket banks, such as JPM, GS, MS, and Citi, always rank well in the league tables.

The other bulge brackets (BofA, Barclays, UBS, and DB) tend to rank lower, but this varies each year.

Many people would say that the elite boutiques – specifically, Moelis and Rothschild – are the top banks in the region based on deal activity, business model, and overall experience.

Among the other banks, HSBC usually makes a strong showing, most middle-market banks are barely present, and the other elite boutiques (Evercore, Lazard, etc.) are much less active.

The most important point is that many bulge-bracket banks do “coverage work” in Dubai, which means more “process management” and less technical analysis.

This has changed over time and varies based on the industry, but in many cases, teams based in London do much of the heavy lifting in deals.

Moelis and Rothschild are unique because they do everything out of their Dubai offices, which means a better experience for Analysts and Associates in most cases.

It also means larger Analyst classes than at some of the other banks.

Some MENA-based banks also do a lot of deals in the region, but as in Hong Kong and Canada, they tend to focus on corporate bonds for domestic companies (DCM).

Example firms here include Riyadh Bank Ltd, Saudi National Bank SJSC, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, and the Arab Banking Corporation.

As you can tell by the names, many are based in Saudi Arabia or other Middle Eastern countries and also operate in Dubai.

Finally, there are MENA-based boutique investment banks, such as Alpen, Arqaam, Awad, deNovo, EFG Hermes, SHUAA, and Swicorp.

Some of these firms offer internships or off-cycle roles, but there’s not much information about most of them.

Investment Banking in Dubai: Recruiting and Interviews

The biggest differences in recruiting and interviews are as follows:

1. Entry-Level vs. Lateral Roles – Dubai tends to be very skewed toward lateral hires, such as Analysts who spent 1-2 years working in Europe. Internships and off-cycle roles for fresh graduates pop up, but the “class sizes” are small (see below).
2. Technical Skill Required – Partially due to this emphasis on lateral recruits, the technical rigor seems to be higher than in London. Most of our students and coaching clients in the Middle East have had to complete modeling tests or case studies, even for entry-level roles, and something like the 90-minute 3-statement modeling test or DCF model on this site could easily come up.
3. Smaller Class Sizes – The numbers change yearly, but many banks in Dubai have “Analyst classes” of only 5 – 15 per year. There are probably a few dozen new Analyst hires per year in the city, making it comparable to Australia in terms of headcount.
4. Drawn-Out Process – Due to the emphasis on lateral hires, recruiting processes in Dubai are mostly “off-cycle” (i.e., network yourself, follow up repeatedly, and interview over several months to win the job).
5. Ideal Candidate Profiles – For the best chance of working in Dubai, you should attend a top-ranked university or Master’s program in the U.S. or U.K., gain 1-2 years of deal experience first, and have a strong connection to the Middle East.

Technically, Arabic is not required to win IB roles in Dubai, and banks hire non-Arabic speakers since English is the standard business language.

But native-level Arabic skills will give you an advantage and compensate for other weaknesses in your profile.

It’s just that language skills are not a “requirement” like they are in Hong Kong, nor do they give you quite the same boost as European languages in London.

Target School and Degrees

The investment banking target schools for Dubai combine the U.S. and European lists, but you can also add a few of the top schools in the Middle East, such as the American University of Beirut (perhaps more for consulting).

There is no preferred degree or major, as your university, work experience, interview prep, and networking matter the most.

Investment Banking in Dubai: Salaries, Bonuses, and Taxes

In most cases, IB salaries and bonuses in Dubai match New York compensation, with some banks paying slightly less – but there are no personal income taxes.

For reference, you can view our NY-based IB salary and bonus report here.

If you’re a U.S. citizen, you still need to report and pay taxes on your worldwide income, but you get an exemption on the first ~$120K per year, which means you save a good amount.

The Dubai influencer team likes to highlight this lack of personal income taxes as one of the top selling points of the region.

They’re correct that it is a significant benefit, but they also miss some important points.

First, the tax savings are much more impactful when you earn, say, $500K+ at the senior levels and your home country has a high tax rate.

If you’re earning $150K per year, the lack of taxes helps, but you don’t necessarily want to change your life and career to save $30K.

Second, working in Dubai makes it more difficult to transfer to other regions if you change your mind and want to return to the U.S. or Europe.

Finally, although I don’t have hard data to back this up, I assume that most Managing Directors in Dubai earn less than in NY because of the reduced deal flow and smaller deal sizes.

They might still come out ahead post-tax, but the lower pre-tax pay may translate into a smaller-than-expected difference.

With all that said, the tax benefits are great, and if your main goal is to save as much money as possible over a few years in investment banking, nothing beats Dubai.

Pretty much any other city with real IB roles has income taxes or pays less than NY – or both.

And while Dubai is an expensive city, it’s also cheaper than NY and London in rent, food, and transportation, so your savings can be substantial.

IB Lifestyle, Culture, and Hours in Dubai

Banks in Dubai have a reputation for maintaining a “sweaty” culture (i.e., you will work even longer hours than usual).

Clients tend to be demanding and unsophisticated, which often translates into a lot of last-minute work (especially when you factor in the smaller team sizes).

So, expect the usual 70-80-hour workweeks with spikes to higher levels when deals heat up, or when there’s an emergency.

People often say that the work culture is “no-nonsense,” meaning that bankers are direct about the quality of your work and your overall performance.

That could be a positive if you like transparency but a negative if you don’t respond well to criticism.

Getting promoted can be very political because banks tend to favor certain nationalities and offices within the broader MENA region.

Like the issues with sovereign wealth funds there, you’ll face a much tougher path if you’re not from the right country or you don’t have the right connections.

I hesitate to say much about Dubai as a “place to live” because it’s subjective and depends on how you want to spend your free time.

But even the biggest Dubai influencers would admit that there are fewer cultural hotspots and activities than in cities like London, New York, or Tokyo.

There are sports, outdoor activities, and shopping, but the city’s main draw is that it’s great for weekend trips due to the cheap flights to other parts of the Middle East.

Of course, this assumes that you’ll have the occasional free weekend, which is a bit of a gamble as a junior banker.

Investment Banking in Dubai: Exit Opportunities

The standard exits – private equity, hedge funds, corporate development, family offices, and sovereign wealth funds – exist, but they’re all smaller than in other regions, except for SWFs.

I’ll back this up by citing Capital IQ data about the number of firms in different regions:

• Private Equity Firms:S.: ~7,200 | U.K.: ~1,000 | Dubai: ~150
• Hedge Funds:S.: ~3,200 | U.K.: ~500 | Dubai: ~15

Admittedly, the real numbers are slightly higher, as these lists include only firms headquartered in Dubai.

The Dubai PR team even claims that 60 hedge funds are setting up base there.

But even if you add up all the PE firms and hedge funds in the entire Middle East and Africa region, it’s still less than the total number in just the U.K.

All the private equity mega-funds have offices in Dubai or Abu Dhabi, and the big SWFs all do PE-style deals as well.

The 2018 collapse of Abraaj, one of the most prominent domestic PE firms, hurt Dubai’s local private equity scene, and it still hasn’t fully recovered.

There are a few MENA-specific PE firms that have done well, such as Gulf Capital, Waha Capital, and NBK, but they would all be considered “lower-middle-market” by U.S. standards (i.e., low billions up to $10 billion in AUM across all funds).

But the biggest issue with the exit opportunities is that it is much harder to go from Dubai to NY/London than to do the reverse.

So, if you spend a few years there, build up your stacks of cash, and decide you want to leave, it might not be the easiest transition.

Recruiters and bankers still tend to “discount” experience gained outside the major financial centers, and that’s unlikely to change anytime soon.

Is Investment Banking in Dubai an Oasis or a Mirage?

If you consider the advantages of Dubai:

• After-tax savings potential.
• Deal/market diversification.

And the disadvantages:

• More difficult recruiting.
• Questionable deal experience, depending on the bank.
• More limited exit opportunities (except for SWFs)

It makes the most sense to work there in three scenarios:

1. You’re a High Earner Who Wants to Save More and Leave – If you’re already at the senior level in finance and want to boost your savings for a few more years before you leave the industry, Dubai is great (ideally, you’ll also be a non-U.S. citizen).
2. You’ve Already Worked in London or NY and Want Something Different – You might be able to enhance your profile with this experience, especially if you stay for 1-2 years and then move on.
3. You Have a Strong Connection to the Middle East – In some cases, a strong enough connection might make you competitive for Dubai roles even if your profile is not quite good enough for London or NY roles.

Online detractors sometimes say that working in Dubai is like joining “the minor leagues” in U.S. baseball.

But I think another sports analogy is more apt: a banker moving to Dubai is like Lionel Messi leaving Paris Saint-Germain to join Inter Miami.

Messi has already established himself as one of the best football/soccer players of all time, he’s earned over $1 billion, and he just won the World Cup.

But at 35 years old, he doesn’t have that much time left in his sports career, and he’s unlikely to win another World Cup.

So, he’s joining a weaker, U.S.-based team to downshift and get a huge pay package for his last few years.

If you move to Dubai toward the end of your finance career, you’ll get similar benefits.

Just don’t expect to win the World Cup again.

The post Investment Banking in Dubai: The New York of the Middle East? appeared first on Mergers & Inquisitions.

Whenever internships begin, we get a lot of questions about how to “prepare quickly.”

A long time ago, most questions were about Excel, financial modeling, and how to find data quickly.

Today, they’ve shifted to programming languages, automation tools, and AI (e.g., can InternGPT do everything for you?).

I get the obsession with The Shiny New Thing, but if you’re a new hire in banking or another corporate finance role, boring old PowerPoint might be your highest-ROI skill.

It doesn’t take that much time to reach a decent proficiency level, and in many groups, you’ll spend more time in PowerPoint than Excel.

Since PowerPoint is an important-but-often-overlooked skill, this article will give you a 30-minute crash course on the most important parts:

Investment Banking PowerPoint Shortcuts: The Tutorial, the PDF Guide, and More

I recommend starting by grabbing the free PowerPoint shortcut guide and other documents below:

• Investment Banking PowerPoint Shortcuts (PDF)
• PowerPoint Crash Course – Slides (PDF)
• Reference Slides Used in This Tutorial (PPT)

And then you can watch the full crash-course video or read the written summary below:

Table of Contents:

• 2:17: Part 1: Quick Access Toolbar
• 4:16: Part 2: Windows Shortcuts & Slide Fundamentals
• 10:01: Part 3: Inserting and Formatting Shapes
• 15:01: Formatting Shortcuts
• 20:02: Part 4: Aligning and Distributing Shapes
• 27:55: Part 5: Grouping and Ordering Shapes
• 30:54: Recap and Summary

This video and the written version below are extremely condensed versions of our PowerPoint & VBA course.

The course is about 30x more detailed and has a full macro package, practice exercises, and extensive VBA training, but you can easily get started with this shorter version.

Investment Banking PowerPoint Shortcuts: The Quick Access Toolbar (QAT)

The Quick Access Toolbar in Office programs lets you build shorter versions of existing shortcuts.

If you execute certain commands 500 times per day, entering them with 2 keystrokes rather than 4-5 results in significant time savings.

We make our recommended PowerPoint QAT freely available right here, so you should download it and follow the installation instructions.

If you cannot install it, you can also create the QAT yourself via the Options menu (Alt, T, O).

Enter the menu, click “Quick Access Toolbar” on the left side, and go to “All Commands” to add the ones you want:

Slide #8 in the presentation has the full list and the proper order.

Investment Banking PowerPoint Shortcuts: Windows/Office and Slide Commands

All the standard Windows/Office shortcuts work in PowerPoint as well.

This includes shortcuts like Ctrl + N for creating a new file, Ctrl + O for opening an existing file, and Ctrl + C, Ctrl + X, and Ctrl + V for Copy, Cut, and Paste.

Look at slides 9-11 of the presentation or the shortcut reference guide for more; they’re all important and useful, but you should already know them.

If you’re on the Mac, you can substitute the “Command” key (CMD) for Ctrl and make most of these work – but check the guide for the full details.

With these shortcuts, you should be careful with your selected range because you can select either slides or specific shapes in PowerPoint:

If you’ve just clicked something in the left pane, a shortcut like Ctrl + A will select all the slides in your presentation.

But if you’ve just clicked something in the right pane for your current slide, Ctrl + A will select all the shapes on this slide.

Once you’ve reviewed the key Windows/Office shortcuts, the next-most important ones are the slide shortcuts.

To insert a new slide, press Ctrl + M (new slide based on your current template) or Alt, H, I (pick the template you want to use).

The “+” symbol in these shortcuts means “press the keys sequentially, hold them, and then release them at the same time.”

The “,” symbol means, “press the key, release it, and then press the next key.”

So, for Ctrl + M, you press and hold Ctrl and M and then release both; for Alt, H, I, you press Alt, release it, press H, release it, and then press I and release it.

You can also use Ctrl + Shift + D to duplicate your current slide, regardless of your selection.

The Home and End keys jump to the first and last slides, respectively, while PgUp and PgDn advance to the previous and next slides.

Of all these shortcuts, I probably use Ctrl + Shift + D the most because it’s very common to copy and tweak existing slides in pitch books and other investment-style presentations:

Investment Banking PowerPoint Shortcuts: Inserting and Formatting Shapes

In presentations and pitch books, you’ll need to insert shapes, text boxes, and lines when you’re adding and editing slides.

The most important shortcuts are:

• Alt, 09: Draw Shape
• Alt, 8: Draw Rectangle
• Alt, 9: Draw Horizontal Text Box
• Alt, 08: Draw Line
• Shift + Draw Shape: Draw Shape with a Constant Height/Width Ratio

The first four in this list require our QAT to be installed.

If you’re wondering about the difference between a shape and a text box, a shape has a fill color, centered text, and a white font color.

A text box has no fill color, left-aligned text, and a black font color.

But you can easily change one to the other, so there’s no real difference in simple use cases.

Drawing a shape or inserting the default-sized shape is up to you, but if you want to draw it, you should activate the shortcut and then click the shape with the mouse:

If you want to insert a default-sized shape, you should use the arrow keys to navigate to the shape and press the “Enter” key.

Once you have inserted multiple shapes, the Shift key is essential for selecting them, resizing them, and moving them around:

• Shift + Left Click: Select Multiple Shapes (or use the mouse – often faster/easier)
• Shift + Drag Diagonal Edge: Resize Shape & Keep Height/Width Ratio Constant
• Shift + Drag Shape: Move Shape & Keep Horizontal or Vertical Axis Constant

I find the Shift + Drag Shape shortcut the most useful because there’s no other way to move shapes in a straight line.

It’s especially good when you’ve selected multiple shapes and want to move them all in one direction:

Formatting Shapes

The two key shortcuts here are Alt, 5, which brings up the “Format Shape” menu on the right side of PowerPoint, and Alt, JD, which brings up the “Shape Format” area in the ribbon menu.

The difference is that Alt, 5 gives you more options but is slower to access, while Alt, JD is good for quick/simple edits, such as changing a shape’s height and width:

You can also use shortcuts for more specific formatting changes.

For example, Alt, 2 changes the Font Color, Alt, 3 changes the shape’s Fill Color, and Alt, 4 changes its border colors, weight, styles, etc.

Alt, 7 lets you change the font size, and the standard Windows shortcuts for bolding, italicizing, and underlining text also work (Ctrl + B, Ctrl + I, and Ctrl + U).

You can left-align, center, and right-align text with Ctrl + L, Ctrl + E, and Ctrl + R.

You can format specific text in a shape (if you use the mouse to select only parts of the text) or the entire shape (if you click the entire shape).

But it’s almost always better to format the entire shape for consistency:

Once you have your slides set up, you don’t want to reinvent the wheel, so you should learn the shortcuts for copying and pasting shape formats and duplicating shapes:

• Ctrl + Shift + C: Copy Shape Format
• Ctrl + Shift + V: Paste Shape Format
• Ctrl + D: Duplicate Object(s)
• Ctrl + Shift + Drag: Duplicate Object(s) in Place

Copying and pasting shape formats have their uses, but I use Ctrl + Shift + Drag the most often:

It’s essential on any slide with multiple columns or rows in a grid-like layout when you want to add a new area.

Investment Banking PowerPoint Shortcuts: Aligning and Distributing Shapes

When you start inserting new shapes and creating slides, you’ll rarely align everything perfectly on your first try.

You’ll also come across a lot of slides that look like this:

You probably don’t want to show this slide to a client or your Managing Director in its current form.

You can fix these issues with the alignment and distribution shortcuts.

With both these commands, there are two modes: “Align to Slide” and “Align Selected Objects.”

By default, PowerPoint uses “Align to Slide,” but you almost always want to use “Align Selected Objects.”

To change this setting, select at least two shapes (using Shift + Left Click or the mouse), press the Alt, 1 shortcut, and then press “O” for “Align Selected Objects”:

Once you’ve done this, you can fix the alignment on slides like the one above using these shortcuts:

• Ctrl + Mouse Scroll Wheel or Alt, V, Z: Zoom
• Alt, 1, L / C / R: Align Left / Center / Right
• Alt, 1, T / M / B: Align Top / Middle / Bottom

These alignment commands work by finding the furthest edge of your selection and aligning everything else to it.

For example, if you select all the rounded blue boxes on the slide above and press Alt, 1, L, you’ll get something like this:

But you probably want to left-align everything to the “Project Jaguar” or “Goldman Stanley” text so there’s padding on the left side.

To do that, move the entire selection of blue boxes to the right of the “Project Jaguar” text with Shift + Drag, add the “Project Jaguar” textbox to the selection with Shift + Left Click, and then press Alt, 1, L:

You can keep going with these commands and fix most of the other issues on this slide.

But even if you’ve aligned the objects properly, there may not be equal spacing between them.

To fix this, you can use the distribution commands: Alt, 1, H for Distribute Horizontally and Alt, 1, V for Distribute Vertically.

Taking these rounded blue boxes as the example once again, here’s what the Alt, 1, V command does:

If you want to get even better at alignment and distribution, you can use the Ruler, Smart Guides, and Drawing Guides in PowerPoint.

You can toggle the Ruler off and on with the Alt, W, R shortcut; I almost always keep it enabled because it takes up very little space.

You can enable Smart Guides by pressing Alt, W, X and checking the “Display Smart Guides” option:

Once you do this, dashed, orange lines will appear whenever you’ve aligned objects correctly or arranged them with equidistant spacing.

This feature helps a lot because it lets you fix shapes without selecting everything and entering the alignment/distribution commands:

Finally, you can activate Drawing Guides with the Alt, W, S shortcut.

These lines appear on every slide in the presentation, and you can use them as references for the shapes and other layouts you want to create.

To create a new Guide, press and hold Ctrl and drag the mouse on an existing one:

To delete it, drag the Guide off the slide’s edge.

Investment Banking PowerPoint Shortcuts: Grouping and Ordering Shapes

While you can select multiple shapes with Shift + Left Click and move them around, it’s often easier to group them so you can treat them like a single shape.

They’re also much easier to resize and “swap” with other shapes when they’re grouped.

The key shortcuts are:

• Ctrl + G: Group Shapes
• Ctrl + Shift + G: Ungroup Shapes

Grouping is especially useful on a slide like this if you want to rearrange the order of the scenarios:

Moving around each column is much easier when it’s treated as a single shape.

Finally, moving objects forward and backward is useful when you’re working with “compound shapes,” like these arrows:

The most useful commands here are Alt, 6, R for Bring to Front and Alt, 6, K for Send to Back.

With these commands, you can click a shape and change its “position” on the slide so that it moves on top of or below the other shapes.

These commands are useful for fixing the issues on the slide above:

…but they’re not that important.

I use the alignment and distribution commands 10x more often than these ordering shortcuts.

Investment Banking PowerPoint Shortcuts: What’s Next?

If you follow along and learn the shortcuts above, you will be ahead of ~80% of interns.

That said, this 30-minute tutorial only scratches the surface of PowerPoint.

Topics covered in our PowerPoint & VBA course that we skipped here include the Slide Master, sections, text and tables, Excel and Word integration, images, maps, and macros in PowerPoint.

If you learn something about these topics, you’ll become even faster at key tasks and more likely to leave the office before 3 AM.

Even if you have no interest or time/money for our full course, I recommend looking at the ~10 free PowerPoint tutorials with screenshots and videos within the BIWS Knowledge Base.

They’re not as good as having your own InternGPT – but they also give you a more realistic path to winning a full-time return offer.

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