Breaking into Investment Banking: Insights into M&A

Wenbin Chen is currently working in London as an investment banking analyst at Nomura. He graduated from UCL with a First Class Honours in Economics and has prior work experience in diverse fields such as asset management, investment banking and consulting. He has kindly offered to share some insights on his job scope and tips on the job application process.

AIBC Research Team: Could you tell us more about yourself and how you came to work at Nomura?

Wenbin: I am Singaporean and studied Economics in UCL. I got interested in investment banking during my university studies and applied (for a position at Nomura). I am now working with the healthcare team in Nomura and we are specialising in the healthcare sector, which includes biotech, consumer healthcare and Medtech. We are also involved in healthcare services, which include hospitals, nursing homes and diagnostic services. Many people these days do diagnostics, thus this is the focus of the healthcare team and is also what I am mainly working on in Nomura.

Would you share with us some of the challenges you had to overcome while applying for this position?

One thing that is difficult is that you need to find out and be clear on what you want to do. This is because Investment banking does not only have M&A, but has all sorts departments and divisions. A lot of people would say that they are interested in investment banking initially, but in the long run after they start working, they may actually realise that they do not like it. Instead, they may prefer to join other departments such as credit risk, which are equally interesting.

When you first apply, you will face many rejections, so keep your options open. In the long run, if you are still interested in investment banking, you can still get into M&A after two to three years of work experience by requesting for an internal transfer.

I recommend you cast your net a little bit more widely, because you want to gain experiences when you do internships, so that you can accumulate to the final (application). If you spread out a bit and get some good names into your CV, it can bring you a long way. So (for example), you can be doing Risk (Management) in one company, and then after the internship, you might be doing M&A in another company.

Since you mentioned divisions, I actually understand that there are differences between an industry coverage team and a M&A team? Is there a difference in your bank?

Definitely, I would distinguish between industry and products. Industry means healthcare and consumers. Then you have your M&A, Leveraged Finance, equity capital markets (ECM) and debt capital markets (DCM) team. The main difference is how you look at a company. So for example, if you’re looking at a company, if I am doing M&A deal, I will bring in the M&A team which will execute the task. There are many steps involved in an M&A deal, and we will all work together. But if it is a leveraged financing deal, M&A wouldn’t be involved, it’ll just be the industry team doing the analysis for the company, and provide the financials and forecasts of the company before “passing it on” to the leveraged finance team to do the leverage and credit analysis. That’s how it works. Where the deal originates can be up to anyone, it can originate from the healthcare company, it can originate from people from financing working for a while, but the healthcare people will help to develop the models. That’s how we usually tag team.

What is your job scope and what are some myths about your job you hope to dispel?

Your daily work involves being on deals. You will not be dealing with modelling everyday. That’s a misnomer. Sometimes, on good days, you may be modelling a few days in a row. But usually, for one deal, (you work on) one model and one model may take a few hours every alternate day, because you update your model as the deal progresses. The further you progress into the deal, the more information you obtain about the company you are acquiring. As you get more detail, the model becomes increasingly granular through the days, weeks or even months. Other than being on a deal, you do a lot of market research analysis on a daily basis. Sometimes you have to trigger an interest in getting a deal, so you will have to pitch. That’s not something you will be doing on a daily basis. It may be on a daily basis at certain times of the year, but apart from that, you will either be on deals or doing pitches. You will be using a lot of Powerpoint and Excel to execute these two aspects, and of course there’s a lot of administrative matters to handle because there is due diligence for a deal you must do.

What motivated you to begin your career in investment banking?

Being in a school where many people around you want to do investment banking, it will motivate you as you work with a pal, towards a common goal with others. Secondly, investment banking challenges you both physically and mentally, you want to have an accelerated career, and do things that are difficult mentally. The work is quite high pressure and on some days you get scolded (although I would say people don’t scold you much!), it may get quite stressful. There will be times when you face a time crunch, and when they say they want things now, it means five minutes to seconds. So I guess I wanted to do something that pushes yourself to a new level.

You have previously interned in BCG. What are some key differences between your role in consulting and investment banking and why did you decide to enter M&A instead of your previous side? Any advice to students considering either consulting or investment banking?

AM is really interesting, but one thing about joining buy-sides too quickly is that your fundamentals may not be strong. Investment banking really trains you and equips you with the skills you need, compared to buy-sides which assumes that you have a certain amount of knowledge. You’re looking to learn a lot about the fundamentals, learn how a deal process is like, how a deal starts, what are the stages, how do you approach someone. You don’t want to go into a buy-side like PE for example and not know how a deal is executed. You won’t feel very comfortable executing a full length deal in a PE/ AM position.

Not that Investment Banking is bad, but you have more autonomy in AM, in terms of exploration, and your imagination gets to go a bit wilder, it’s all give and take.

As for consultancy, I think that you get a lot of on-site experience, very innovative, a very good team. But I think not choosing that is attributable to my background in Economics and a desire to work in a more quantitative field.

In both jobs you work with a level of ambiguity and unknown, but how you approach and tackle the unknown shapes your choice. If you study economics or accounting, you’re looking at statistical significance and may not necessarily like to do estimation. Each (area) has its good points and bad points.

7. What do you find most exciting about your new role as an IBD analyst?

Doing more deals. We do not know so many things and there are different processes for different kinds of deals and different types of executions. The size (of the company) matters, but sometimes even a small company can be hugely profitable, the details of the deal and things that you need to know. Detailed analysis (is) something anyone can do, you can research on an industry and give me an answer sooner or later. What is important is you know the deal so well, that can anticipate and do more additional work beforehand. You know what a deal brings, and you can prepare before certain processes start kicking in, you can prepare a certain level of model(s) before the actual model is wanted, you can prepare certain amounts of slides before the actual deck is required, you can pre-plan if you know the process really well. That’s the trouble being a new analyst though, you don’t really know what’s needed and tend to be told what’s needed at a more intense level, and you have to be catching-up all the time.

8. What are some key challenges you face working in a foreign country?

Culturally, there are some challenges. Communication once in a while may be different and difficult. Other than that, be open to different cultures. You want to connect with your colleagues on a personal level.

9. In your opinion, how does working in Nomura differ from working in other investment banks in Singapore or Shanghai?

In terms of working in finance, being in London and the US, the Financial markets are more developed. You learn from markets like Singapore as well, but in terms of the products you deal with, you see a lot less products like leveraged finance or Leveraged Buyouts (LBOs). The industries are very different in Asia. The products and size of the teams, and the size of the deals are usually bigger in more developed economies. Working in Singapore is rather structured, but compared to Shanghai, things are less structured as there are less documentation and standard procedures to go through, unlike in the US.

10. What advice would you give to aspiring analysts?

Keep applying and be focused on what you want. If you don’t get it, you are not missing out on anything. Be more structured and create a table, detailing the deadline of application for various firms and cast your net a bit more widely. Always let other people vet through your CV. In IB, we are very particular about formatting because the documents are sent to the clients. Work on the blurb of your CV and don’t start with “I”. Think through the narrative of the CV. The CV is very important as it tells your story and a cover letter completes it. Know when to apply and what to apply to and apply diversely. Then it goes into your interview skills.