eFinancialCareers

The international jet set of investment banking.

Strictly speaking, it is more accurate to talk of MA&D rather than M&A, as M&A covers mergers, acquisitions and disposals. Mergers is where two companies join as equals; acquisitions is where one company buys all or part of another; and disposals is where a business is selling or all part of its operation.

Most large investment banks only become involved in the biggest deals – those worth at least US$150m (€111.5m). Lower-value transactions, those generally worth US$20m to US$150m, are typically dealt with by the M&A divisions of accountancy firms. Transactions worth less than US$20m will normally be the domain of solicitors and high street banks.

Trends

In 2006, European-announced M&A volumes rose 38.3% on 2005 to £35.8 trillion. In the first six months of 2007, European M&A activity rose 57% on the same period of 2006.

The UK is the most important country in Europe for M&A activity. It accounted for 32% of all announced European deals in the first quarter of 2007 – more than France and Italy combined. However, announced doesn't necessarily mean completed, and while the first three months of 2007 saw some impressive deals announced in the UK – such as the £10bn offer by CVC Capital Partners for Sainsbury's supermarkets – not all those deals came to fruition.

How will the rest of 2007 work out? Bankers are said to be upbeat and there are several large UK deals on the cards. Watch for the £7.5bn bid for Reuters, a potential £3.5bn bid for brokerage firm ICAP and a £3bn-plus takeover of EMI Music.

Key players

The so-called US 'bulge-bracket' banks are generally found towards the top of the M&A league tables issued by Thomson Financial. Morgan Stanley, Citi, Goldman Sachs and JPMorgan occupied the top four rankings for total European M&A in 2006. The situation was slightly different in the UK, with German-based Deutsche Bank in pole position, followed by Morgan Stanley, Citi, and, in fourth place, Rothschild, a UK-based bank.

Roles and career paths

As a rule, the more senior you become in M&A, the more contact you have with clients.

As a junior banker, or analyst, you will spend a lot of time working on 'pitchbooks' – documents outlining a bank's ideas for a particular transaction. Analysts in M&A usually conduct basic research for the pitchbook and build the financial models used to price the companies concerned.

One notch up from analysts are associates, who oversee analysts' work and check their models are correct. Further up the scale are vice-presidents, who survey the work of analysts and associates, and often ask for the pitchbook to be partially or completely re-written.

Vice-presidents report to directors and managing directors, who 'own' the client relationship (i.e. the main point of client contact). It is usual for pitchbooks to come to nothing: clients decide not to go ahead with the suggestions or engage a rival bank. However, when a pitchbook elicits a positive response, the M&A team see the deal through to completion.

Live M&A deals are hard work. People involved can work nights and weekends and are at their clients' beck and call. Once a deal is underway, junior bankers can expect to be very busy assembling the reams of necessary financial information and legal documentation.

Pay

2006 was a good year for pay. Graduate trainees working in London M&A teams earned nearly £70k on average. Those two years above them were on six-figure sums.

However, it's worth bearing in mind that what goes up can go down. Bonuses for mid-ranking and junior M&A staff were up around 20% in London in 2006 compared to 2005. In a bad year for M&A they could just as easily fall 20% – or more.

Skills

The M&A sector is very popular with graduate applicants, so banks want clear evidence graduates have thoroughly researched the industry in advance, cautions Richard Moore, EMEA head of campus recruitment at UBS. Within corporate finance and M&A, UBS expects to take around 75 graduates into full-time positions this year: "Candidates need to be resilient, robust and able to adapt to rapidly changing circumstances," he explains.

Jonathan Jones, EMEA head of recruiting at Goldman Sachs, adds: "You'll need a lot of analytical skills, as a significant element of the role is modelling and valuing companies. A lot of it can be spreadsheet-based modelling, but we do not expect people to be experts the day they walk in the door."

M&A candidates also need to be good negotiators and a second European language is an advantage.

If you want to execute an M&A deal and prepare a pitchbook, you'll need to be analytical and not averse to number crunching, says Jonathan Baines, a headhunter specialising in M&A at Whitehead Mann. To make it to the top you'll need a different skillset: "You need the communication skills and self-confidence to strike up a genuine relationship with the chairman and chief executive of a FTSE 100 company," says Baines.