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Welcome to one of the most competitive sectors of the financial industry. As the name suggests, mergers and acquisitions (M&A) teams within investment banks advise client companies on mergers, where two companies join up as equals, and acquisitions, where one firm takes over all or part of another.

Big investment banks aren’t interested in small-fry M&A deals. They only start to get involved at the mid-market – deals worth at least $100m – and at the upper end, the deals can be worth billions.

M&A can be hard work. M&A bankers advise their clients at what are often stressful and important periods in a company’s lifetime. They must therefore be available whenever the client needs them – be it the weekend, their summer holiday or Christmas Day. Junior bankers work long hours and can expect to be busy assembling the required financial information and legal documentation late into the night if necessary.

It’s not for the faint-hearted, says Jane Clark, head of graduate recruitment at Merrill Lynch. “You do have to work very hard and it’s accepted that the hours will be long. Throughout this, at analyst level, you have to be incredibly accurate as all the financial modelling you’re doing is essentially underpinning presentations and pitches that will eventually be given to the client.”

Key players

In Europe, the US ‘bulge-bracket’ banks often dominate the M&A league tables – think JPMorgan, Merrill Lynch, Morgan Stanley and Goldman Sachs. However, at the halfway point of 2008 a few big-hitting European banks also ranked towards the top of the league table compiled for us by data provider Dealogic. Swiss-based UBS ranked third and German-based Deutsche Bank was in fourth place.

Leading banks in European M&A, January-May 2008
(net revenues and market share)
JPMorgan: $227m (8.2%)
Merrill Lynch: $209m (7.6%)
UBS: $208m (7.5%)
Deutsche Bank: $207m (7.5%)
Morgan Stanley: $185m (6.7%)
Goldman Sachs: $181m (6.5%)
Citi: $160m (5.8%)
Credit Suisse: $158m (5.7%)
Rothschild: $157m (5.7%)
Lazard: $110m (4.0%)
(Source: Dealogic)

Roles and career paths

There’s a relatively straight route up the career ladder in M&A. You start out at analyst level, move up to associate, then vice president, director and managing director. Within those roles, you have a chance to focus on a particular sector, be it consumer, oil and gas, media and telecommunications, real estate or another option.

As a rule of thumb, the more senior you get in M&A banking, the more you’ll get to deal face to face with clients. At the junior level you may get to attend a few client meetings with more senior bankers, but mainly you’ll be focused on complex financial modelling and research to put together the ‘pitchbook’ for the bank – the document the firm uses to outline its ideas on which companies a client should be buying or selling to.

Tiziana Galassini, executive director, investment banking division, Morgan Stanley, says: “As an analyst, you need to be able to confidently work and run financial analysis and business planning. You will work closely with the associate level and be responsible for aspects like due diligence of a transaction and preparation of presentation material.”

It’s only later you step away from the number crunching, says James Robertson, managing director, M&A at UBS. “At the mid-level you’re very much involved in managing the process and making sure things run smoothly. If you’re at the top, you’re primarily ensuring the right tactics and advice are deployed about what should be paid, how it should be paid and the terms of any purchase.”

Pay

As with most areas of financial services, the real money to be made in M&A is through bonuses.

In the UK, the latest salary survey by recruiters Michael Page puts graduate trainee salaries at £35k-£38k, with a potential 25-50% bonus. This rises to £58k-£70k at associate level (four to six years’ experience), with a 100%+ bonus potential. At the top, MD positions pay £120k-£150k, and bonuses start at 300% of salary.

On the Continent, figures are not quite as hefty. The 2008 Robert Walters salary survey says an M&A banker working in Paris can expect €60k-€80k with five to seven years’ experience, which rises to €100k-€200k at the top level.

Although M&A bonuses were particularly generous in 2007, they’re expected to fall in 2008. Some people have put the reduction at as much as 30%.

Skills

Given that you’ll be working on complex financial models for valuing companies, and piecing together presentations to clients, numeracy and analytical skills are essential. Second languages are valued for working with overseas clients, as are stamina and attention to detail.

Galassini says: “The complexity of M&A deals, particularly cross-border transactions, means that you encounter different cultures, regulations and fiscal and legal frameworks. An intellectual curiosity is needed to be able to draw all these aspects together.”

Robertson says: “There’s a lot of analysis output to be done. Even though it takes longer to do this work, the need to do things quickly on a limited timetable means everyone here works harder than in a lot of other areas of financial services.”

Click here to read the profile of an analyst in M&A.

Click here to find out about global trends in the M&A sector.