Photo: flickr: Ravenshoe Group
Even if you remember nothing else out of the Vault guide and all those other investment banking interview guides out there, you remember attention to detail. The one quality all prospective investment banking analysts really need.”But wait,” you might say, “If all you do is crank out Excel and Powerpoint all day and an Associate is checking your work all the time, why is attention to detail so important?”
Make no mistake. It’s a game of diminishing returns. Attention to detail will never win you that new deal that results in $50 million of fees.
But a lack of attention to detail can easily derail projects. Or at least make you look stupid in front of everyone.
It was a few months after I started, and it was the first investment banking deal I ever worked on. Times were good back then. Private Equity Firms were actually doing deals; there was no credit crunch; more people than Bill Gates had thoughts of buying Yahoo. And investment banking bonuses were at their highest levels ever.
A private equity firm was contemplating buying a division of a huge company we were representing, and we were deep in due diligence meetings with both sides. During due diligence, the buyer makes sure that the seller isn’t trying to screw them with funny accounting, legal problems or plain old lies about the business.
Since it was a divestiture, the key question was what the division of the company looked like as a standalone entity. Were the expenses accurate? Could it really generate that much revenue on its own? How many employees were going to come along for the ride?
The role of an investment bank, at least in M&A, is to introduce buyers and sellers and “sell” both sides on doing the deal. Once you get past the initial meetings, the usefulness of a bank goes downhill faster than a Jamaican bob-sledding team (exceptions apply of course; sometimes banks really do make a difference all the way til the end).
In this case, we had to hand-hold and help management answer these key questions. We’re talking very detailed financial information, down to how a company would actually think about buying offices and furniture.
Needless to say, when investment bankers have to figure out how much chairs cost, you have some issues.
The “leader” (I won’t say CEO) of this division had his own channel with the private equity firm and tried to do everything on his own.
One morning, he sent out a completely new version of the model to everyone without running it by his trusted investment bank first.
This was 2 hours before the next diligence meeting started.
The Associate on my team saw this and just said, “Check EVERYTHING! The meeting is in 2 hours! Make sure it’s perfect!”
Perfection…. Or Not
It’s hard to check a model with 20 or so detailed worksheets in under 2 hours. But rather than adopting brute force and hitting “F2″ in every single cell to see that all the formulas linked correctly, I decided to use the “eyeball method” to check Excel due to my time constraints.
I found a few mistakes with this method, and thought I had found everything….
After printing about 30 copies of this 20-page long document, I went and delivered them to everyone in the meeting room. This had detailed, line-by-line expense projections down to individual employees.
Everything was going fine… until one of the many accountants in the room (Private Equity Firms hire big teams to conduct due diligence) saw an error – one of the formulas had not been copied across correctly and everything was divided by the wrong constant, throwing off someone’s salary by around $200,000 per year.
It seems like a minor mistake in the grand scheme of things. And it was the company’s fault, not mine. No one from the private equity firm blamed me or even said anything about it, but everyone from my investment banking team glared at me simultaneously while the Associate thought up different ways to crucify me (if this had been UBS LA, I would have actually been executed).
Up The Chain
Attention to detail. Not only can it embarrass you in front of clients, but it will also make you look bad to your superiors. And they, in turn will look bad to their superiors, all the way up the chain until the Managing Director is scolding a Vice President for some formatting error, and the VP is scolding the Associate, and the Associate comes over to your cube and tries to take away your models and bottles.
And that’s the real reason you’re tested for attention to detail in superday interviews: bankers don’t want to hire an Analyst whose screwups result in their investment banking salaries being cut in half because of an employee salary being off by $200,000.
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