Managing directors in M&A and the scourge of the mandatory meeting
If you work in the investment banking division (IBD) of a major bank, you're going to need to press some flesh. Depending upon where you work, you may need to press a lot of flesh: at some banks, productivity and flesh-pressing are seen as synonymous.
"I have 150-200 meetings each year," says a managing director at a French investment bank. "Counting meetings may seem old-school, but it's measurable and makes a good KPI," he explains.
As we reported yesterday, UBS is all over the use of face-to-face meetings as a proxy for banker productivity. Following successive miserable quarters in M&A, the Swiss bank is commanding its country-specific M&A and underwriting MDs to have 300 face to face meetings each year, and the rest of its MDs to have 250. The strategy might be working; UBS's M&A bankers did better in the past quarter.
Even so, senior bankers at rival banks say mandatory flesh-pressing is a mistake. "It’s a bit of a simplistic, one size fits all approach," says one. "There is a whole cadre of bankers who travel purely for the sake of travelling and trying to look important. Deal-making seems secondary."
Worse, MDs argue that meetings targets are a nightmare for clients who suddenly find bankers insisting on continuous personal visits. "Pity the poor clients!", says one, noting that regular dialogue between meetings is as important as talking face to face. In areas like debt capital markets, he adds that personal meetings are less necessary than in M&A: "M&A clients are more demanding and the topics are more secretive, so there's more pressure to meet in person."
Even so, cruising about meeting clients as a senior M&A banker comes at a cost. Deutsche Bank insiders say Alasdair Warren, the ex-Goldman Sachs head of the investment banking division in EMEA, is very partial to client meetings indeed. However, Warren also lambasted his senior M&A bankers for running up unnecessary travel expenses earlier this year.
One M&A MD says the client meetings measure is meaningless. "I have a mandate from a client in a country four time zones away and I see him three times a year, in part to cut down on travel expenses. Does this mean I'll be dinged because I don't see him enough? Or does it mean I'll get paid because I bring in $$$ millions just the same?"
The same MD observes that client meetings require the complicity of clients. "If a client's going to agree to meet you, he or she has to find your ideas compelling." For this reason, he says meetings are a test of how much sway bankers have over clients. Multiple meetings require a high level of client flattery and ego-stroking. In M&A, it helps that the clients are often former bankers themselves, and therefore understand how things work.
One VP says that the emphasis on meetings for MDs feeds the cycle of overwork for junior bankers and foolish deals for corporates. "A typical MD is going to tell a CEO or CFO that their idea to spend $4bn on an acquisition that boosts revenues (but not RoE or profitability) and hence their own compensation, is a great idea. They'll give the analysts and associates the weekend to run some numbers for deals that use almost the full amount of the client's excess cash (thereby maximizing the transaction fee and their bonus) and then they'll both get back to the corporate entertainment."
Have a confidential story, tip, or comment you’d like to share? Contact: firstname.lastname@example.org
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)