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Interview with: Big 4 Corporate Finance VP

What do you do on the corporate finance team in a big 4?

The corporate finance team in a big 4 firm functions like a boutique investment bank that focuses on mid-market businesses. Most of the clients are private. The CF team serve as transaction advisors for acquisitions, divestitures, and capital raises.

The team would run the entire transaction process from beginning to end. This would include drafting the teaser and confidential information memorandum (CIM), constructing/modifing the financial model, managing the data room, contacting prospective financiers/buyers/sellers, evaluating the term sheets, assisting in the due diligence process, and reviewing the final agreements with lawyers.

What groups do you work closely with within the firm?

Depending on the nature of the project and client needs, we will work with multiple teams on cross functional engagements. Here are some examples.

A carve-out of a private company led by the CF team may involve the M&A Transaction Services team to perform a vendor due diligence on the potential buyer, the valuation team to provide a fairness opinion on the division to be carved-out, and the tax specialists to advise on the structuring of the deal for to achieve tax efficiency etc.

A capital raise for a complex specialty finance company may involve the data analytics team to transform data from the loan tape into meaningful dynamic dashboards to be presented to the investors/lenders.

A capital raise for a hospital may involve collaboration between CF and the Infrastructure team, where we would bring our expertise in capital structure and project financing, and they would bring their industry knowledge.

Who are your competition and where do investment banks come into the picture?

The direct competitions include other mid-market investment banks within Canada. All major investment banks also have mid-market investment banking services that would compete directly with the CF teams in big 4 firms. Since the big 4 firms do not have a capital market platform, the CF team would refer the clients out to several investment banks if the clients’ intentions are to pursue an IPO.

Throughout the process, the CF team would serve as a financial advisor on all financing related activities, such as arranging bridge financing, presentation to investment banks, assessing the company’s information, and advising the management on the investment bank that would be the best suited for bringing the company public.

What is the average deal size and deal volume

The transaction size ranges between $10MM and $150MM in enterprise value or capital arrangement.

The big 4 CF teams often have higher deal flows than major banks since the sweet spot is in the mid-market space, where there are numerous opportunities. Although some big 4 CF teams may have higher deal flows, the overall fees are less than those earned by major investment banks due to the smaller size deals.

What is the career trajectory like and where do people exit to?

Most juniors leave after working in the CF team for 1 – 2 years. The exit opportunities include investment banking, corporate banking, corporate development, private equity, and pension funds. People that stay until VP (manager) or director (senior manager) level tend to go over directly to a C-level position with a client, an associate position at a private equity firm, or a director role in corporate development in an industry that they have specialized in.

How do big 4 compete against banks without a capital markets platform?

Although the big 4 firms do not have capital markets platforms, the CF teams can serve as trusted advisors to clients and arrange private debt and equity placements. CF teams will leverage the existing relationships with private equity, private debt funds and institutional investors, run competitive processes, and negotiate the most favorable terms for the clients.

For a private mid-market business, an added advantage in engaging a big 4 as the advisor is that they will also have the access to integrated service offerings. The big 4 firms can bring in different types of expertise and services to the clients other than M&A and capital advisory work. These include services such as vendor due diligence, tax optimization advises, financial reporting enhancements, independent valuation, and operational performance enhancement etc. This makes the big 4 a one-stop shop for private companies.

What sort of specialization or niche can big 4 play into where banks cannot?

Banks have a minimum fee they would need to meet before accepting clients. The mid-market businesses normally fall below the minimum fee threshold for larger investment banks. Therefore, the CF teams benefits from the large volume of deals driven from these mid-market clients.

What are the hours like?

The hours are deal-driven. They can range up to 80 – 90 hours a week during busier times, or as little as 40 hours a week during down times. It is generally less demanding than the traditional investment banking roles at major investment banks, and will offer more flexibility.

Are clients separated by industry?

We are industry agnostic. Analysts and associates are not required to specialize in an industry. They can be pulled to work on many different types of clients/deals in financial services, consumers, manufacturing, food and beverages, or technology.

At a VP (manager) or director level, specialization comes into play more as they are expected to develop industry expertise and source deals.

What sort of candidates does CF look to hire? Are a lot of staff plucked from the audit team?

CF looks for candidates that have prior relevant work experiences, a demonstrated track record of performance and other characteristics similar to what investment banks would look for.

  • Experienced Hires
    1. External Experienced Hires – Individuals with prior investment banking or private equity experiences are required; they are hired into the associate position or above. Most of the team members in the CF team would fall into this bucket.
    2. Internal Transfers – The firms will allow transfers from other service lines to apply into any of the financial advisory positions via an internal interview process. CF teams reserve spots for internal transfers each year, and they have historically taken top performers from audit teams.
  • New Graduates
    1. CF teams does not actively post many analyst positions online or through school websites. If a new graduate is interested in a position in the CF team, the best method is to directly reaching out to someone that already works there. The team looks to hire new analysts that have an undergrad degree in finance and have previously interned in a similar role.

What does compensation look like and what are the other perks?

The compensation offered by big 4 is not as competitive as the compensation offered by larger investment banks. However, it comes with a lot of flexibility and less demanding hours. Everyone is given a laptop, and all communications can be done online. This allows for opportunities to work remotely.

There is overtime pay for analysts and associates that do not have a professional designation. An analyst that is consistently pulling 80+ hours over the year will be fairly compensated. However, for anyone that holds a CPA, CA, the overtime pay will not apply.

At the VP (manager) level and above, there are large bonus payouts based on the sourcing and closing of deals. The range of the bonus varies quite significantly, but the all-in compensation is not quite close to those of VPs’ at major investment banks.

Since big 4 is so global is there a lot of cross boarder work? Are there opportunities to work in international offices?

In Canada, most of the deals are regional based. The CF teams have regional teams in the major cities, such as Toronto, Montreal, Vancouver, and Calgary. There are also smaller teams in sub-regions, such as Hamilton/Burlington, Kitchener/Waterloo. Each of the regional teams tend to serve clients within its own region. The Toronto team will have the most resources, and it will leverage its expertise to assist teams and clients in other regions.

There are some cross boarder deals where we would seek for buyers in the U.S. or arrange capital with U.S. financiers. This is applicable if our clients have operations in the U.S. or if they are in a niched space seeking for cheaper capital arrangements.

There are many international opportunities available within the big 4 firms through either a secondment or a direct transfer. The CF teams have more presence in the U.S. and Europe, but not so much in Asia. The financial advisory groups in Asia are consisted of mostly valuations and M&A transaction services teams that would perform some CF work.

Is there any difference in expertise between the big 4? Are the smaller shops like BDO or Grant Thornton competitive in certain spaces?

Most of the big 4 firms focus solely on M&A work, with a concentration on divestitures. Deloitte is the only big 4 that has its own specialized debt and capital advisory group within the corporate finance team, where it focuses on the assessment capital structure and private debt arrangements.

The industry expertise is highly dependent on the senior management team, and varies based on the leading partners and directors within the team. Due to the global recognition and scale of services, the big 4 firms are better at hiring experienced professionals in comparison to smaller shops like BDO and Grant Thornton. As such, at a junior level, you can expect to benefit from more deal flows, visibility to more complex deal structures, and learning opportunities from more experienced individuals.

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