Investment Banking Lingo: How To Walk, Talk And Act Like Gordon Gekko

“I have read Monkey Business, Liar’s Poker, and When Genius Failed each 3 times and consider them my collective bible. I know I have the eye for perfection and artistic vision to create truly immaculate pitch books. I am Microsoft Certified in Excel, and I know all the shortcut keys (alt-i then r, that will insert a new row). Furthermore, I consider myself a whiz with numbers. I know I would be able to build robust models and complete precise calculations for Lehman Brothers.

Most importantly, however, I want to stress how willing I am to do “anything for the team.” I realize the possibility of long hours exists in such a position, and I am ready to work as hard as necessary. I have been practicing staring at a computer monitor for extended hours; I can currently sit motionless in front of a screen for 28 hours, and I am improving daily.”

–RE: Lehman Brothers Recruiting, The Leveraged Sellout

So, how do you succeed as a young investment banker?  How do you perform best in your upcoming summer internship?  What if you’re a full-time hire and you don’t want to be laid off 3 weeks into the job?

Dressing for success and buying some nice clothes might help (don’t go crazy, though).  And yeah, make sure you network and make a good impression on everyone.  Maybe try to learn some modeling before you start.

But one aspect that advice-giving bankers often overlook is the lingo.

Not the basics, like IPO, M&A and LBO – you can read about those in some book called the Vault Guide.

Let’s just skip to the interesting lingo.  The lingo that determines your life or death as a young banker.

Fire Drill

Typical usage: “Sorry for the fire drill, but we need to get this presentation out in the next 30 minutes – can you take care of it?”

What it means for the Analyst: Your life is going to suck for the next 30 minutes… or next 2 hours… or even longer, but at least it will be over at some point.  No, not your life.  The sucking.

What it really means: A “fire drill” is an emergency where you need to finish a presentation or analysis under very tight time constraints.  Generally it’s client-related (so the firm might end up getting paid something for all the insanity), although often it turns out to be completely useless.

Tips and tricks: Unfortunately, you can’t do much when confronted with a fire drill except extinguish the flames as quickly as possible.  The good thing about a fire drill is that it forces you to focus for a set period, and then all the work is done.  You may lose some hair in the process, though.

Bake-off / Beauty Pageant

Typical usage: “We have an IPO bake-off on Friday – can you work on the pitch?”

What it means for the Analyst: Your life is going to suck until the bake-off is over.  There will be many, many (as in potentially over 100) revisions of the presentation until every last comma is placed in exactly the right location.

What it really means: A “bake-off” (also called a “beauty pageant” or “beauty contest” though that sounds even weirder…) refers to several investment banks competing for the same business, whether it’s an IPO, a financing or an M&A deal.  These types of “contests” involve long and very painful pitchbooks.

Tips and tricks: The best way to deal with an upcoming bake-off is to do as little work as possible and to only do specifically what you’re told without going overboard.  If you don’t need a graph with market share by competitor, don’t do it.  Don’t submit work too far in advance of the actual deadline – this just gives people an excuse to add unnecessary material and increase your workload.

Bandwidth

Typical usage: “We have an IPO bake-off on Friday… do you have any bandwidth?”

What it means for the Analyst: Unless you answer “no” with a compelling reason, your life is going to suck until you finish whatever it is the senior banker is indirectly asking you to do.

What it really means: They are trying to give you work and assess whether you have any “capacity” (bandwidth) left to finish it by a certain time.  If you are leaving before 2 AM every night, you have bandwidth.  If you have 3 other bake-off pitches in the next few days and 5 active deals, you don’t have bandwidth.

Tips and tricks: When you’re trying to convince them you have no bandwidth, focus only on future deadlines.  It doesn’t matter how many all-nighters you’ve pulled in the past week, all that matters is how much work is due in the next 24 hours.  This one is straight out of Monkey Business and is as true today as it was back in the 1990’s.

Face Time

Typical usage: “I’d leave right now but it’s only 9 PM… need to put in some face time.”

What it means for the Analyst: Even if you have no work and no one has successfully detected this and given you work, your life is still going to suck because you can’t go home and risk alerting the higher-ups of this truth.

What it really means: “Face Time” refers to staying in the office until an acceptably late time (11 PM or later, though some offices can be more like 2 AM) so that everyone thinks you’re busy and no one gives you more work.  This concept might seem strange to those of you who don’t work in finance.  Don’t worry – it still seems strange to me and I’ve been doing this for 2 years.

Tips and tricks: Actually, many firms and offices are not as big on face time as they once were.  If you have a bad staffer (the one who assigns work to Analysts), he or she might actually go back to the office late at night and check to see who’s still there.  But even at bulge brackets, most groups have become more reasonable in recent years.

If you are in a bad group or one where a lot of face time is required, I would find other ways to get out of the office, like going to the gym on weekdays.  Also, you can start a blog on investment banking to pass the time. :)

Below The Bar

Typical usage: “This deal is below the bar… I think we’re going to pass on the business.”

What it means for the Analyst: Your life, for once, is not going to suck because your MD has decided to give up a client that was too small for the firm.

What it really means: Every firm has a “bar” or “minimum size” deal it will do.  The minimum size can be based on either potential fee or potential deal size (the 2 are not always directly linked, though generally a larger deal will result in a larger fee).

Most bulge brackets, for example, will not do deals below $300 million or so in size.  In a tough market this can change, but bulge brackets focus on deals over $1 billion.  At middle-market firms, the “bar” might be $25 or $50 million.

A small deal takes as much work as a large deal and generates a lower fee, so why spend time and resources on the small fish when you can land the whale?

Tips and tricks: Just keep your mouth shut and be glad you avoided some extra work.  Small deals are really painful anyway because those involved tend to be less sophisticated and cause an uproar over small issues.  So be glad you got to work on Microsoft-Yahoo, even it fell apart, rather than the sale of some $10 million family-owned business with more leaks than the Titanic.

Low Hanging Fruit

Typical usage: “Currently we only have 1 office in Europe but we’re getting requests from European customers all the time… so staffing up there to meet demand would be some real low-hanging fruit.”

What it means for the Analyst: Your life will consist of many painful PowerPoint charts and you may have visions of being a consultant for awhile.

What it really means: Clients usually use “low hanging fruit” to refer to any easy opportunities to increase sales that will become available only after they get sold… or raise money… or get taken private.

Generally “low hanging fruit” is not low hanging at all and requires substantial time and resources.  It’s just a “selling point” or “acquisition consideration” you might try to sell investors on.

Tips and tricks: Use your presentations department.  Avoid the temptation to do too much PowerPoint yourself.  I’ve seen this mistake in many banking newbies.  Also, try to mentally replace any reference to “low hanging fruit” with “this is going to take a lot of time and money and it’s all a lie.”

More To Come

This just scratches the surface – what other investment banking lingo do you use a lot, or do you want to hear about?  Again, nothing as simple as defining IPOs or M&A- you can read about those in an outdated version of the Vault guide.