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Backup to Investment Banking



Suppose as a student you gave it everything you got. You prepared for Investment Banking interviews as good as you could. You sent out a bunch of applications. But, at the end of the day, you couldn’t get into Investment Banking. You didn’t make it into a bulge bracket or even a smaller boutique firm. However, you still have your reasons to pursue Investment Banking. What is your backup to Investment Banking at this point?


First, you should keep a strong foundation. By that, we mean becoming very proficient in accounting and valuation. Keep learning about M&A Investment Banking. Keep your interview game up. Next, keep your GPA as high as possible. The main goal is to keep yourself as marketable and competitive as possible going into the next recruiting cycle.


With that out of the way, here are backup plans to Investment Banking: Directly related transaction-based roles --> Good

  • Smaller boutique firms

  • Big4 transaction services

  • Controlling

  • Big4 audit


Consulting roles --> Wild card

  • Restructuring Consulting

  • Management Consulting

  • Sales & Trading

  • Asset Management

  • Private Wealth Management

  • Back Office


The main point is to stick as close as possible to the job function. It’s job function over brand at this point. If you don’t manage to break into larger institutions, such as bulge brackets and elite boutiques, the first order of action is to try all other smaller M&A boutiques. Next, we are talking about Big4 transactions services, which is also transaction-related business. Company finance roles are starting to become less related to transaction-based business. Consulting roles are a bit of a wild card. Restructuring focuses heavily on accounting and liquidity planning. Management Consulting should be top-tier strategy consulting. On the other hand, any type of operations consulting is relatively unrelated to finance.



Directly related transaction-based roles


Smaller boutique firms


If you are struggling with more prestigious institutions, such as bulge brackets & elite boutiques, maybe you should expand your scope to middle market and regional boutiques. There are many boutiques in the US and Europe besides the obvious and well-known middle-market banks. Just look around and dig up some more dirt than the obvious players.


Smaller boutiques are a great place to look at if you have little to no finance experience. The recruiting process is less structured compared to larger institutions and they are more willing to hire a strong candidate with an unconventional CV and the right attitude. Once you have your first relevant internships, you will make yourself more marketable for the next recruiting cycle.


If you are really keen on getting into Investment Banking, we think this is your best alternative. There are enough lesser-known banks and advisory firms out there. You are better off working at a no-name boutique and doing the actual job function.




Big4 transaction services


Next, we have Big4 transaction services. While it is not directly M&A Investment Banking, it is closely related. There are lots of transferrable technical skills. Those transaction services teams draft financial due diligence reports for an M&A transaction. This is more about checking the books and checking whether the adjusted EBITDA is indeed valid for valuation purposes. It’s less about deal-making, but the accounting skills you learn are easily transferable to M&A Investment Banking.


We think it’s a good stepping-stone. Many first- and second-year students intern in these roles before building their CV. It’s also an alternative full-time option to move into M&A Investment Banking after 2-3 years of professional experience.



Controlling & accounting roles


Controlling


Here, we are moving one step away compared to transaction-based roles. Controlling goes into deeper detail regarding financial statements, projections, forecasting and monitoring of the company’s financial performance. It’s a role that focuses more on the finances of one specific company or business unit of a larger corporate. Projections and forecasting are more relevant skills to Investment Banking, but Controlling is not about deal-making.


Your main angle to Investment Banking is that you learned in detail about financial statements and accounting and now want to learn more about valuation and deal-making.



Big4 audit


Here, you learn more about accounting and financial statements on a very detailed level, like IFRS-level and how invoices get recognized. Audit is more about drafting and checking annual reports. It’s not about deal-making. It’s very accounting heavy. To be blunt, audit is good for your first finance internship if you have zero experience and want to build your CV. Other than that, we recommend moving into Transaction Services roles. Those roles are much more transaction-focused, whereas audit is very accounting-focused.


Your main angle to Investment Banking is the same: you know accounting and financial statements and want to learn more about valuation and deal-making. If you are still having difficulties breaking into Investment Banking, your best bet is trying to move into Transaction Services roles within Big4 and build your CV from there.



Consulting roles


Restructuring Consulting


Restructuring Consulting is about helping firms in distress. We are talking about firms close to bankruptcy or already within insolvency procedures. Now, the firefighters are called in to salvage whatever is left of that company. Compared to regular Management Consulting, Restructuring Consulting involves a lot more finance. You will develop a good understanding of accounting, liquidity planning and financial modeling. It’s a lot more operative and hands-on compared to Investment Banking.


Your main angle to Investment Banking is that you have a good understanding of accounting and know how financial modeling works. You are now looking to transition into a more deal-making role and deal with healthier companies compared to near-bankrupt firms. Remember, Restructuring Consulting is a little bit of an oddball. Insolvency procedures and regulations are their own thing. Transitioning into distressed M&A might be more accessible. But again, distressed M&A is entirely different from regular M&A.



Management Consulting


Top-tier strategy consulting is relevant. You will get invited by Investment Banks if you have brand-name Management Consulting firms on your CV. Keep in mind, though, stay with strategy consulting firms like MBB. You want to remain as close to strategy projects as possible, where you have some exposure to business case modeling in Excel.


Your main angle is that you understand strategy, can quickly grasp business models, are good with PowerPoint and Excel and have the work endurance. But you want to learn more about finance, valuation and deal-making.


Stay away from more operative process consulting roles, HR consulting, change management or super specific banking consulting, like risk management. These roles just don’t have any connection with finance. They are very specific to their function and industry and have little in common with Investment Banking.



Roles to avoid for Investment Banking


Now, let’s talk about roles to avoid for Investment Banking. These are not good backups to Investment Banking. The main point is to stick as close as possible to the job function. These roles are just different in their job function to Investment Banking. Don’t pick those job functions because the brand is more “prestigious”. It’s job function over brand reputation. You are better off with a no-name regional boutique than any of these roles at a bulge bracket.

  • Sales & Trading – Both are intermediaries or brokers. However, Sales & Trading deals with trading securities for hedge funds and asset managers. We are talking about trading stocks, bonds, FX, derivatives or commodities for institutional clients. Investment Banking is about buying or selling an entire privately held company. It’s just a different skill set. Sales & Trading has little exposure to accounting, financial modeling, valuation and corporate finance. It’s securities vs. privately held businesses

  • Asset Management – Here, you are managing a specific asset class (i.e., securities) for institutional clients. No connection to Investment Banking or privately held companies.

  • Private Wealth Management – Here, you are managing the financial portfolio of a wealthy individual. No connection to Investment Banking or privately held companies

  • Back Office – Transitioning from Back Office roles to front office Investment Banking rarely happens. The skill sets are entirely different. Back Office roles, such as compliance or technology, just don’t have any overlap with Investment Banking or privately held companies

We don’t want to bash or talk down on any of those roles. They are just different. It’s another discipline. If you want to get into Investment Banking, it’s best to choose the roles to maximize your chances. You have to think in terms of probabilities. These roles are just not a good bet for Investment Banking.

Where does it leave us?


To recap, what is a good backup to Investment Banking? The main goal is to stick as close as possible to the job function. Any role you pick should have some skill overlap in accounting, financial modeling, valuation, corporate finance and deal-making. The more, the better. It’s job function over brand at this point.


With that said, here are your alternatives:

  • Directly related transaction-based roles: smaller boutique firms and Big4 transaction services

  • Controlling & accounting roles: Controlling and Big4 audit

  • Consulting roles: Restructuring Consulting and Management Consulting

  • Roles to avoid for Investment Banking: Sales & Trading, Asset Management, Private Wealth Management and Back Office

There are plenty of smaller M&A shops in the US or Europe. You just need to look closer and dig up some more dirt. Big4 transaction services is the next best thing. They do the financial due diligence reports for the deals. Controlling and Big audit roles are still finance but more company specific vs. related to deal-making. Consulting roles are a bit of a wild card. Restructuring Consulting has overlaps in accounting and financial modeling, but insolvency procedures have specific quirks. Top-tier strategy consulting is a good bet. Just avoid more operative consulting roles, such as processes, HR or change management. Lastly, please avoid Sales & Trading, Asset Management, Private Wealth Management and Back Office if you want to get into Investment Banking. There is just too little overlap in skills.



Additional resources


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