Let’s face it. The finance industry prides itself on being complicated. That veil of complexity does a great job of keeping supposed outsiders (read: anyone who is not a straight, white male) out. Part of the reason I started Glass Half Funded was to share knowledge and experience that helps break down the information barrier that surrounds the finance industry.
When I was in college, and even once I started working, I didn’t have a firm understanding of what my career options were. I knew I was interested in mergers and acquisitions (M&A), but I didn’t realize how many different career options were available within the M&A landscape.
If you’re interested in working in M&A, I hope this will help you understand some of your career options. If you’re already working in the industry, chances are you interact with professionals in these areas regularly and learning about their roles might help you build better working relationships. And lastly, even if you don’t work in the industry, learning about these key roles can empower you to participate in conversations you may have previously felt excluded from.
Before we get started, let’s define what is meant by mergers and acquisitions. A merger is when two companies combine forces to become one company (typically under a new name). For example, BB&T and SunTrust merged to become Truist.
You can think of a merger as a combination of equals. An acquisition, on the other hand, is when one company purchases another company and the purchased company becomes part of the acquiring company. For example, when Amazon purchased Whole Foods.
Combining two companies is a huge undertaking that requires several parties to work together. I’m going to separate these career paths into two categories: buyers and sellers, and third party specialists. Buyers and sellers work for or own the companies being bought and sold. Third party specialists, on the other hand, are hired to advise the companies being bought and sold (i.e. the companies are their clients).
BUYERS AND SELLERS
Private equity firms raise money from institutional investors and high net worth individuals to create funds. Those funds are then used to buy companies from the private market (either not publicly traded or taking public companies private), with the intent of selling them again for a profit after 4-7 years (though the time horizon varies greatly between funds).
Private equity firms look for companies where they can create value through financial and/or operational efficiencies. For this reason, a private equity buyer is often called a “financial buyer” or a “financial sponsor.” In the context of an M&A transaction, a private equity firm can either be a buyer or a seller. The type of work you’ll do at a private equity firm will vary depending on role and level.
The junior level associates will spend most of their time researching and analyzing companies. As you move up, you’ll start to manage associates and work more on strategy and negotiations. Once you reach the top, you’ll make the investment decisions and assist in raising funds.
Companies that are large enough or very acquisitive often have their own corporate development departments that work to source potential acquisition targets and execute acquisitions that further the strategic initiatives of their company. This is called a “strategic buyer” (vs. private equity “financial buyers”).
Corporate development work includes industry research, sourcing potential acquisition targets, analyzing those targets, and executing the deals. Depending on the company you work for, you might be involved in other strategic projects outside of acquisitions, too. While it’s most common to represent the buying company, you could also help your company through a merger or even a sale. If you’re interested in corporate development, you can read more about it, here.
THIRD PARTY SPECIALISTS AND ADVISORS
Investment bankers are third party advisors that help companies with a variety of activities, such as underwriting new debt and equity securities, helping companies raise capital, and advising companies through mergers, acquisitions, and reorganizations. In the context of an M&A transaction, investment bankers can be advisors to the buying company or the selling company.
On the buy-side, the bankers can help find and analyze potential acquisitions. This work will be similar to what a corporate development department will do, except the banker is a third party advisor. More commonly, investment bankers work for the selling company. They will create the marketing material used to sell the company, find potential buyers, and see the deal through close. The type of work will vary by level. Analysts spend more time analyzing companies and as you move up, you’ll spend more time trying to find clients.
DUE DILIGENCE CONSULTANTS
An important part of the M&A transaction process is due diligence. In the context of M&A, due diligence is a comprehensive analysis of the business to be acquired. There are several different types of due diligence: legal, financial, technological, operational, and even cultural, to name a few. The purpose of the diligence process is to appropriately assess the risks of executing a transaction.
For example, financial due diligence providers will help the buyer fully understand the financial position of the company. Financial due diligence providers can work for the buyer or the seller. This type of work requires a high level of technical expertise and often requires a CPA (Certified Public Accountant) certification. Read more about what a career in financial due diligence is like, here.
One very key piece of any M&A transaction is the price. For this, buyers and sellers can use valuation specialists, both before and after a deal. A buying company may hire a valuation expert to advise on what price to bid. A selling company may work with valuation experts to determine what they could sell the business for, perhaps even before the company decides to sell.
After an acquisition, valuation specialists are needed to allocate the value among the purchased assets, and then test these assets for impairment each year. Valuation work, like due diligence work, requires a very high level of technical expertise and often requires certification such as CFA (Chartered Financial Analyst) or ASA (American Society of Appraisers). If you’re curious about a valuation career, read more about it, here.
Of course, there are several more parties involved that I haven’t mentioned here, such as the lawyers, because I want to highlight the more financially-inclined career options. I hope you learned more about the M&A process and potential career options available.