THE ESCAPED ANALYST: M&A vs. markets

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In the responses to my last article, a lot of people focussed on the difference between working in advisory and a trading floor role (i.e. in sales or trading). As someone who has seen both sides of an investment bank (I interned on the trading floor and then did my analyst programme in M&A for three years) these are my thoughts...

Trading is chaotic, M&A is cerebral

A trading floor is an intense, noisy place. Work starts early (our first morning meeting was at 5.45AM) and you may not be able to leave your seat until the markets close. That's a 12-hour stint, so bring a colostomy bag. It requires a level of focus not many people have. Personalities are colourful, sometimes even sociopathic. Don't be surprised if the same trader who shouted and swore at you one day cracks a joke with you the next day.

By contrast, the M&A floor can feel like a library. A friend of mine who switched to an analyst role on the fixed income floor after 3 years of M&A had a daily headache for the first three weeks. Work starts later (there's no market open) but the novelty wears off after your first all-nighter. I found a client meeting room with a lockable door upstairs where I used to sleep after my bosses had left for their meetings. There are moments of high intensity and you can never switch off your Blackberry. I've been called into the office at 8.45AM on a Sunday (I didn't go home until the next morning at 06.15) and have had my holidays cancelled less than a day in advance. But you'll make the front pages of the papers if you work on a large deal.

M&A gives you other options, trading doesn't

Trading teaches you to understand market behaviour and flows, and can be very mathematically analytical. Sales will develop your interpersonal skills (but you'll need to have some in the first place). Salespeople go on to manage important institutional relationships (think; I.R. at a large hedge fund). John Mack started out as a bond salesman. Traders can make the switch to asset managers and hedge funds, especially if they have a prop background. Beyond that, choices are limited, unless their roles involved financial modelling or fundamental valuation. Assuming that he hasn't already made enough to retire on, a trader's skillset is not transferrable.

M&A involves women; trading generally doesn't

I say 'he' because there are hardly ever female traders. I dated within the firm throughout my

time in M&A; the trading floor was a dry patch.

Trading allows you to justify your bonus; M&A doesn't

Pay is greater and hierarchy is less in sales or trading. Having a P&L to point to at year end helps justify your bonus demands in a way that's not possible in M&A. In advisory, your bosses hold the relationships - get ready to play the political game to point out your role in the transactions you've worked on. It's not meritocratic.

In summary...

M&A analysts have more exit options. As long as you were mandated on meaningful transactions, you will have had a crash course on valuation, corporate finance and accounting, second only to a CFA or ACA qualification. And that is valuable to hedge funds (who do any kind of fundamental analysis), private equity, asset managers & sellside equity research and corporate strategy divisions of companies. And most of these firms look to be exempt from the super-tax, not posing a systemic risk to the economy (apart from the largest hedge funds) or having received bailouts.

Advisory is a trade-off of broader career options over the higher pay and sooner accruing rewards of the trading floor. But think carefully about who you are before you make the decision. And discount your cashflows with a high cost of capital in each case.

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