What is M&A

In this article for the Bayes Times, our aim is to help students gain a better understanding of M&A, by tackling key questions surrounding the M&A division, such as how to break into it, what to do once one has secured a job in the industry, typical salaries on offer, and more…

What exactly is M&A?

In an investment Bank, M&A divisions advise clients/companies with choosing whom to buy and whom to sell to. M&A refers to the coming together of two or more companies in some shape or form. Although Mergers and Acquisitions are similar in their overall objective of bringing two firms together, they differ in the way in which the companies combine. In a merger, two companies of similar size combine to form a single entity. Whereas in an Acquisition, generally, a larger company acquires a smaller company. (Hayes, 2019).

What is the typical route into M&A?

The M&A industry is extremely competitive and is showing no signs of easing ‘barriers to entry’. But there are tried and tested ways to get into M&A. The most common route would be, as a university student, to secure an internship and work hard to convert that position to a full-time role. Post this, one should strive to work their way up the corporate ladder within that specific firm.

In terms of skills that are needed for M&A, Morgan Stanley’s Anthony Zammit, a VP in Morgan Stanley’s Investment Banking division, states “M&A bankers need an analytical mind, motivation, and interpersonal skills”. These are some of the key skills required to succeed in M&A and are skills students pursuing a career in Mergers and Acquisitions should work to improve on.

How to progress in M&A?

The first position would be as an analyst for around three years, then moving up to an associate for a similar amount of time, then Vice President/Managing Director. (Clarke, 2014). Generally, the more senior you get within the firm, the better chance there is to be on the forefront of M&A deals, rather than at junior level, where one may occasionally attend client meetings, but will predominantly focus on financial modelling and research in order to produce the ‘pitch book’ – the document a firm will use to outline ideas on which company a client should buy or sell to. (Clarke, 2014).

Who are the biggest firms in the industry?

Some of the biggest names in the M&A industry include Goldman Sachs, JP Morgan Chase and Co, Bank of America, Morgan Stanley, Evercore, Moelis and Company, Lazard, and many other prestigious Investment Banks.

How well does M&A pay exactly?

For your first year as an M&A analyst, one can expect to make around £50,000, plus bonuses which can take the yearly salary to £100,000. With that rising to around £55,000-£65,000 in your second year. After becoming an Associate (around 2-3 years after becoming an analyst), one can expect to earn around £80,000 plus bonuses and depending on the firm, a sign-on bonus at around £25,000, so all in all around £130,000 upwards. In the 3rd year as an Associate one can expect to breach the £180,000 barrier, more depending on the Bank. (Butcher, 2020).

Bear in mind, however, the above salaries are based largely on bulge bracket banks.