Monkey Business | John Rolfe

Summary of: Monkey Business: Swinging Through the Wall Street Jungle
By: John Rolfe


Welcome to the thrilling and tumultuous world of Wall Street investment banking, as detailed in the book ‘Monkey Business: Swinging Through the Wall Street Jungle’, authored by John Rolfe. This intriguing book highlights the clearly defined hierarchy in investment banking, from the entry-level analysts and associates to the upper echelons of vice presidents, senior vice presidents, and managing directors. The summary will take you through the intense recruitment process, the often grueling and thankless tasks performed by associates, and the cunning methods they use to survive and advance. Brace yourself to uncover the inner workings of this high-powered world, where extravagant salaries and dizzying sums of money lure people into an unending cycle of long work hours and cutthroat competition.

Inside the World of Wall Street Investment Banking

The world of Wall Street investment banking is a hierarchical world where Analysts occupy the bottom rung while Vice Presidents, Senior Vice Presidents, and Managing Directors occupy the top. Naturally, the industry is fueled by greed, as business schools indoctrinate their students to crave the glories of a career in investment banking. Surviving the gauntlet requires a sense of humor as well as an intense drive to succeed. Summer jobs are designed to test the limits of the young associates, all of whom are competing for a limited number of full-time positions. To be successful, associates must work extreme hours, participate in weekly social events, and become adept at handling pressure. In the end, the associates who are offered fulltime jobs are promised interesting work, good people, and a solid salary. But at what cost?

The Investment Banking Pyramid

The investment banking industry follows a pyramid structure, with Managing Directors at the top, and analysts at the bottom. The industry mainly deals with raising capital for companies and providing corporate finance advice services. Investment banks compete against each other to win clients through “beauty pageant” pitches and making exclusive sale assignments. Investment bankers earn a percentage fee of up to 7% for an IPO. The book also highlights the challenging work environment where junior bankers have to work long hours, do mindless information processing, and print prospectuses, all for the sake of tradition.

The Life of an Investment Banking Associate

Investment banking associates are primarily responsible for valuation work, which involves using different techniques to determine the right sales price for a transaction. Apart from valuation, associates also handle drafting tasks including prospectus development. These drafting sessions are long and boring, and involve legal teams and company representatives. Associates also travel a lot and work with the word processing and copying departments.

Investment banking associates are responsible for valuation work, which involves using different techniques to determine the right sales price for a transaction. Every transaction requires a valuation. For example, if bankers are selling a company, they need to figure out the fair sales price – how much the market is willing to pay for the equity or what the value of the assets backing the bonds is. The managing director gives the associate a reasonable valuation number that they think they can sell to the client. The associate’s primary role is to come out with the right answer rather than use the best technique.

Associates have access to various valuation techniques such as “comparable multiples analysis,” “discounted cash flow analysis,” and “research analyses.” “Comparable multiples analysis” or “comp analysis” is the quickest to use but is subject to great abuse. Since bankers want the highest multiples possible, they often compare with companies in different market segments from the company being valued. “Discounted cash flow analysis” is used to value companies without any business. It attributes value to future business, which the company may or may not produce. However, every valuation boils down to what the market is willing to pay at the end of the day.

Apart from valuation work, associates also handle drafting tasks, including prospectus development. Drafting a prospectus is mandatory under the U.S. Securities law. Drafting sessions are long and boring and involve legal teams and company representatives. Ten sections must be drafted to complete a prospectus: summary, risk factors, use of proceeds, selected financial data, management’s discussion and analysis of risk, business, management, principal and selling stockholders, underwriting, and financial statements. Each organization sends a small army to gird for war to create a sales document that conforms to the U.S. securities law. The entire drafting session takes five to ten full working days, and the associate must attend all the sessions, quietly waiting for the senior banker to say to do something and make sure the document confirms to the bank’s format. At a point known only to the senior banker, the prospectus is deemed complete. The magic words are, “It’s time to go to the printer.” Going to the printer is another opportunity for the associate to wait, as the only task is checking the style of the document and approving the final blue line copy for printing. Then, the associate gets to “push the button” on production, which means approving the printing of 30,000 copies of the prospectus, costing approximately $1.5 million.

Associates also work in word processing, copying, and drafting. Success often depends on effective communication with support staff and bribes. The first two require the associate to deal with the urgent, often-unreasonable needs of managing directors, senior vice presidents, and vice presidents. They play the liaison with the word processing and copying departments to ensure that everything is in order. Drafting is a major element in the prospectus development process, and the importance of this task is only matched by the tedium required to complete it. Drafting sessions are slow, painful, and excruciatingly boring.

The life of an investment banking associate is not just confined to a desk. Associates also travel a lot, visiting exotic locations but seldom seeing them in reality. A European road show can start in New York, go to London for a morning meeting, fly to Paris for a lunch meeting, and then fly home to New York, all within a twenty-four hour period. Domestic travel is as aggressive, and an associate can accumulate 250,000 frequent flyer miles in a year. It is not uncommon for a client company to be located in a city the associate did not know existed prior to landing at its airport.

In conclusion, the life of an investment banking associate is not just about crunching numbers or drafting prospectuses. It involves dealing with multiple aspects of a transaction, working with different departments, and traveling frequently. It can be an arduous task, and one that can lead to an epiphany about one’s life’s true purpose outside the office.

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