While M&A teams talk about the ‘deal cycle’, the key term you’ll hear in equity capital markets (ECM) is the ‘deal pipeline’. Current deal activity is one thing, but having a healthy number of firms rumoured or largely expected to go public is key to success in equity capital markets.
“A typical day begins by understanding the market complexities for that day and week,” says Steven Halperin, co-head of EMEA equity capital markets at Barclays. “We do this by reading newspapers, listening to the research briefings, and participating in team meetings.”
As soon as a pitching process opens up, it’s the senior bankers that will often hop on a plane and try and sell the investment bank to a potential client. This is the ‘origination’ stage of the deal, but although it’s the directors and managing directors who are expected to be the face of the bank, junior employees are engaged in preparing the marketing material required to convince a client to go with a particular bank. If they’re successful, the team involved moves on to the ‘execution’ stage of the deal.
“Origination could include preparing or conducting client pitches. Executing would include drafting or structuring work with clients, lawyers and/or accountants or distribution efforts involving syndicate, sales, and investors,” says Halperin.
Equity capital markets jobs are typically divided into three separate areas. Firstly, there will be the industry group or sector that you’re focused on – investment banks tend to use the same categorisations across the different investment banking divisions such as healthcare, technology media and communications or financial institutions. Then there’s the geographical area you’re covering and finally the product type you specialize in.
That’s not to say that you’ll be focused purely on, say, IPOs. Teams are divided by ‘common’ equity products that includes first issuance, follow ons, secondary offerings and the like, then convertibles are separated out (and tend to sit in both ECM and debt capital markets teams) and there are also teams that focus on more complex derivative products. In some banks, there are teams of bankers who focus solely on private placements.
Then, there’s the comparatively small and niche (or banks would say ‘collegiate’) teams working in equity syndicate. This is close to the ECM division, but not officially part of it and they work on primary and secondary equity issuances. Equity syndicates will come to the deal at a later stage, liaising with the sales, trading and research departments to try and get an idea on the markets, speak to investors to drum up interest in the deal and keep track of clients who have subscribed to the deal or are interested in doing so.