Introduction to the Pitchbook
2021.07.12 Pitchbook Draft v1
Dear friends,
Welcome to a new week. Today we are going to look at the “Pitchbook” which is a common document in M&A advisory and it might be something you come to dread!
The below is the front cover of Moelis’ pitchbook to Oracle for the role of advisor to the Special Committee of the Board of Directors on a proposed transaction with Netsuite (which went on to be successful).
What is a Pitchbook?
A pitchbook is a document used to support a pitch (presentation) to a client – it is basically your firm presenting its thoughts / ideas on a situation to the client and telling them why they should hire you to work for them. This is one of the “sales” elements of M&A advisory.
There are several types of pitches depending on the level of relationship with the client and specific situation. We will outline these from most desirable to least desirable:
Confirmatory Pitch [Most Desirable / Least Formal] - in this situation, the client has given you a very strong indication (usually off the record) that they will hire you for a certain mandate due to a very strong relationship. However, they still require you to prepare some materials in order to “justify” their decision to the higher ups (could be CEO or Board depending on who makes the final decision on the appointment). In this case, the pitch might be very short which is great for you!
Request for Proposal (“RFP”) [Desirable / Most Formal] - in this situation, the potential client has formally contacted a number of M&A advisors with a briefing on a potential situation. They ask each bank to prepare its thoughts on this situation and to submit it to them by an agreed date. Following which, the banks will present (pitch) to the potential client. This is known as a “beauty parade” or “bake-off” given banks are trying to out-compete one another. These pitches often require the most work as your team will be under pressure to “pull out all the stops” to differentiate itself to give it the best chance of winning. You may be invited to pitch even if the client has a very strong relationship with another bank - the fact you are invited usually indicates your relationship is fairly strong and there is a chance of you winning (if clients continually invited banks to pitch but never awarded them a mandate the banks would begin to be wary of putting in a good effort and focus their efforts elsewhere).
Warm Pitch [Somewhat Desirable / Somewhat Formal] - in this situation, your team has come up with an idea which they would like the client to explore further. This idea is something the client has indicated they might want to do (for example buy another company) in discussions with your team - you are in regular conversation with the client due to a warm relationship. This is somewhat desirable as the client has indicated they may be open to the idea, so there is some chance of it converting to a real project.
Cold Pitch [Least Desirable / Somewhat Formal] - in this situation, your team has come up with a random idea (which may or may not be clever) which they would like a client to explore further. The client has not indicated that they are interested in the idea prior to the pitch (you may not have even talked to them - i.e. cold relationship), although it is likely your team thinks this idea “makes sense” for the client to do strategically. This is least desirable as the client has not indicated they are open to the idea, and therefore the chances of it converting can be very slim. The one thing to note is sometimes “unconventional” ideas delivered as cold pitches might “prompt” the client to think in a different way resulting in them viewing your team as adding value - the right idea can be powerful and could result in a mandate.
A common scenario where a pitchbook is prepared is for a potential sell-side mandate. A prospective client you know is looking to sell their business might ask you to prepare a pitchbook to outline what you think of this idea and why they should pick you to work on the engagement.
You might ask, what is included in a pitchbook? Good question! We will cover this in detail in following posts. Many pitchbooks will have overlap in a few areas which makes it easier to produce these documents under time pressure, while other areas will require bespoke research and analysis.
When you are asked to create a pitchbook a tip is to always ask around your team what “precedent” (example) documents they might have from previous pitches. Depending on how your firm operates, there could be a shared storage drive where work is stored, making it easy to find these precedents. It could be that your team has these saved on their computers locally (e.g. desktop) or in their email inbox. They may even have hard copies of pitches from other banks which they obtained in “questionable” ways - to repeat, it is always worth asking around (unless if you don’t mind wasting your time!).
Precedents are always useful as they give you an idea of how the firm (or other firms) have approached different situations in the past, what level of work is the “standard” and how different pitchbooks are structured.
Note: I’ll quickly cover below the common ranks in M&A advisory before we continue so it will be easier for readers to understand the rest of the post, although there could be a whole post on hierarchy!
The common hierarchy in M&A advisory is as follows (titles may differ slightly by firm):
Intern or “Summer Analyst” - usually up to 3 months of experience during summer internship
Analyst - usually 0-3 years of experience depending on market (graduates start as analysts)
Associate - usually 2-6 years of experience depending on market (MBA recruits start as Associates)
Vice President (VP) - usually 6-9 years of experience depending on market
Director - usually 9+ years of experience depending on market
Managing Director (MD) usually 10+ years of experience depending on market
The above indications of years of experience will vary a lot depending on the firm, the country, individual performance, the state of the market, desire to retain staff (early promotion) etc. The Director / Managing Director Level isn’t as clear given that some Directors will never become Managing Directors, while some are “fast-tracked” to MD through exceptional performance. If you have any connection to the military, you will see that M&A advisory is “similar” in ways based on the rigid structure!
Let the Games Begin!
Once you have received a briefing from a senior banker (MD) on the situation (for example who the potential client is, what they are looking to do and the all important deadline), someone on your team will generally be asked to prepare a “table of contents” (TOC) for the pitch or a “skeleton” PPT. This is usually left to someone with a few years of experience (e.g. Associate or above) given they are thought to have the ability to think in a “structured” way and are being given an opportunity to “lead”. In reality, this drafting exercise could be done by anyone who has seen a few pitchbooks.
Table of Contents (“TOC”)
A TOC is what it suggests, it outlines what pages should be in the pitchbook for example page 1: Title page, page 2: Disclaimer, Page 3: Table of Contents, Page 4: Team Structure etc.
The TOC might be done in a Word document or an email. A “skeleton” PPT is simply a blank or incomplete PPT (created in PowerPoint) where each slide is set up how the banker envisages the pitchbook will look. A skeleton PPT might have a bit more detail for example placeholder charts or tables and drafting notes on the pages (e.g. “use the chart from the pitch last month for page 5”). The last (and generally least preferred method) would be a hard copy skeleton of the PPT! This would be where the banker physically draws on blank pieces of paper what they are wanting each slide to look like – these bankers tend to have a bigger “ego” given they don’t want to take the effort to record their thoughts digitally, which would save time for the whole team!
Once the draft TOC or skeleton has been completed, in the best case scenario, it will be looked at by the MD who will provide their comments / edits on this before you begin work. In the worst case scenario you will be handed the TOC or skeleton by the Associate or VP and told to get to work. The reason this is not recommended is because you may end up doing the work and the MD does not actually want it to be done that way! It is important to get directions from the most senior banker wherever possible because they will have the greater influence on what the final product should look like, so you should listen to them.
The Associate will assign slides from the TOC / skeleton between team members so everyone knows what they are doing in order to get the task done (although in many cases you will be working on virtually all the slides). Now it is time to get to work! The team for a pitch can vary wildly depending on how important it is. In this situation we will assume there is a yourself (Analyst), an Associate, VP and MD. Note that there is no Director on this team - not every team will necessarily have one person from each “position” or “rank”. Some teams can be very lean, for example just an Analyst and Director, or Analyst and Associate.
As mentioned before, you should ask your team for precedents so you can directly copy and paste work (hopefully) or slightly modify / update it where possible. You will find in many cases work has been done previously so there is no need to start from scratch or “reinvent” the wheel.
Why do Pitchbooks involve so much work?
It is important to understand the timeline for the completion of your pitchbook. Some people might think that a pitchbook is simple task and be done in a short time. This can be the case in some situations. What usually makes it a difficult task is the continuous reviews at each stage of the process!
Before we continue, we must define a few more concepts: “comments”, “mark-ups” and “turns”.
Comment - self-explanatory – it is a comment from another banker on the presentation. For example, “on page 3, suggest you change this word to another word”
Mark-Up - a mark-up is when a banker makes written comments on a hard copy (print out) of the PPT. For example they might cross out certain words and write in what they should be, or make a note to swap the order of charts on a page. Some bankers are notorious for using “aggressive” pen colors when making their mark-ups (often red pen to reinforce that you have made mistakes). In the modern era some bankers will do their mark-ups on a tablet (e.g. Microsoft Surface or Apple iPad etc.) and provide it as a PDF
Turn - a turn is another word for a revision – for example, a banker might say “after this turn on the PPT it should be ready for the client”
Creating a PPT is a very iterative process. After a full draft of the pitchbook is completed, or perhaps a section or a slide is completed, a senior banker will often review the work and provide comments or mark-ups to you with the aim of “improving” the slides. The comments are for you as a junior banker to interpret and execute in order to create a document to their desired standard. Whether or not their comments actually improve the final output are another matter…
In my experience, the Associate will provide comments on your work for a few “turns” before it goes to the VP for their comments. The VP will provide comments for a few more turns, then it will go to the MD who will provide their comments for a few more turns. This is why it takes a very long time to complete a pitchbook because differing opinions clash - what the Associate thinks is right might not be what the VP wants, and what the VP wants might not be what the MD wants - this is why getting direction straight from the MD is highly recommended!! (but can be difficult in practice as the VP and Associate need to feel useful / that they are adding value, and will often say that you shouldn’t worry because they “know” how a certain MD likes things to be done).
When setting the timeline to complete a pitch, you will always need to take in to account how many turns might be required. For example, if the deadline was in one week from today, a work plan could be:
We need a full draft completed in two days so the Associate can have a look;
Then leave one day for Associate turns before we give it to the VP;
Then two days for VP turns before it goes to the MD;
Lastly, allow two days for MD turns
In the above, although there is a whole week before the deadline, which seems reasonable, the first draft must be done in two days to allow for turns! (This is why the Analyst will be in the office after midnight most days). Note that this timeline may differ by firm / situation and could in fact be a lot less forgiving (e.g. a few days rather than a whole week!).
You will also find that the senior bankers often take a very long time to provide their comments. You may provide the latest version of the PPT to a senior banker in the morning (or the previous night) and not get any response until many hours later. Therefore many junior bankers might in fact not have much to do during the “normal” work day (9am-5pm) as they are waiting for comments. Senior bankers will strategically provide their comments in the evening before they leave the office, meaning the work day only starts between 5pm-8pm for a junior! The seniors will also expect their comments to be reflected on the next turn and ready for when they get to the office the next morning (even if they only intend to read it again in the afternoon!).
Although this might seem ridiculous to some, the core reason there are so many comments / turns is to try and produce a PPT which the MD will like - the MD doesn’t want to see minor errors or half-baked analysis when they read the pitchbook for the first time. If you have a good Associate and VP they will work collaboratively with you to produce the best product possible and actually work on some of the slides themselves in PPT (this can be rare depending on their “ego”). You should try to avoid making minor errors (such as typos), but they are bound to happen when you have your eyes on the same PPT until the early hours for several days in a row!
Some comments can be straightforward (such as modifying a word or words), others can be time consuming but not difficult (we need to change the colors on all of the charts to a certain order), while some are time consuming and difficult (let’s have a look at summarizing potential buyers from Europe who have invested more than $100 million in this sector after COVID-19, and also check if their investment appetite has changed materially when comparing pre-COVID and post-COVID deal-making activity).
There will be many turns of the PPT before it is finally “completed”, often all the way until the deadline the client has imposed. This is because the MD or other senior bankers want to make it “perfect” and in their mind it cannot be perfect unless it is being improved continually prior to the deadline, regardless of how much value the “improvements” are adding. It would not be uncommon to have more than 50 revisions of a pitch (although I’ve seen much more!).
In the next post I will include a draft TOC for a pitchbook where your team is seeking to win a potential sell-side mandate. I will then go into each of these sections included in the TOC in greater detail over a few posts and provide some commentary on how we might approach them and add any insights I might have.
Best regards,
BowTied Sand Cat
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, tax, legal or accounting advice. You should consult your own financial, tax, legal and accounting advisors before engaging in any transaction.