Vice presidents and directors shoulder an enormous, outsize set of business development and execution responsibilities that keep the investment banking machine running.
It's not uncommon to hear a senior investment banker describe his or her "VP years" as having been the best or most fulfilling of a multidecade career. And there's a certain logic to it. VPs, supported by associates and analysts, are unshackled from the manual creation and refining of slides and financial models, and are not yet directly responsible for the different, but at least as intense, pressure to bring in deals.
But it is a far more precarious perch than most realize. VP compensation and job security are dependent, in many cases, on overall deal volumes which sit beyond their control. When the job is to prepare compelling pitches for actionable ideas and execute the deals those pitches yield, a macro-level slowdown in IPOs, debt offerings and merger and acquisition deals will invariably prompt any firm's leadership to take a very close look at its roster of VPs, and quickly cull any who are: 1) insufficiently effective now, and/or 2) ill-equipped to be productive at the partner/managing director role tomorrow.
Conversely, VPs who operate efficiently not only create incremental near-term value, but they also position themselves to begin originating deals immediately, and seamlessly when they are promoted. That position is more important than it might appear and is compounded by the jarringly abrupt shift in investment banking responsibilities that comes with a promotion to the coverage officer level. In just months, directors are expected to cultivate C-level relationships, fill a pipeline and convert a meaningful portion of it to revenue in the form of capital markets and M&A mandates. It isn't easy to begin with, and has been made more difficult by the fact that senior bankers long ago stopped retiring in their early 40s, thus making room for early-career coverage officers. Imagine if each bank made the transition more likely to succeed by supporting relationships and productivity.
To maximize both, the most successful mid-level officers focus their energies on three specific places, none of which may be obvious or conventional. These hidden gems position mid-level investment bankers for success if they have the time and tools to find and build relationships in the market and inside the firm.
Some VPs have greater access to rising stars than to corporate C-suite officers who are known quantities, invariably being courted by several capable bankers. And those mid- to senior-level corporate VPs who don't make banker selection decisions today are likely to tomorrow. Turnover at the CFO level, to take one example, tends to be high, and new or replacement CFOs are often drawn from within the company's or another company's finance team. Similarly, a COO who doesn't get involved in capital raises or acquisitions until they're closed might be a future CEO. The same story goes for the promising private equity VP who is likely to be a partner one day, at which point they will be in a position to dispense potentially millions of dollars of investment banking fees every year.
The agreement includes funds for small-business lending and mortgages for low- and moderate-income borrowers in California and Massachusetts. It puts an end to questions about the fate of an $11.2 billion plan that Silicon Valley Bank inked before it failed in March.
Then there's broader coverage. As managing directors stay in place, they continue covering their clients and own the fees generated by those clients. VPs need to support that coverage, and are also the first to notice who isn't on their radar today. They can add value by exploring neglected corporates and financial sponsors that are or are becoming acquisitive or capital-intensive. What sub-verticals, requiring specialized industry knowledge, are rapidly growing and attracting venture capital? What small private equity firms are doing well and are likely to become big private equity firms when they raise their next fund? Any finance organization that increases VP efficiency and provides the tools for good VPs to explore greenfields will help leadership identify the talent that has created an opportunity to augment the firm's clientele and pipeline when considering the next person they will promote to director.
There's one more source that is closer to home — colleagues. Versatile coverage bankers are conversant in their bank's range of products — equity, debt, advisory. But the best bankers have figured out how and when to leverage the expertise of the product experts who handle that panoply of transactions.
As for productivity, VPs who don't have access to a broad range of resources and information are hamstrung. Investment banks are sitting on a cache of data — inside the organization and across all its external services and resources. Meanwhile, M&A, equity and debt deals are delicate, labor intensive and, with rare exceptions, complex. Investment banks need to provide coverage bankers with the tools they need to target, track and manage relationships as well as deals.
It may seem counterintuitive when banks ask more from VPs in a tight investment banking market, but firms that make the work easier while introducing VPs to opportunity often get the benefit of relationships that no one counted on monetizing.
