by John Rolfe
There were other managing directors, though, who got up to make a pitch to potential clients and froze up like a born-again preacher in a Tijuana whorehouse. The pitch book was their security blanket. They read it aloud to the client like a kindergarten teacher at story time, physically unable to deviate from its sequence of pages. Watching these managing directors deliver a pitch was as painful as getting a steaming hot chocolate enema.
An associate’s primary job is to put the pitch books together, carry them to the meeting, and pass them out. Associates routinely fly five hundred miles just to be the bellhop at a meaningless pitch. For a while, when associates are new, they’ll try to convince themselves that things will change and that eventually they’ll be asked to take a more active role, but it never happens. It’s nothing but a pipe dream.
When associates finally reach this realization, they no longer waste time during the pitches conjuring visions of greatness. The pitch becomes nothing more than a routine to be suffered through. Since associates have typically been working on the pitch for the entire previous night, their primary activity becomes a struggle to stay awake. Every associate has his own techniques. I used to stick my hands into my pockets and try to pull hairs out of my legs. Rolfe once considered attaching clothespins to his nuts.
Being assigned to create a pitch book is a punishment. It’s the pinnacle of mindless processing. Associates start out believing that they’re going to create the Magna Carta, the masterpiece that will bring in the big deal, and that their pitch book will move mountains, convert heathens, and generate enormous fees. They end up realizing that the pitch book is an unholy creation, a mixture of three-week-old potted meat and smelly cottage cheese with just enough curry powder added to cover the latent rottenness.
A pitch book is never original. It’s three sections from each of five other pitch books mashed together with a new overview in the front. The general outline is always the same. There are four main sections: Overview, Capital Markets Update, Valuation, and Expertise.
The first section is Overview. This section explains why the company that’s getting the pitch is such a great company, and why they should think about doing a deal now instead of later. It shamelessly strokes the company’s ego. Overview utilizes the classic technique of buttering up the client. It gets the client to spread their legs before the banker jams home the bacon.
If the pitch is for an underwriting, the second section of the pitch book is Capital Markets Update. This is the section where the capital markets guy chimes in if the bankers have brought him along. Capital Markets Update gives the client an overview of either the equity market or the bond market. If the capital markets are in good shape, this section provides the bankers with the ammunition to give the client inflated expectations about how successful their offering is going to be. If the capital markets are in a funk, the bankers gloss over this section quickly, and then use it as an excuse when they later fail to get the deal sold: “We warned you. We told you that the capital markets were bad…remember the Capital Markets Update section? Don’t blame us!”
If the pitch is for an advisory deal, then a Strategic Considerations section replaces the Capital Markets Update. Strategic Considerations is supposed to justify for the client the need for a merger, acquisition, recapitalization, or whatever other flavor of the day the banker is peddling. In reality, this section is a lot like a game of Boggle. The associate puts a bunch of sexy-sounding financial words into a shaker (“capital,” “synergy,” “efficiency,” “value”…), then shakes the words up and peppers them randomly through a bunch of sentences that contain other random words. None of it makes any sense, but if it begins to sound enough like it’s out of a business school textbook, then the potential client will sometimes buy off on it and retain the investment bank to do a deal.
The third section of the pitch book is Valuation. This is the heart of the book, and it’s the part that the client really cares about. This is the part where the banker pleasures the potential client with a high hard one. This is the section that either tells the client how the market will value their company, or how much money they stand to make from the transaction that is being proposed. It’s the main course. The experienced clients turn directly to this section as soon as the pitch books are handed out so that they can get to the answer quickly. They look for the answer on their own and ignore the bankers. If they don’t like the answer that they find, they sometimes throw the bankers out the back door into the alley.
The fourth and last section of the pitch book is Expertise. This is the part of the pitch book where the investment bank making the pitch attempts to demonstrate why its the logical choice to lead the transaction. The marketing approach in this section generally focuses on size and quantity, as in the pie-eating contest at the county fair. If a bank has done a lot of a certain kind of deal, their bankers figure that it implies that they must be good at them. Quality is of no consequence, it’s all about size and quantity. The Expertise section gives the bankers a chance to perpetrate one of their favorite deceptions—the spinning of the league tables.
The league tables are lists detailing how many deals, representing what total dollar amount, an investment bank has done in a given category. They’re included in every pitch that’s ever been made for an underwriting. If the pitch is for an IPO, the league tables will trumpet the bank’s IPO experience. If the pitch is for a high-yield offering, the league tables will focus on the bank’s experience in issuing high yield. The problem is that only one investment bank can truly be number one for any given type of deal, so the bankers have to get creative. It becomes the associate’s responsibility to maximize this creativity.
When spinning the league tables, a banker will steadily whittle down the universe of “appropriate” deals until the bank comes out number one. There are a million ways to do this. First, the banker might narrow the list of deals down to only those within a certain dollar-size range. Next, he might narrow the universe down further to include only those deals in a certain industry sector. Still not number one? Try throwing out all deals for foreign issuers, or maybe excluding deals that were done concurrently with other kinds of deals. The possibilities are nearly limitless. With enough trips to the plastic surgeon, just about any bowlegged trollop can come out looking like a supermodel.
At the end of the day, when the league tables finally make it into the pitch book, the only evidence of subterfuge will be discreet. The heading of the league table will trumpet, “Our bank is the top underwriter of IPOs for companies similar to Acme.” The caveat, in the form of a footnote in barely legible type at the bottom of the page, will tell the whole story. *
I once met a guy who told me that he’d had sex with seven different women. I told him that I didn’t think that was so many. Then he told me that five of them had been Scandinavian hookers. Well, that changed the picture a little bit. If he was a banker, he could have made a league table for “Most Sexually Active” that would have had him as number one and Wilt Chamberlain as number two. That would have looked impressive, as long as you didn’t read the footnote.†
In concept, the creation of pitch books shouldn’t be the bane of the associate’s existence. Mix up a cup of hyperbole, a dash of fabrication, a healthy dose of plagiarism, and a saucerful of aggressive valuation, shake well, and it’s complete. In practice, it doesn’t work like that. When it comes to pitch books, there’s a long-standing tradition among bankers that it is all about pain, suffering, deliverance, and learning who’s in charge.
The associate can deliver the first draft of the pitch book to the managing director a week ahead of the pitch. The associate can deliver the pitch in person or can have a eunuch in a loincloth deliver it. The associate can put on a Lycra body suit and a pair of gold lamé pumps, and deliver the draft with his head spinning like Linda Blair in The Exorcist. It won’t make any difference. Regardless of the delivery time, regardless of the delivery mechanism, most managing directors in charge won’t look at the p
itch until the night before the pitch is due to be delivered and then they’ll decide to futz with it. Why? Because like the rest of us, they procrastinate, and it’s imperative that the associate fully experience the rite of passage.
The associate will spend the first half of the night before the pitch, up until about midnight, faxing copies of the pitch book draft back and forth between the homes of the vice president, the senior vice president, and the managing director. Each of them will continue to make changes to each other’s drafts and comments until they’re too tired to play their little game anymore. Throughout this part of the process, the associate plays the role of master fax operator and word processor, making sure that each of them sees the changes that each of the others has made. After they go to bed, the associate begins working full-time with the word processing and copy center departments to get the actual pitch books made in time for delivery to the pitch the next morning.
Only about one pitch out of ten ever hits the mark. Sometimes the bankers know when they walk out of the room that they aren’t going to get the business, the karma’s just not right. Other times, it’s a couple of days before they find out. The worst possible outcome for the associate is when the potential client can’t make up their mind. They hem and they haw, and they tell the bankers that they haven’t reached a definitive decision as to whether they want to do a deal or not. They leave the door open just a crack, and give the managing director hope that if the bankers just keep pushing a little harder, they’ll be able to convince the client to go through with the transaction. We used to call these clients the Living Dead.
The Living Dead were evil. They sucked out our brains and destroyed our spirit. They wouldn’t die, no matter how many bullets we tried to pump into them. There was one managing director, Jack Gatorski, who was infamous among the associates for his ability to spawn the Living Dead. Gatorski rarely allowed any potential opportunity to die an easy death.
Gatorski was a rail of a man who looked something like a retarded scarecrow. His crowning glory was an egregious pointy tuft of hair on the top of his head that made him look as if a flying squirrel had just used his cranium as a landing strip. Associates used to place bets as to whether this shaggy curiosity was actually a rug or not. On the one hand, some believed that something so ill-fitted and so poorly maintained couldn’t possibly be natural. Another school of thought, though, argued that a man making the kind of coin that Gatorski made wouldn’t possibly subject himself to the humiliation of wearing such a disgraceful accessory. An associate classmate once deliberately rented a convertible while on a diligence trip in Florida with Gatorski in order to once and for all end the rug-or-not-a-rug controversy. However, it rained and the top stayed up, thereby scuttling the fact-finding mission and ensuring continued debate.
Rolfe had spent a lot of time working with Gatorski, so he had firsthand knowledge of why the guy was known as Gator. Gator was a prehistoric lizard in banker’s pinstripes. He attacked potential deals like a Louisiana swamp gator going after a fatted calf. Gatorski would lie quietly in wait in the shallow water anticipating the arrival of his next hapless meal, and when it finally stumbled by he would attack in a flurry of churning water and sharpened teeth. Before the unwitting client knew what had happened they were firmly locked between Gator’s muscular jaws, and the only way out was through a generous disgorging of fees. Tasty fees weren’t the only satisfying feast for the wily reptile, however. A plump piece of fresh associate ass was nearly as pleasing for Gator, as it represented an untapped resource that could be molded into a potent weapon for use in the client attacks. That’s why many associates had grown to fear Gator. Rolfe had done more than one tour of duty with Gator, and he had the battle scars to show for it.
Gator was one of a kind. He was the most persistent son of a bitch any of us had ever known. That was a good trait for a banker but spelled trouble for an associate—in this case, me. He refused to ever admit defeat. He thrived on rejection, it empowered him. The man was scary because he never took no for an answer. A client could tell him, “You suck. Your firm will never, ever do business with us. We hate you.” Gator would be calling the guy up the next day with new alternatives and new ideas. It was rumored that there were actually clients who had specifically requested that Gator not be allowed into their offices because it was so hard to get rid of him. He was like a bad case of jock itch, only he could walk and talk. The only way to stop him was to either physically restrain him or kill him. Both options had been given serious consideration.
When you first did a pitch for Gator the work had only just begun. He would force you to create, rearrange, and explore literally hundreds of permutations of the original material after you’d made the pitch. The work that any given project generated was completely independent of the likelihood that the project would yield an active deal.
Gator’s persistence wasn’t just directed at associates and clients, it was directed at everybody. His whole promotion from senior vice president to managing director a couple of years before had allegedly been a direct result of his persistence with one particular client, Universal Wavelength. His performance on the Universal Wavelength deal was legendary. He had hounded the company for a full two years, almost nonstop, before they finally agreed to let DLJ underwrite a junk bond offering for them. Once the offering was under way, he had proven to be so persistently annoying that the only comanager on the deal had walked away from the table leaving $1 million of extra commission dollars for DLJ. It was unheard of, a miracle in the world of investment banking, for a co-manager to leave a $1 million fee behind. When the head of DLJ’s banking group saw that, he must have decided that he better promote Gatorski quickly to harness the full moneymaking potential of his abrasive ways.
The whole thing was, Gator’s craziness may have been the result of a supercharged adrenaline rush coursing its way through his veins. Rob Katz, a vice president who used to spend a lot of time working with Gator, told me that he’d once been on an airplane trip back from Asia with Gator and he’d been having some difficulty sleeping. Gator told him to “try a half of one of these pills that I have.” Katz asked for a whole pill, but Gator told him that he’d probably better stick with a half. “They’re kind of powerful,” he said. Katz claimed that he took half a pill and then watched Gator down two of them. Katz reported falling into this incredibly deep dreamless sleep immediately thereafter.
The next thing Katz remembered, all the passengers were getting off the plane and hitting him in the head with their luggage as they passed him in the aisle. Gator was still going full speed two seats over, cranking through a huge pile of work. The man couldn’t be slowed.
Gator knew that he was a pit bull. It made him proud. He used to tell stories that perpetuated the myth. The best one came my way as I was cruising through the woods of Minnesota with him in the back of this late-seventies Cadillac stretch limousine. We were on our way back to the airport from a closing dinner, and the two of us were smoking some stogies and stinking up the entire limo. We started bullshitting about stupid things we’d done through the years, and Gator let loose with a classic.
“When I was in college, I was on a road trip with a buddy of mine. We were traveling from South Bend, Indiana, to Ann Arbor, Michigan. It started to get kind of late one night, and my buddy saw this quick-stop store up ahead, so we pulled in to grab some coffee and get something to eat. Well, while we were in there my buddy saw this Penthouse magazine, so he decided to buy a copy so that he would have something to do once we were back on the road.
“We were taking back roads most of the way, and the sun had gone down, so the roads were pretty dark. On top of that, my buddy had the dome light on in the car so that he could get a real good look at all these naked chicks who were in the magazine. You take all that, plus the fact that I was listening to my buddy read the Penthouse “Forum” submissions to me, and you ended up with me not paying real close attention to everything that was happening on the road in front of me. Next thin
g I knew, there was this fucking cow standing right there in the middle of the road, right in front of me, and it was too late for me to stop. We hit the cow.
“Well, now, this cow was a big fat one, and when it came down to this collision between our car and the cow, the cow came out ahead. He rolled up onto the hood, rolled over and crushed the front windshield, and then rolled right off the side of the hood and landed next to the car standing on all four legs. It was amazing. He stood there dazed for a minute, let out a belch, and walked off toward the side of the road into the darkness.
“I think that me and my buddy were more shocked than the cow was. We were sitting there in the middle of nowhere, and now we had a crushed hood, a windshield that we couldn’t see out of, and we still had another fifty miles to go until we got to Ann Arbor. There was one other small problem. When we had hit this cow it was so shocked that it had spontaneously emptied its bowels all over the front of the car, so we now had not only transport problems and vision problems but stench problems too. My buddy was all flipped out about the car, and he kept saying that we needed to wait for another car to come along so that they could drive us to the nearest place with a tow truck. Well, I told him ‘Fuck that, we don’t have any idea when somebody’s gonna come help us out, I’m gonna get us to Ann Arbor one way or another.’”
I often thought about the remainder of Gator’s trip to Ann Arbor after he told me that story. I pictured him starting the car back up, sticking his head out the window like a dog, and driving down the road. I could see him, like the Red Baron, piloting a big whale of a cruise-mobile up to about thirty-five miles an hour before pieces of cow crap started peeling off the hood and flying back to hit him in the face. I could picture his buddy in the car hearing the slapping noises of the doody chunks hitting Gator in the face, and I could picture him pulling into Ann Arbor covered in cow shit, looking like something out of a grade-B horror movie. It didn’t paint a pretty mental picture, but it helped me understand how Gator operated.
