How a Deal Team Works in Investment Banking
What is a ‘Deal Team’ and how does it work?
In simple terms, a ‘deal team’ represents the various personnel from within the investment bank executing a transaction. The personnel range from the most senior bankers down through analysts and even administrative assistants. Deal teams become part of the contact list for a transaction. In addition to the deal team from the bank (or banks) on a deal, the deal team for the broader transaction also includes a range of contacts from the clients and legal advisors, and others depending on the transaction.
Key Learning Points
- Deal Teams are compiled once a pitch or transaction is ready to get underway
- The division or business unit of the bank that originated the transaction is the primary point of contact for the transaction and will often be the most represented on the contact list
- The deal team will be a range of personnel from very senior managing directors/partners down through analysts
- Many transactions involve multiple areas of the firm and those areas will also be included on the deal team; however, usually only at more senior levels
- When other banks are involved, the same representation applies; however, typically one bank is positioned as the lead
- Clients are always at the top of the deal team contact list
Purpose of the Deal Team
Deal teams take shape when pitching for business as many areas of the firm will often work together to win a mandate. Once the mandate is established, one of the business units will take the lead to execute the deal, often with other business units supporting or contributing. The formal deal team is created to identify this hierarchy and establish points of contact both within the firm and to the client, as well as for other firms working on the transaction.
The business unit executing the deal will usually be the most represented with several professionals from managing directors or partners down through to analysts. Other areas of the firm which are playing critical roles will often have a full range of professionals although some may just be represented by one or two professionals.
Example of a Deal Team
The more complicated a transaction, the larger the deal team will usually be. Consider a leveraged buyout in which the lead bank has arranged the financing. The Financial Sponsors team which advises the private equity firm behind the deal most likely originated the transaction and maybe at the top of the deal team. However, since the Sponsor’s team is not running the financing, the Leveraged Finance group will be the most represented from MD down through analyst. In addition to Leveraged Finance, the Loan Syndications group will have a point of contact as well as the High Yield Syndicate if there is a bond involved. The High Yield Sales and Trading Team will also be part of the team beginning with the roadshow but as they sit on the other side of the Chinese wall (private vs public information) care has to be taken in including them on all communique.
The Contact List
Each firm working on the deal will form a deal team so if there are co-leads on the financing deal, for example, the other bank would have a similar-looking deal team. The lawyers working on the financing deal would also have a team of professionals. These teams are all combined to form a contact list for the offering memorandum and any other documents that go out to the investing community. The client representatives, typically from the finance or treasury department but occasionally the CEO, will always be at the top of the list. When potential investors in the deal (banks in the targeted syndication group or institutional investors) have questions, they will address them to a member of the appropriate deal team member. Typically, questions about the financials typically go to the more junior members and other questions can go further up the chain.
The whole point of creating these teams is to maintain continuous communication with both the client and the other professionals working on the deal. By involving a raft of experienced team leaders (with a designated deal leader) as well as staff from all the relevant sub-divisions of the bank, the deal team can offer a breadth of experience and contact points to facilitate the deal progressing seamlessly through to transaction. Creating the contact list and adhering to it will ensure that information is not lost or mis-sent to staff who are not relevant to this particular deal.