Investment Banking Series: Pitch Books

Investment Banking Series

Post 3 Pitch Books

1. What is it anyway?

A pitch book is the paramount of days and nights of a banker's hard work. It is a marketing tool that tries to set apart basically very similar banks and to support the claim that THIS bank, and NO ANY OTHER should be selected to arrange the deal. They say pitch books used to be actual books, but in the present world they are Power Point presentations printed out and bound in a plastic cover. The main purpose of the pitch book is to deliver two messages to the prospective client: (1) "we understand your business very well", and (2) "when it comes to arranging your deal, we are the best fit". Both claims are usually weak at best, but they are made elaborately and extensively, and the resulting multi page document often looks impressive.

2. Typical structure

A pitch book will have varying structure depending on what product is being proposed, but there is a lot of similarities. Below is one example, assuming equity Public Offering Without Listing (POWL) structure, and proposal's scope limited to that of a Lead Arranger in Japan:
Executive SummaryHere the most compelling marketing points will be made, carefully phrased not to sound like ones, and checked by compliance not to sound as assumption of any obligations. In case of POWL, the demand estimate is one of the key points to watch. The number is nothing more than an educated guess based on similar deals in the past (if any), and as the bank fears being held responsible if the stated demand is not achieved during the offering, a conservative range is usually provided.

Bank's Introduction

The bank's ownership structure, retail network and services provided are some of the possible topics to be covered here.

Investor Base Overview

In case of POWL, particular emphasis will be put on the retail investors: the propensity to savings that created a zero-yielding bank savings of unprecedented scale and the recent emerging shift to investment into equities. Also, the overview of the institutional investors is also likely to appear here, consisting from Life Insurance, Non-Life Insurance, Trust Banks and Asset Management companies.

Placement Options Available in Japan

For an equity placement, it can be public or private, and public can be done with or without listing on one or more of the Japanese stock exchanges. The emphasis in a POWL pitch book will be put on the lighter documentation and less stringent requirements to qualify for placement, as compared to listing.

POWL Overview

Technical overview: requirements to be met, process flow, approximate timeline, required disclosure (at the time of placement and ongoing) to name a few aspects.

Market Trends

Recent equity market performance, usually illustrated by the movements in one of the major indexes, such as Nikkei 225 or TOPIX.

Case Studies

This part introduces the overview of similar deals. Similar can refer to the same
region, same industry or similar deal properties, for instance privatization deals. For POWL, this part is always a bit of a challenge, as most of the recent deals were by Chinese companies, so it is not easy to find good comparable cases.

Bank's Credentials

League tables (carefully selected to show the bank at the top), list of the deals in similar industry, geographical region, or similar in nature will be put together in this section. Any awards the bank has (hopefully) recently received will also go into this section.

3. Lessons

Putting together a pitch book is not a piece of cake. It takes a lot of research, data mining and internal communication between departments, let alone the endless formatting and rewording of every passage. Here are some tips to survive it:

• Make good use of the existing pitch books - they will give a lot of hints and useful data
• Confirm the contents with your boss ASAP. To get his attention may be challenging, but the risk of rewriting everything from scratch outweighs the trouble
• Polish your Power Point skills - the better you know how to align all those boxes, the sooner you can go home
• Check with your friend in Capital Markets (hopefully you have one) if they have any recent market overview presentations. Getting one can be a huge time saver

This concludes my Post 3 on investment banking.

Links to other posts in the investment banking series:
Post 1: Series Introduction
Post 2: Deal from Sourcing to Completion
Post 4: Valuation, Part 1
Post 5: Valuation, Part 2
Post 6: Equity Story
Post 7: Roadshows