🪜 Corporate Ladder

▲ Successful IPO · square 4 to 25

• Priced above the range. When the order book is several times covered, the bookrunners can raise the price range rather than leave money on the table.
• The greenshoe is exercised. The greenshoe lets underwriters sell up to 15% more shares than planned, then keep the extra if the stock trades above the offer price.

▲ Strong quarter · square 9 to 31

• Beat and raise. Shares move on results against consensus, and more on raised guidance: the market prices the years ahead, not the quarter just gone.
• Margins surprise to the upside. Operating leverage: once fixed costs are covered, each extra pound of revenue drops through to profit at a higher rate.

▲ Funding round closed · square 21 to 42

• Series C closed, oversubscribed. Post-money is pre-money plus the new cash: raise £40m at a £160m pre-money valuation and the company is worth £200m after.
• A flat round on clean terms. Price is not the only term: a 1x non-participating preference means investors take their money back or convert to shares, never both.

▲ Promotion · square 28 to 46

• Promoted to VP. A VP runs the deal day to day: the associate builds the model, the client calls come to you, and the pitch carries your judgement.
• Top-bucket bonus. Banker pay is a base salary plus a discretionary bonus drawn from the year’s fee pool, so a strong year for the desk shows up at bonus time.

▲ Major client mandate · square 36 to 57

• Sole bookrunner on a green bond. A sole bookrunner keeps the whole underwriting fee; in a syndicate the gross spread is split by role and by allocation.
• Hired for the dual track. A dual-track process prepares an IPO and a sale side by side, so the owner can take whichever proves worth more.

▲ Regulatory approval · square 51 to 67

• Approved on the first pass. Biotech is valued on risk-adjusted NPV: approval lifts a drug’s probability of success to one, and the share price re-rates with it.
• Merger cleared without remedies. Clearance with no disposals means the synergies in the merger model survive intact, and so does the price paid for them.

▲ Landmark M&A mandate · square 63 to 81

• Lead adviser on a $9bn merger. Advisory fees are a percentage of deal value, paid mostly on completion, which is why the mandate that closes makes the year.
• Defence mandate, and the bid goes up. Advising a target, you win on price: a board that rejects the first offer often draws a higher second one.

▲ Exceptional investment return · square 71 to 91

• A 3.1x exit. MOIC is cash back over cash in; IRR adds how fast it came back. Three times the money in four years is an IRR of about 32%.
• A dividend recap pays out early. A dividend recapitalisation borrows against the company to pay its owners before any exit, which lifts the IRR on the same final sale.

▼ Failed deal · square 98 to 78

• Financing pulled at the eleventh hour. Most advisory fees are success fees: a deal that dies before completion pays for months of work with almost nothing.
• Shareholders vote it down. A merger needs the target’s shareholders to approve it; a premium they think too thin loses the vote, however good the strategy.

▼ Hostile takeover setback · square 87 to 68

• Poison pill adopted. A rights plan lets every holder but the bidder buy cheap shares once a stake crosses a threshold, so the bidder must negotiate with the board.
• A white knight appears. A friendly rival invited in by the target’s board can top a hostile offer and leave the first bidder with nothing but its costs.

▼ Antitrust challenge · square 79 to 59

• Regulator sues to block. When a merger is blocked, the reverse termination fee decides who pays: usually the buyer, compensating the target for the lost months.
• An in-depth review opens. A second-phase review can add six months or more, and every month runs down the time before the long-stop date lets either side walk away.

▼ Credit downgrade · square 64 to 44

• Fallen angel. Cut from BBB- to BB+, a bond leaves investment grade, and funds allowed to hold only investment grade have to sell it.
• Outlook negative, spreads wider. A wider credit spread raises the cost of every new pound borrowed, and with it the cost of debt in the WACC.

▼ Liquidity crunch · square 55 to 38

• The revolver is fully drawn. Profitable companies still fail for lack of cash: liquidity is about when money arrives, not whether it does.
• Covenant breached. Breach a leverage covenant and lenders can demand repayment; the usual way out is a waiver, bought with a fee and a higher rate.

▼ Compliance investigation · square 48 to 26

• Wall-crossing breach. Information barriers keep inside information on the private side of the bank; one breach can freeze a whole team’s work.
• A trade on the restricted list. Banks bar staff from trading companies they advise; personal trades are pre-cleared, and a slip means an investigation.

▼ Earnings miss · square 34 to 12

• Guidance cut, shares down 18%. The cut hurts more than the miss: lower guidance lowers every year of the forecast, and the valuation falls with all of them.
• Inventory written down. Stock that will not sell at cost is written down to what it will fetch, and the whole loss lands in one quarter’s gross margin.

▼ Client mandate lost · square 17 to 7

• Pitch lost to a rival bank. Mandates go to banks the client already trusts, often the ones lending to it: a balance sheet wins pitches a slide cannot.
• Dropped from the syndicate. Issuers trim their banking syndicates after a deal, and the banks with the smallest roles and the least lending go first.