Investing in Africa

Is it just me, or are newspapers full of hints that many countries in Africa are booming right now, unnoticed by the general public still in awe about growth in China and India? I think to spot beginning trends, one cannot wait till stories make the front pages. I usually watch out for recurring themes that are mentioned here and there as if they had no significance. Africa is such a case right now. You might here of a big IPO in Nigeria, increasing tourism in Mozambique, and a real estate boom in South Africa - but most journalists don't seem to put 2 + 2 together.

For the last two years, I have noticed more and more positive news coming out of West Africa and also Southeast Africa. And in recent months, the momentum is astonishing. Once you start watching out for news on successful businesses and investment in Africa you will notice it is in the news every day - but never as a top story.

Did you know, for example, how African stock markets performed last year? Botswana up 47%, Kenya up 47%, Malawi up 127%!!!, Mauritius up 46%, Nigeria up 40%, Uganda up 72%. If you read the companies & markets part of the FT closely, you will also notice that more and more investment and private equity funds are set up for the sole purpose of investment and Africa - for example Actis Capital , Aureos Capital, or African Capital Alliance, all members of the Emerging Markets Private Equity Alliance.

I'm posting this to encourage you to watch out for positive news and articles on Africa. Also, if you see anything interesting, feel free to post links and info in the comments!

First week of classes

Yes, the sun is shining again in London. The storm is over and it is not raining anymore. What a change. Other than the weather, which is a very important topic in Britain, the main topics at London Business School are the summer recruitment and the start of classes. I am very positive about classes so far, at least more so than in the first term. What did we have?

- Finance: as I already said, and Martha and Patxi wrote the same, Joao Cocco is a great teacher. He manages to teach at a very high level and fast pace and at the same time entertain and engage everyone. Finance continues to be my favourite class. This week we did mergers and acquisitions and analysed many newspaper articles on deals and discussed why share prices of acquirers, targets and competitors in the same industry moved the way they moved. Especially helpful for the hundreds of classmates applying for Investment Banking jobs!

- Decision and Risk analysis: so far we have not done much new but refreshed the statistics pre-course (which I waived), but it seems it will be mainly about using excel and building models, which I find very useful. The teacher is energetic and cheerful, so the class is entertaining.

- Discovering Entrepreneurial Opportunities: We do what the name suggests, try to find opportunities for new product development. In our first class we had a visit from an entrepreneur whose business failed and we discussed the case of his start-up and he shared his experience of the liquidation of his business. The teacher is also very good and senior.

- Managing Organisational Behaviour: I cannot comment much on the class or faculty as of yet because we spent most of the class watching a video. It was about Nick Leeson, the guy who traded Barings Bank into bankruptcy. I found the documentary fascinating. The link to MOB was to discuss what was wrong in the organisation to enable such a massive fraud to happen.

- Marketing: this maybe one of the more disappointing classes. Unfortunately in some core courses (same last term) the programme office has assigned us very junior teachers, and unfortunately sometimes people with PhDs from Harvard or MIT aren't necessarily great teachers. Especially with fluffy topics I find experience is key. Chicago GSB has an advertisement saying "Our full-time MBA faculty is the same as for the Executive MBA" and I wish it was the same for London Business School. But it's not.

In addition to those classes, summer jobs are on everyone's mind! On Thursday, Morgan Stanley hosted a lovely and delicious dinner for 20 female MBAs and they came with ~ 10 female Managing Directors from all divisions. They were great, charismatic women, we had lovely dinner and lots of wine and were laughing a lot, I don't think we ever talked about finance or investment banking, it was more about getting to know each other and also seeing how they managed to have kids and be MDs (all of them had children). It was a great evening and very inspiring. I also met a woman who is head of equity derivatives and has a degree in international politics like me. So we had a nice chat about how to leverage political insights for a career in trading.

Yesterday, I had my first interview with a hedge fund and got an interesting brainteaser: company A and company T both have oil fields, company T has one in Texas and company A has one under the arctic ocean. Both have a market capitalization of $1bn. Who has more barrels of oil in the field? Then: okay, where is the price of oil? Let's assume tomorrow the price of oil jumps from 50 to 100, whose market cap will rise more? It was quite fun and I solved them quickly, so it was no problem.

Then they asked if I could do DCF and LBO modelling, and they also gave me some questions like "ok, assume I have a company with an EBITDA of 10 and sales of 100 and CAPEX of 5, make some assumptions and tell me how you would value the company in your head? I tried the lazy way of saying I would just assume an EBITDA multiple and multiply it by the EBITDA :-), but then they still pressed for the DCF valuation, as expected.

I liked the experience and it was very good practice for the upcoming sales & trading interviews (only 1 week to go!). The question that always knocks me out is when they ask if I have ever invested money. The truth is that I never had a any money left, or when I was younger I did but I didn't really know about investments. As soon as I had $1,000 saved I would just go on a long holiday, spend it all and come back home and start saving again. But I don't think it makes sense to hastily start trading FX or whatever just so I can claim in interviews that I have done that. I hope it is okay. Not everybody has experience investing in their twenties, right?

First week of summer recruiting almost over

What a week. It isn't easy to get up so early anymore. The female MBAs were particularly hard hit since the Women in Business Club organised daily breakfasts with investment banks for us starting at 8:30, while the guys only had to come in by 10. But I'm not complaining, it was very nice to meet the representatives in a relaxed and personal setting, since the mixed recruiting presentations are crazy. There can be up to 200 people trying to speak to 5-10 representatives, and often they don't have any representatives of the departments some are interested in.

Overall I met some very nice people though and think I have formed a very good view of where to apply and where not to apply. I was very positively surprised by Merrill Lynch and Bank of America, they were extremely approachable, down to earth and friendly. Apart from that, the investment bank that made a great impression was Morgan Stanley, they were very friendly and professional. Lehman is tomorrow and knowing them I'm sure they'll bring along many alumni.

But today was consulting day, I skipped all the presentations and enjoyed my time in the gym and in my bed :-), but of course I went to the McKinsey presentation in the evening. Though I may not be the most objective person in the world on this matter, I think they had the best presentation of all companies so far. They brought many consultants from the London Office, the BTO, the Corporate Finance Practice (all of them LBS alumni), and invited all of the students from the classes of 2007 and 2008 who worked or interned there before. Then they even had a director from the London office who heads the Private Equity practice as a speaker. I was watching the event to see how I would like it if I was an uninformed student and I think I would have liked it a lot and I would have thought it is the best company to work for :-). I hope many of my class get to intern there.

I'm also collecting a bit of information about Private Equity and Hedge Funds on the side. I'm not actively looking for anything there, but I thought it makes sense to have good information about it. The funny thing is that here everybody tells you "you can only get into PE through networking", and I have just been told by a Permira guy I know that this is complete bullshit (his words). Maybe it's true for the small funds in London, but he said hiring works almost exclusively through headhunters, but that if they're hiring, direct speculative applications can work as well. So I've made up my mind that it is better to listen to someone who has been working at Permira for 5 years than business school students. I'm not looking into PE though, because I don't think it solves the consulting problem of travel and I think it makes more sense to do it with a lot of business experience, otherwise you just end up being a normal hard working Associate doing the same job one would do in an ibank.

Next week a very high profile speaker is coming to campus - Ana Botin from Banesto/Grupo Santander! I think she was voted Europe's most powerful businesswoman by the FT and I have signed up to go to the event. Things are going to be crazy next week, classes will start again and everybody is busy writing cover letters, preparing interviews or networking. No idea how this will work! But it definitely is an exciting time.

One resource for those preparing for finance interviews that might be helpful:
McKinsey on Finance special M&A issue

Good luck everyone! I think I won't post as much these days as I don't want to talk about what is happening until I know for sure what is happening, but some exciting things are going on and I am slowly but surely seeing how great my decision to come to London Business School was :-).

1st anniversary of my blog

One year ago to this day (if I'm not mistaken - in any case I believe it was a few days after Xmas), I started this blog, not knowing where this would go. So I just wanted to wish my blog a happy 1st birthday :-).

I was inspired to start this mainly by the blogs of The Divine Miss N and Rusgirl, as I found them to be very helpful (whenever I didn't know how to do things, I would just copy their source code, paste it into my template and modify it a little bit :-) ). I think I was the first blogger of the class of 2008, though Moe almost beat me to it (his blog has sadly closed down since then due to some hacker attack). Then there was Wheels, who never showed up in our class and stopped blogging in June (though he did show up at admits weekend). Where are you?

Then there were Ellen, Jorge and FM, enthusiastic in the beginning but somewhat less once classes started. But of course, we are still a large group of active bloggers in our class, namely Patxi, Karlitos, VJ, Linda, and our recent addition, Genie! So the new admits should have plenty of resources here to find out about life in London and ask questions - congrats again, guys & girls! And this is just the class of 2008. Obviously, the veterans of the class of 2007 - Suzy, KV, Al and Myles, are also part of this happy family ;-).

Let me end on this happy note, I have enjoyed having this blog and getting to know more of you and so... expect me to continue :-).

Happy holidays and a happy new year!

Good time to get into investment banking?

I'm not sure how to interpret the record bonuses paid out to investment bankers these weeks. Most journalists, and also quite a few investment bankers I've talked to, take the way things are going well now as proof that things will go badly very soon. I don't know if this is a realistic assessment though. What I observe is that most financial journalists are embarassed they didn't see the tech bubble bust coming in 2000, and now they are predicting a crash just in case one happens - this time they will have predicted it! The only indication I have so far from the ground that things might not go so well is that Bear Stearns has decided not to recruit Summer Associates next summer and has canceled their career presentation at London Business School on short notice. I don't know what the reasons are. I know Goldman plans to hire ~40 summer associates for their London office (IBD and FICC) next summer, so those numbers look good.

So I actually think so many people predict a crash right now mainly to insure themselves against embarassment should a crash occur. In fact, I think we might have plateaued a bit but soon things are going to rise even faster. I think the record bonuses may be a symptom of something very different, not a bubble, but a symptom of how the spread between the stars and the "underperformers" is getting bigger. I'm not talking about investment bankers strictly, it is a common phenomenon that the highest earners in most countries see their income growing disproportionately, while the bottom earners are losing purchasing power as time goes by. Capital is getting more and more concentrated in fewer hands. So in essence, if this is true, it is a great time to become an investment banker. If the world is more and more split into the lucky and the unlucky ones, it matters more and more which side you join.

These are just some thoughts I'm going through, I'm still alert that many insiders are telling me this is not a good time to enter, but in the end I notice among all courses at the MBA and in general my strongest interest lies in finance and economics, so I want to go into that field. As I mentioned in my last post, I have to take some serious career decisions right now. Luckily since classes are over I had a lot of time to think and reflect. The funny thing is, after 4 months of going here and there mentally, I am back to where I started: I definitely want to leave consulting, and the only field that excites me is Global Markets/ Sales & Trading. It is funny how you can get confused and end up at square 1 again, but I guess at least now the decision is more thought through than in the beginning. So milkround is coming up and my plan is to focus only one 4 or 5 banks that have a great programme in markets. January will be busy!

You know the first term is over when...

- people are throwing farewell parties and wish each other happy holidays
- you start looking for Christmas presents
- you sleep 9h every night plus take long naps in the afternoon
- you finally get to see the Velázquez exhibition in the National Gallery that opened in early November

- you get to check out some a cool vintage dresses on Portobello Market
- you finally write to your best friends back home
- instead of complaining about assignments, you are sad that time passed so quickly
- you scan the job postings on the Career Services website, realise you have signed up to dozens of company presentations and that you should start writing cover letters soon

- you go to Royal Albert Hall to sing Christmas Carols
- you know it will soon be time to take some serious career decisions
- you start thinking about what to pack and prepare for the flight back home