Overview of Corporate Development
Corporate development is an interesting career path that blends the M&A engine of investment banking with the perspective of working for a single company.
Many ex-bankers tend to pursue corporate development because it uses the skillset learned in investment banking but tends to be much more humane (i.e., fewer hours) than investment banking.
If you want to earn six figures, but be able to work closer to 40 hours, then Corp Dev might be the job for you. It’s viewed as one of the best blends between lifestyle and compensation in all of finance.
Corporate development is a career path where you can really learn about the ins and outs of a single business, immerse yourself in an industry, and still play the role of the financier.
What is Corporate Development?
Corporate Development the role that is responsible for the corporate finance and M&A at a business. Responsibilities carried out by the corporate development team may include:
Identifying potential acquisition targets and landscaping the industry
Performing due diligence in an acquisition of another company
Running the sale process when selling to a private equity firm or other company
Managing the financing process to raise new debt or equity
Divesting non-core assets or different parts of the company
Coordinating strategic or financial partnerships
Working with the CFO to maintain the company model or cash flow projections
It’s worth noting that Corporate Development exists in many different forms at different companies.
Some companies will have a robust FP&A or accounting team that will be responsible for many of these functions. Some companies might call the entire department Corporate Finance. Smaller start-ups might not explicitly have corporate development roles and might just have one or two ex-bankers supporting the CFO with a loose title.
You can generally think of Corporate Development as a company’s “internal investment banking team”. Companies often reach the scale where it’s important to have continuity and long-term vision when executing on M&A strategy. As such, it can be valuable to build out your own team as opposed to always relying on external M&A via investment bankers.
If you are a large tech business that is constantly doing M&A, it will be your Corporate Development team that is taking a first look at businesses and thinking about how the financials work.
You might hire an investment bank to do the nitty gritty work or to handle the deal process, but the Corporate Development team will act as the thoughtful client.
If you look at very acquisitive companies like Salesforce, Disney or Canada’s Constellation Software, you’ll see that they all have large Corporate Development teams that help systemize M&A. If you’re in investment banking or private equity and happen to work with one of these businesses on a deal, you’ll often see that you’re working directly with a Corporate Development team.
Corporate Development Compensation
The range of Corp Dev salaries is extremely wide. Larger companies typically pay more cash, while smaller companies typically pay more stock. We’re going to borrow the Corp Dev estimates from Mergers and Inquisitions, which have been substantiated by our own industry sources.
Associate: Base salaries of $100K – $120K and bonuses worth 20-30% of base salary, for total compensation of $120K – $160K.
Manager: Base salaries of $140K – $160K and bonuses worth 35-50% of base salary, for total compensation of $190K – $240K.
Director: Total compensation of ~$300K – $400K, with a higher percentage from the bonus and stock (over 50%).
VP or Head of Corporate Development: Total compensation of $500K+, perhaps approaching $1 million depending on bonuses and stock-based compensation.
Why Corporate Development?
I would say most people end up pursuing Corporate Development for the following reasons:
Pros of Corporate Development
Hours and lifestyle tend to be better than investment banking and buyside roles
Anecdotal estimates seem to put Corp Dev hours between 40-60 hours per week, which is a healthy improvement over most high finance roles. Companies that do lots of deals might still require very intense schedules, but the median seems to be much, much lower than investment banking.
In Corp Dev, you are the client. Unlike investment banking, you no longer have to respond to specific client demands or have to spend lots of energy trying to win business. This tends to make workflows more predictable and manageable.
Unlike private equity, you’re less beholden to processes. You might still participate in the odd buyside process, but it’s not the core way your business runs. Processes lead to very lumpy and unpredictable work schedules.
Roles tend to have much less attrition
Corp Dev tends to be a longer-term career play and people stay in their roles more permanently than on the buyside. Lower attrition often leads to better culture and stronger team dynamics.
On the other hand, many people that go to private equity are still focused on recruiting or thinking about their next step. The volatility of hedge funds can lead to hedge fund employees jumping ship more often as well.
More discernible contributions and continuity
Some people do not like the detached nature of advising or investing. It’s much easier to see the impact of your work when you work for one company and can see the impact of long-term projects. In Corp Dev, you’re working for a single principal entity.
Build company-specific knowledge
Similarly, if you work for a single company, you have the ability to truly go deep and build very deep expertise. If you’re the sort of person that prefers depth over breadth, corporate development can make some sense.
Get company-specific equity opportunities
One of the most reliable ways I’ve seen people become rich is to join pre-IPO companies. We’re talking Series E or F businesses that are on great growth trajectories and are likely to IPO soon (Robinhood, Coinbase, Roblox, etc.). If you want to bet on the outcome of a single space or company, you might get the most equity opportunity by joining them.
Cons of Corporate Development
Pay tends to be lower than other finance roles
On a relative basis, Corp Dev does pay less than the top buyside roles. Whereas you can earn >$300k in private equity or hedge funds right after investment banking, you might only earn >$300k in Corp Dev after several more years of seniority.
If your main priority is maximizing lifetime earnings, you can theoretically make more on the buyside, but Corp Dev again might provide a more well-rounded career.
Lifestyle is not guaranteed to be better
Lifestyle is not always going to be better. It typically is, but there are still some sweatshop companies, where the Corp Dev head is an ex-banking MD or the entire corporate culture is more intense. You might end up at a start-up, where you have to pull much more than your own weight.
Career risk is more anchored to a single company’s performance
By joining a Corp Dev team, you are also betting on the outcome of a single company. If the company performs poorly, goes through layoffs, or something changes in the industry, you have to deal with the entire risk.
Harder to move back to high finance roles
It tends to be uncommon to move to Corp Dev and then easily move back into a hedge fund or private equity role. It does happen, but it anecdotally seems to be much less common than vice versa. To put it bluntly, it is very hard to break into a buyside role at the mid-level and if you join Corp Dev, you are taking yourself off the buyside fast-track.
Why Corporate Development?
Corporate development is a bit of a hard career path to learn about, because it doesn’t exist in the same form at all companies and the recruiting process is much more ad hoc than the buyside. Here are some characteristics of Corp Dev recruiting that are important to be aware of:
Corp Dev recruiting is ad-hoc and much more opportunistic
Corp Dev teams at even the largest companies are not incredibly large. Large, acquisitive public companies might only have 5-10 people in their entire Corp Dev team. The team might only have 3 or 4 junior people, none of whom are interested in leaving. Therefore, if you want to join the team of a specific company, you might need to wait several months or years before a spot opens up at your level. Corp Dev roles are fairly comfortable, so there isn’t as much of a revolving door as there is at buyside firms.
Analysts might have to be very patient if they’re trying to exit to a specific company or sub-industry. I personally think this contributes to why many analysts don’t end up recruiting for Corp Dev — there isn’t the same level of predictability as with private equity recruiting.
In private equity, you might wait over a year to start your job after you finish interviewing. Corp Dev tends to be much more “normal” i.e., a position opens up and you start working there right away.
Prep for interviews should be more “company-specific”
Private equity interviews are a lot about passing a technical bar, while hedge fund interviews are a lot about talking about stocks. One generalization we can make about Corp Dev interviews is that you should do a deep study of the company you want to join. We would recommend you think about the following questions:
Tell us a few potential acquisition ideas for our company.
How does the company make money?
What are the company’s most profitable products or business divisions?
Who are the company’s main competitors and how do their strengths / weaknesses differ?
Talk about a deal that we’ve done recently and what your opinion of it is.
If we had to raise additional capital, what structure do you think would make the most sense?
Corp Dev hires tend to be more senior
The most common entry points into Corp Dev are post-MBA associates or VPs who have already spent a couple of years in investment banking or consulting. Corp Dev teams are smaller so there’s less infrastructure for training new hires. Corp Dev teams also aren’t afraid to lean on investment banks for grunt work, which is why they might not always have dedicated analysts or junior members.
Recruiting may be administered by headhunters or by internal HR teams
Relative to buyside firms, it seems that Corp Dev roles tend to be recruited more by internal HR teams. Buyside firms rely heavily on headhunters due to their size, but many large companies will have robust recruiting functions that will assist in filling Corp Dev roles. The takeaway here again is that Corp Dev recruiting comes in many different sizes and it’s hard to describe a standard process.