(Flickr/sylvar)

It's called a "bake-off," and for investment banks looking to land a role on a big initial public offering, it's a critical time.

That's when bankers will, one after the other, try to convince a company's executives that their firm is best equipped to get the executives the value they want in a public listing.

As it turns out, banks pull all kinds of stunts when they are trying to win this role — like presenting a cake with the company's logo.

Alan Li, a former tech, media, and telecom investment-banking analyst at Goldman Sachs, broke down the IPO process on a recent episode of his new podcast, "The Vampire Squid."

The bake-off

Once a company decides to go public, it holds a "bake-off," as Li called the competition between investment banks to take the company through the process. In some parts of the world, it is called a "beauty parade," which gives you a sense of what happens. One by one, firms roll into a conference room and offer up their services.

During this bake-off, banks pitch the company to show which knows it best — which really understands the company and its mission, goals, revenue, and risk factors. Banks usually have a 40- or 50-page presentation detailing their attributes and why they are in the best position to take the company public.

And many banks try different ways to stand out among their peers. Li has seen banks bring an "IPO survival kit" — bags of goodies like Red Bull, pillows, and sleeping bags, a sort of gag gift to show that they're in it for the long haul.

Other banks have literally baked cakes, decorating them with the company's logo. Others might show up to the meeting in matching shirts bearing the company name.

The company's management team and board then pick a winner, which becomes the "lead left" bank on the IPO (so named because of its placement on the offering document).

This gives the winner control of the process, a bigger percentage of pay, and bragging rights.

To "win lead left," Li said, is a "badge of honor."

(Twitter S-1 filing)

There's good money at stake. On the world's biggest IPO — that of Alibaba Group — fees to underwriters totaled $300 million. For a deal like that, the wooing begins long before the decision to start a sale.

The hard work

All of that is just the beginning. The next step is for the company to file an S-1 document with the Securities and Exchange Commission. The document includes a business description, the legal and business risks of the company, how it will use the money raised in the IPO, financials, and management commentary, Li said.