VANDERBILT INVESTMENT BANKING VANDERBILT INVESTMENT BANKING Meeting 4: Researching Companies

Lender Clients Exchange cash for security interest in the capital structure of the debtor Fixed Return Levered Return Debtor Clients Invest cash in projects that produce a return Pays fixed return to creditors; Owners receive residual profits How an Investment Bank Operates Corporate Finance Product Group Industry Coverage Strategic Advisory Lending Bank “Balance Sheet” Syndicated Finance Deposits Sales & Trading Fixed Income Equities Proprietary Research Coverage Economic Strategic Wealth Management Institutional Retail “Distribution” Investment Bank

Investment Bank Organization Corporate Finance Product Group Industry Coverage Strategic Advisory Lending Bank “Balance Sheet” Syndicated Finance Deposits Sales & Trading Fixed Income Equities Proprietary Research Coverage Economic Strategic Wealth Management Institutional Retail “Distribution” Investment Bank

Company Research  Your objectives  to identify and target investment banks that offer the position you are seeking  to weave into your story the reasons why you are the right person for a particular company  to speak intelligently on the strengths, recent deals, etc. of a target bank  to eventually speak intelligently on the activities of a target group within the firm  to identify topics for on going dialogues with investment bankers

Company Research  Your tools  Owen’s Library  Hoovers.com  up-to-date news  Deal announcements  corporate filings  Others  Vault.com  Bloomberg Terminal  WetFeet.com  Yahoo Finance  Wall Street Journal  New York Times Deal Book

How to Begin  Begin researching target companies  Organization design  balance sheet?  functional structure  product/industry groups  Clients  Size  Type of deals  Strengths / Weaknesses  Geographic presence  Top groups  Lending?  Identifying recent alumni  Culture

Structure Universal vs. Non-Universal Combines Commercial & I-Banking Extended Balance Sheet Allows bank to take on more risk Greater economic efficiency Examples: Citigroup, JP Morgan, Banc of America More conflicts of interest Gives monopoly power to banks Examples: Goldman Sachs, Merrill Lynch, Morgan Stanley

Structure (cont.) Full-service vs. Boutique Concentrated in M&A, Corporate Finance, or Restructuring Small deal teams (2-4 people) Goes for niche markets More responsibility Less-comprehensive training (learn on the job) Examples: Lazard, Evercore, Greenhill Combines Corporate Finance, Sales & Trading, Research, and many times Asset Management under one roof Large deal teams (5+) Less responsibility More in depth training Examples: Goldman Sachs, UBS Investment Bank, JP Morgan

Product/Industry Groups  Organized by industry groups, product groups, or both?  Recent deals (value, multiples, background)  Target groups  where is the action?  what industries do you like?  generalist program

Clients  Large, Middle, or Small-market clients?  Large: $500 Million+ Deals  Fortune 500, Governments  Middle: $50-$500 Million Deals  Companies in Russell 2000 index  Small: $10-$50 Million Deals  Mom & Pops Stores

Culture  Varies slightly from firm to firm  Larger banks will have different ‘cliques’  Research by networking, going to info sessions, and doing the dinners/open bars

Ongoing Activities  Continue researching target companies  new developments, new deals  Look for opportunities for continued dialogues with Bankers

Rankings  1 st Tier (Bulge Bracket) 1.Goldman Sachs 2.Morgan Stanley 3.Citigroup 4.JP Morgan 5.Merrill Lynch  2 nd Tier 1.Lehman Brothers 2.UBS Investment Bank 3.Credit Suisse First Boston 4.Deutsche Bank 5.Banc of America  3 rd Tier 1.Bear Stearns 2.Jeffries & Co. 3.Wachovia Securities 4.SG Cowen 5.CIBC World Markets

Q&A/DISCUSSION