Careers in Finance.

Careers in Finance

Agenda Overview of Career Paths: Comparison Between Paths
Corporate Finance (Finance Club) Investment Banking & Capital Markets (IBCM) Investment Management, Research and Hedge Funds (IMC) Private Equity & Venture Capital (PEEK) Strategy & Business Development (SBD) Comparison Between Paths Internship Panel

What is corporate finance?
Corporate finance serves to maximize shareholder wealth through investing and financing decisions Investment governance: project valuation and financing resources Capital structure: working capital management Risk assessment: real options and decision tree analysis Financial Manager positions span diverse roles across treasury and business development Financial Manager Investment Decisions Financing Cost of capital Operations Markets Characteristics

What do corporate finance roles entail?
Treasury Financial Planning / Corp. Development FAP/FMA Domestic and international funding Foreign exchange and commodity risk management Cash portfolio management and capital planning Pension funding analysis Audit and internal controls Employment cost analysis Pricing and market analysis Product cost development Business case development to support investment decisions Investment governance and diversification Communication of company and share price performance to employees, investors, and other key stakeholders Decision coordination across operations and marketing Mergers, acquisitions, and strategic alliances Typical rotations: Planning & Analysis Strategy CFO’s Office Treasury Investor Relations Chief Investment Office Internal M&A Audit Tax High level critical financial issues… from grit to glamour Typical hours: hours per week (Weekends common) Typical hours: hours per week (Weekends rarely) Exceptions during: deal transactions, capital restructuring, and quarter/year-end budget closing processes Typical hours: hours per week (Weekends rarely) High-energy and educational “CFO School” Recent MBA graduates Family/lifestyle-oriented Passion for industry and operations Investment banking graduates Intelligent, motivated financial managers who value their personal lives Typical Activities Typical Lifestyle Typical Personality

How do you get a job in corporate finance?
Focus your research on an industry or geography Attend corporate presentations and speaker events Meet Finance Conference attendees Coordinate a trek, i.e. Tech Trek or New York City Trek Leverage our Kellogg network Contact alumni Search the second-year internship database Study the essentials Interviews test basic finance, industry interest, and company knowledge Business/investment case questions (“relaxed” consulting case) Most internship offers extended February - April Informal opportunities arise in May/June

Institutional Investors & Hedge Funds
What is investment banking & capital markets? Investment Banks… Advise companies on financing and merger alternatives Raise capital for companies Roles of an Investment Bank Investment Banking – M&A Advisory and Underwriting for Debt and Equity Sales – Develop business relationships with large institutional investors Trading – Buy and sell stocks, bonds and other securities for provide liquidity & proprietary trading Research – Follow stocks and bonds and make recommendations buying, selling or holding Private Wealth – investment management services to high net worth individuals Investment Banks are Organized by Industry, Product, Roles, Geography Companies Investment Banking Sales & Trading Institutional Investors & Hedge Funds Research Private Wealth Private Equity Investors Investment Bank

What do investment banking roles entail?
Sales Trading Investment Banking Private Wealth Client meetings, conferences, and social obligations Coordination of IPO, new issue & new product sales Partnership with clients to support and help tailor investment strategies Generalist role covering range of industries / products Transaction execution Work closely with Sales and Sales / Trading to meet client needs Increasingly, Trading is a role that involves mainly quantitative tasks Prepare or review financial analysis Gathering info from clients, lawyers, accountants Preparing and communicating analyses to clients Coordinating the "deal team“ Prospecting and acquiring clients through cold calls, networks, socializing, etc. Advising clients on how to manage wealth Following the market and performing analysis to find new investing opportunities for clients Early Mornings! Typical hours: 6am-7pm “Stock Market” Hours Typical hours: 7am-5pm Must be "on call" Typical hrs 9am -10pm + a few hours on the weekends More flexible hours Not uncommon to leave the office early to entertain clients (golf, dinners, etc.) Assertive & Outgoing Quick-Thinking & Decisive Driven & Analytical Clear communicator & good at networking/socializing Typical Activities Typical Lifestyle Typical Personality

How do you get a job in investment banking?
Investment Banking Recruiting Process Networking before the interview itself is vital Showing commitment is the key – Attending all company events, importance of having a story of why banking, etc Investment bankers are first to interview and the interview process is complete by the end of January Attend company & IBCM events as well as weekly training sessions Start to learn about the industry - WSJ, vault guides, CNBC, etc. No case interviews, but expect fit, technical and industry questions Kellogg is a great place to do investment banking – (generally) more positions than available students, great finance preparation and personality fit needed for career progression Remember, bankers know you are learning, so relax but don’t slack!

What is investment management?
Asset Management Firms Buy-side: purchases investment securities (stocks, bonds, real estate, currencies, options, futures, etc.) with the goal of increasing assets Sell-side: provides recommendations and transactional support for buy-side clients Career Opportunities: Sales & Trading Private Wealth Management Sell-side Equity Research Mutual Funds Hedge Funds Fund of Funds Insurance Companies Pension Funds University & Non-profit Endowments

What do investment management roles entail?
Mutual Funds Hedge Funds Sell-side Research In depth company analysis Financial modeling Meetings with company management & sell-side Recommendation of investments to portfolio managers Preparation of detailed company & industry reports Preparation of company reports Screening for new ideas Meetings with company management & buy side Preparation of detailed company reports Specific industry expertise Flexible hours Earnings season (increased hours) Typical hours: 8am to 6pm Flexible hours (but firm specific) Client driven (buy-side) Dictated by earnings releases Typical hours: 7am to 8pm Traveling common as become more senior Analytical, Skeptical, Ability to work in an independent fashion, Strong communicator Analytical, Skeptical, Creative, Ability to work in an independent fashion, Strong communicator Ability to communicate and sell your ideas (Salesman) Comfortable in public forum Typical Activities Typical Lifestyle Typical Personality

How do you get a job in investment management?
Preparation! Start now Stay informed: follow the capital markets, read the Wall Street Journal, Barron’s and anything else you find useful, follow specific stocks/sectors, invest on your own… Have a well thought out opinion: Where is the market heading? Where is the price of oil heading? Why is the selloff in homebuilders overdone?... Attend IMC Club meetings and pitch stocks Share ideas and news articles with friends Take Finance and Accounting courses Take advantage of everything Kellogg and the IMC has to offer: CMC library resources, resume review, mock interviews, speakers, alumni network, lunch/meetings with 2nd years…

What is private equity? What is private equity…
Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. Categories of private equity investment include leveraged buyouts, venture capital, growth capital, angel investing, mezzanine capital and others. Alternative asset class favored by university endowments, insurance companies, corporate pension plans, public employee retirement plans and high net worth individuals Role of the private equity or venture capital firm… Sourcing: This involves identifying the companies in which the fund might invest. Firms often review 200+ investments opportunities per year yet invest in just 2-3 annually. Due Diligence: Once a qualified target is identified, it is vital to conduct a thorough due diligence process to ensure that the target company will meet the fund’s expectations in terms of growth, operations and ultimately, equity returns. Execution: Getting the deal done – coordinating with the bankers, consultants, lawyers, and target company staff to drive the deal to funding. Portfolio management: Portfolio companies need to be actively managed following the initial investment. This is often done through board of directors positions, but level of involvement varies from fund to fund. Exit: Managing the sales process, either as an IPO, a sale to another fund (secondary) or sale to a strategic buyer is the final step. Funds typically seek to exit investments within three to five years.

What do private equity and venture capital roles entail?
Development of industry investment theses Financial modeling and portfolio company management Review of new investment memorandums prepared and distributed by intermediaries (investment banks) Attendance at board meetings for portfolio companies Recruitment of new managers into portfolio companies Fund administration Review of trade rags and participation in industry trade shows to identify new investment opportunities Meetings with entrepreneurs looking to raise venture financing Networking with peer venture capitalists Financial modeling and portfolio management Recruitment of new managers into portfolio companies Typical hours: 8am-8pm Moderate weekend work Late nights when pushing to close a deal Typical hours: 9am-7pm Regular “off-the-clock” networking activities Weekend work is rare Face time is not a concern Assertive & Outgoing Analytical Work well with limited guidance and imperfect information Entrepreneurial / Self-Starter Assertive and outgoing Typical Activities Typical Lifestyle Typical Personality

How do you get a job in private equity or venture capital?
Private Equity Recruiting Process Long, unstructured recruiting process that ramps up in the Spring 85% of 2006 internship offers accepted in March, April or May Parallel path approach to banking, consulting, marketing, etc. is not feasible High level of self selection among students Highly competitive, low yield activity Firms will post at each of the top 5 schools for a total of 1 intern Difficult to crack without prior experience Start networking with fellow students and industry contacts now! Apply for the Kellogg Private Equity Internship Program Actively monitor trade publications PE Week Wire (Thomson) Venture Wire Alert (Dow Jones)

What is Strategy & Business Development?
Function expanding rapidly within corporations Strategy vs. Consulting Strategy is an internal corporate function, not a client function Strategy is about innovation and implementation, not exclusively one or the other Strategy vs. General Management Strategy is a support function, not a cross-functional P&L / line management role General Management thinks about today; Strategy thinks about the future There are a spectrum of jobs available within Strategy & Business Development that cut across functional areas: Strategic Planning Internal Consulting Corporate Strategy New Product Development Customer Acquisition M&A Financial Focus Marketing Focus

Focus on Corporate Development
Scope Analyzes potential acquisitions, joint ventures, alliances, and other strategic, value-creating opportunities for the Corporation (e.g., share repurchases). Responsibilities Work closely with operating group members to assess organizational fit and projections as to the impact of transaction. Develop presentations and recommendations to senior management, executive committee and the BOD. Support the strategic planning process by providing senior management with economic, competitive, industry and financial evaluations. Monitor corporate strategy with respect to minority equity positions. Maintain sensitivity to consumer trends and preferences, industry merger activities, the financial objectives of the Company. Qualifications: Preferably a concentration in Finance. Excellent quantitative and valuation skills reflecting sound grasp of financial theory. Previous experience with the merger/acquisitions or corporate finance

Comparison Corporate Finance Investment Banking & Capital Markets
Investment Management Private Equity & Venture Capital Location All cities Live & Work in major cities (London, NY, Chicago, San Francisco, Tokyo) Primarily major cities (Boston, NY, LA, Chicago). Smaller cities as well. PE primarily in major cities VC concentrated in Bay Area and Boston Workload Predictable Not a “face-time” profession Capital budgeting season and deal transaction periods require late nights IB: Several deals (~3-5) at once, all in different stage of completion CM: Closely follow market movements, with research focused around earnings season Idea driven Not a “face-time” industry Earnings season requires late nights Peaks and valleys driven by deal flow and portfolio activity Less focus on face time in VC vs. PE Limited daily structure or supervision; emphasis on self-starters Compensation Structure Primarily base salary Bonus represents 10%-20% of salary Stock grants grow with seniority Compensation based on performance Variations amongst peer groups and from year to year Compensation driven by big bonuses Truest meritocracy Combination of base salary and bonus Variations among firms (hedge funds vs. mutual funds). However, all are performance driven. Bonus can represent up to 50% of cash compensation Long-term incentive through carried interest Advancement Performance-dependent career path from Finance Manager to Vice President Defined career path from associate to Managing Director Undefined career path Truly based on performance Loosely defined career path No set timeframe Team Interaction Management-oriented with need to lead diverse teams comprised of members across the organization IB: Tend to be very team orientated CM: Tend to be less team orientated Tends to be a very individual working environment Team oriented with focus on personality fit Largest firms can have less than 20 professionals Recruiting Early/mid start and finish Show commitment Mix of on-campus and off Early start and finish Nearly all on-campus Highly unstructured vis-à-vis banking or consulting Most offers made in Spring Long and unstructured Most offers made in the Spring

Exposure to Senior Staff
A “Day in the Life” Exposure to Clients Exposure to Senior Staff Travel Desktime Hours Corp Fin Low High Sales Medium Trading Inv. Banking PWM Buy-side IMC Sell-Side IMC Private Equity Venture Cap.

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