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Published byAugust Marbury Modified over 8 years ago
What Is Investment Banking? A segment within the financial services industry A network of intermediaries that assists clients who need capital and those looking to invest capital Commonly referred to in terms of “buy side” and “sell side” lines of business
The Largest Firms By Advisory Fees J P Morgan B of A Merrill Lynch Goldman Sachs Morgan Stanley Citigroup Deutsche Bank Credit Suisse Barclays Wells Fargo RBC Capital Markets
Sample of Largest Firms By Assets Managed Blackrock UBS Allianz Vanguard State Street PIMCO Fidelity AXA Group J P Morgan Credit Suisse
What Is The “Sell Side?” Involves trading or the promotion of securities – research develops investment ideas, sales teams pitch the ideas, buy side clients execute the ideas through traders Primary roles include: Facilitation of transactions – serve as resource for particular, unique transactions Market making – buy and sell stock on a regular basis at a publicly quoted price Underwriting of securities – raise capital for clients from investors through public offerings Equity and debt research (equity research analysis) – develop opinion on value, risk, and volatility of a covered security for communication to clients
What Is The “Buy Side?” Involves clients looking to purchase (“buy”) investment securities or services. You can also have buy-side equity analysts…but they would work exclusively for the buy side entity Buy side entities/clients include: Private equity funds Mutual funds Life insurance companies Hedge funds
The Largest Investment Banks Provide A Wide Range Of Services Mergers and acquisitions advice Hostile takeover advice Sale of company or certain division/assets Represent potential acquirers Restructuring advice Access to debt and capital markets Create demand for client’s to be issued securities Create specialized securities / derivatives Synergies with their commercial bank
Access To Capital Markets Is Primary To Their Mission Debt Capital Markets Fixed income derivatives Debt instruments sales & trading Syndicated loans Fixed income research Equity Capital Markets Equity derivatives Equity instruments sales & trading Equity research
Many Investment Banks Also Offer Access To Commercial Banking Services Treasury / cash management services Operating lines of credit Lease financing Letters of credit
Functional Areas May Be Thought Of In Broad Terms Investment banking Corporate Finance Coverage / Industry Groups - advise clients Corporate Finance Product Groups – help execute transactions Financing solutions Capital Markets Product Groups – raise capital for clients Secondary markets Sales & Trading (equities, commodities, FX, etc) Research Proprietary trading & risk management
Industry Groups Are Different Than Product Groups Industry Groups Manage specific transactions for clients Cover all clients within a specific industry Generate acquisition ideas, evaluate share buyback programs, assist with optimal capital structure Product Groups Specialize in a particular service or instrument Secondary markets Sales & Trading (equities, commodities, FX, etc) Research Proprietary trading & risk management
In Summary… Investment banks are in business to connect clients that need capital with those entities looking to provide capital The industry thinks of itself in terms of buy side and sell side responsibilities Opportunities exist in product areas, industry groups, and support functions
Your Interview Preparation Should Include… A great resume’ A thorough understanding of what is investment banking Confidence in what the particular job responsibilities will be Why investment banking is the right career choice for you Why this firm is the right fit A solid grip on technical areas Practicing your passion
A great resume’ communicates… Transparent decision making Your value Your desire Relevant experience Technical abilities
Investment Banking Covers Many Areas Buy side vs sell side Industry vs product vs support groups Equities vs debt vs commodities vs FX Regional vs global banks
What Functional Area Is Of Most Interest? Investment banking Product / industry groups Financing solutions Secondary markets Sales & trading Research Proprietary trading Support areas Treasury Risk management
Investment Banking Is The Right Career Choice Because… Be able to explain the origin of your interest You’ve taken steps to prepare for a banking job You understand the industry and role you’d play There are areas of work in the past that were exciting to you and you’ll see them again in banking There are aspects of work in the past in which you have excelled and you’ll see them again in banking It excites you!
A Particular Bank Is The Right Choice Because… You understand their culture and you’re a fit They have a particular area of strength that is of interest to you Their associate program holds some unique quality of value to you
You Must Have A Solid Grip On Technical Items Thorough understanding of financial statements and how they work together Balance sheet, income statement, statement of cash flows Equity vs enterprise value Equity value + net debt + pfd stock + minority int = Enterprise value Time value of money Present value Future value Valuation methodologies Discounted cash flows Public company comparables Acquisition comparables LBO analysis
You Must Also Demonstrate Your Passion Are you “living” finance outside of the classroom? Be knowledgeable of current deals in process Know key rates (10 year Treasury, Libor) Understand domestic and international political environments Be familiar with stock market and key commodity trends (S&P 500, Nasdaq 100, gold, oil) Know approximate exchange rates for key trade currencies (US dollar, British pound, Euro, Yen, etc.) Study financing spreads and levels (new bond issues pricing, debt spreads over Libor, etc.)
Anticipating Questions Is Key To Success What is investment banking? Why investment banking? Why would you be valuable to the firm? What product or industry group is of interest to you? What would your responsibilities be in your role? What do you like to do in your spare time? Where do you need to improve the most?
Anticipating Questions Is Key To Success Do you invest money now? When have you failed? When have you led a team? Talk about an ethical dilemma you have faced. Discuss a recent merger or acquisition. Where is the NASDAQ trading today? Define EBITDA and what it represents? Discuss the shape of a WACC curve and what the curve represents.
Be Yourself, But Demonstrate Your Desire Show positive, constructive energy Show the steps you have taken to prepare for this career Demonstrate your grasp of key financial concepts Highlight your passion…are you “living” finance now?
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