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Investment Banking_SMG 208

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					Select Financial Services Segments
                Investment Banking             Hedge Funds                Private Equity             Venture Capital
                •   Industry Coverage      •   Value, Growth, Blend   •   Growth Equity          •    Control Equity
                •   Product Group          •   Long-only,             •   Large-Cap Fund         •    Co-Investing
                •   Capital Markets            Long/Short, Short-     •   Middle Market
                •   Sales & Trading            only                   •   Control Equity
                •   Equity Research        •   Fundamental,           •   Secondaries
                                               Distressed, Macro,     •   Co-Investing
                                               Event-Driven,
                                               Trading, Quant


                •   Client Pitching        •   Investment Analysis    •   Deal Origination       •    Deal Origination
                •   Valuation / Modeling   •   Portfolio Management   •   Valuation              •    Valuation
                •   Deal Execution         •   Trading                •   Investment Analysis    •    Investment Analysis
                     o    M&A                                             Modeling                    Modeling
Front Office         o    Leveraged                                   •   Portfolio Management   •    Portfolio Management
                          Finance
                     o    Equity & Debt
                          Solutions




                •   Portfolio Credit       •   CFO/COO                •   Cash Management        •    Cash Management
                    Analysis               •   Cash Management        •   Legal Entities         •    Legal Entities
                •   Pricing                •   Marketing              •   Tax Structuring        •    Tax Structuring
                •   Counterparty Risk      •   Legal                  •   Investor Reporting     •    Fund Valuation
                •   Ratings                                           •   Fund Valuation
                •   P&L Reporting
Middle Office   •   Mark to Market
                •   Cash Operations
                •   Settlements
Investment Banking Overview
Investment Banks serve as intermediaries between
providers and users of capital
                                            Chinese
                                             Wall


                Strategic advisory
                    Securities
                   underwriting                         Sales &
                                                        Trading
                                Investment                            Providers of
Users of capital
                                  Banking                               Capital
•   Corporations                                       Research   •    Individuals
•   Governments                                                   •    Pension Funds
•   Municipalities                                                •    Insurance
                                                                       Companies
                                                                  •    Asset Managers
                                                                  •    Corporate
                                                                       Treasuries
                                                                  •    Sovereign Wealth
                                                                       Funds
                                     Private side   Public side
Overview of Investment Banking

           Capital Markets                               Advisory
 •   Equity capital-raising               •   Mergers & Acquisitions
      o Initial public offerings (IPOs)        o Buyside
      o Follow-on offerings                    o Sellside
      o Equity-linked (convertible)            o Spin-offs / Splitoffs / Carve-outs
 •   Debt capital-raising                      o Hostile defense
      o High-grade or investment grade         o Hostile takeovers / proxy fights
      o High-yield                             o Joint Ventures
      o Syndicated loans                  •   Financial Sponsors / Leveraged
      o Tax-exempt                            Finance
                                          •   Restructuring
                                          •   Ratings
What Does An Investment Banker Do?

              Origination                                 Execution
 •   Client Relationship Management         •   Financial Analysis
      o Ongoing dialogue on financial       •   Communication
         markets, industry developments,         o Management, Board of Directors
         new products                            o Internal Committees
      o Long-term relationship as advisor   •   Identify Potential Investors
         to Senior Management and           •   Negotiation / Structuring Transactions
         Boards                             •   Due Diligence
 •   Idea Generation and Problem            •   Documentation
     Solving
      o Strategic Alternatives
      o Capital Raising
      o Optimizing Capital Structure
      o Risk Management, Dividend
         Policy
 •   Assessment Of Opportunities
Investment Banking Groups


     Capital Markets   Industry Coverage       Product
    • Equity Capital   • Consumer &        • M&A
      Markets            Retail            • Corporate
    • Debt Capital     • Healthcare          Finance
      Markets          • Technology
    • Tax-exempt       • Media & Telecom
    • Leveraged        • Industrials
      Finance          • Natural
    • Securitized        Resources
      Products         • Real Estate



        “Markets”                            “Technical”
Investment Banking Competitive Landscape

 Bulge
bracket




Middle
Market




Boutiqu
  e
          Low           Capabilities       High
Life of an Investment Banking Analyst
Overview of Investment Banking analyst programs


  •   Two-year program with opportunity for a 3rd year
  •   6-8 week training
  •   Mentorship programs
  •   Networking opportunities
  •   Summer internship program serves as primary feeder to full-time
      analyst positions
Role of an Investment Banking Analyst


  • Be a member of a deal team, executing day-to-day activities
    surrounding live transactions
  • Perform financial analysis and modeling
  • Develop and prepare client presentation materials (pitches,
    roadshows, board materials, etc.)
  • Coordinate roadshows, and M&A processes
  • Research and due diligence
Why Investment Banking?

               Benefits                             Challenges
 •   “Everyday is different”            •   Long and unpredictable hours
 •   Exposure to senior management      •   Traveling
 •   Steep learning curve               •   Demanding senior bankers
 •   Work with talented and motivated   •   High stress/pressure environment
     people
 •   Gain a strong background in
     financial analysis
 •   Help execute exciting, landmark
     transactions
 •   Networking
 •   Exit opportunities
Tools of the Trade

  Banker Skill Set                                                    Positives/Drawbacks

      •     Motivated               •   Aggressive                      •    Exposure/network        •     Long hours
      •     Team player             •   Deal oriented                   •    Magnitude/notoriety     •     Work-life balance
      •     Quantitative            •   Willing to take                      of deals                •     Stressful
      •     Personable                  initiative                      •    Responsibility                environment
      •     Flexible                •   Handle stress well              •    Skill and knowledge     •     Intensity
      •     Articulate              •   Professionalism                      base development        •     Focus on detail
                                    •   Responsible                     •    Compensation




  •       Little things can mean a lot and poor execution can mask good skills
            o    attention to detail
            o    aesthetics
            o    professionalism
            o    timeliness
  •       Communication is the key to good teamwork and efficiency
            o    understand what expectations are (timing/deliverable), aka underpromise and overdeliver
  •       Analysts generally treat their years as an investment in personal capital
            o    seek out work—be an entrepreneur
            o    vary the people and types of projects to work with/on
            o    maximize client exposure and value add
Qualities that Investment Banks Look for in Candidates

 •   No one facet is
     more important     •   A Strong Interest in Finance
                             o   take courses that demonstrate your interest in finance
     than the rest. A        o   ability to explain: what is investment banking? what does an
     well-rounded                analyst do? why would you be a strong candidate?
     candidate who
     strives to         •   Coursework or Work Experience
     encompass a             o  that demonstrates comfort with numbers/knowledge of
     wide-variety of            financial statements
                             o  that shows comfort in front of people (e.g., sales position,
     talents and                student government)
     interests often         o  any work experience that demonstrates drive
     finds success
                        •   A Team Player
                             o   team-driven (job/athletic/academic) accomplishments on resume
                             o   the objective is to demonstrate that you work well with others


                        •   A Record of Success and Achievement
                             o  academic GPA, scholarships/honors, test scores

                        •   Leadership of student organizations or teams
                             o  a high level of athletic accomplishment
                             o  community service with a record of achievement
General Preparation

  • Network with peers and alumni
  • Internships
  • Research - Do I want to do Investment Banking? What type of
    firms?
  • Make sure your resume is clear, concise and error free
     o Take advantage of resources available to you (alumni, Feld
        Career Center, etc.)
     o Everything is fair game
  • Practice, practice, practice
The Interview

  • Be prepared: know as much about the bank and position as possible
  • Know yourself: what motivates you, your strengths and weaknesses
    and be able to articulate those points
  • Know EVERYTHING on your resume
  • Be honest and demonstrate enthusiasm and motivation
  • Read the Wall Street Journal EVERYDAY and use the Vault Guides
  • Practice interviewing (mock interviews, preparing answers, etc.)
  • Ask questions
Resources


  •   Vault Career Guides
  •   Breaking Into Wall Street
  •   Wall Street Prep
  •   Wall Street Training
  •   DealMaven
  •   Wall Street Training
Corporate Banking Overview
What is Corporate Banking?

  • Provides Corporate Finance advisory, structured finance, and the
    extension of capital to corporate clients
  • Corporate Bankers are coverage officers who are the primary point of
    customer contact (aka “Relationship Managers”). Corporate bankers
    are responsible for:
     o forming trusted advisor relationships with clients
     o developing integrated financing strategies to satisfy complex client
       financing needs
     o providing innovative intellectual and financial capital to clients
  • Corporate Bankers partner with Investment Banking and product
    groups such as Capital Markets, Derivatives, and Cash
    Management/Treasury groups to provide the full spectrum of banking
    services to clients
Corporate Banking

  • The Corporate Banking product offering is focused on debt and other
    corporate finance products:

            Investment                                       Corporate
              Banking                                         Banking



                                                                 Structured           Cash Management /
        M&A                Equity             Debt
                                                                  Products                 Treasury

    •   Strategic      •    IPOs          •   Debt           •      Receivables       •   Cash
        Advisory       •    Follow-On         Issuance              Securitization        management
    •   Divestitures        Issues        •   Acquisition    •      Asset Based       •   Securities
    •   Acquisitions   •    Preferred         Finance               Finance               Services
                       •    Convertible   •   Bilateral &    •      Project Finance   •   Trade Finance
                            s                 Syndicated     •      Synthetic /       •   Investments
                                              Loans                 Leveraged         •   Agency &
                                          •   Derivatives           Leases                Trust
                                          •   Commercial     •      Commodities /     •   Corporate
                                              Paper                 FX                    Cards
                                          •   Hybrids/       •      Equity
                                              Convertibles          Derivatives
                                                             •      Pensions
Corporate Banking

  • For large multi-national corporations, corporate bankers primary
    contacts in a company are the CFO and Treasurer

                          Coverage                  Product Offering

     Board of Directors
                                                      Strategic and Financial
                                                      Advisory
                           Investment
             CEO
                             Banker

             CFO

                                                      Capital Structure Management
           Treasurer
                                        Corporate
                                         Banker
    Assistant Treasurer

                                                      Cash Management and
      HR           Ops                                other Treasury Products
Corporate Banking

  • Role of an Analyst:
     o   Prepare client presentations and marketing materials
     o   Participate in customer calls and client meetings
     o   Perform industry and company research to develop a view on financing
         transactions
     o   Coordinate due diligence process
     o   Navigate and participate in term sheet negotiation
     o   Analyze the risks associated with a transaction and the implications on
         relationship returns
     o   Drive dialogue with Credit Risk Management on client credit analytics and
         recommendations
     o   Evaluate impact of products on company’s future earnings, EPS accretion, and
         credit ratios
     o   Analysis and dissemination of industry performance and trends
Corporate Banking

   • Although skill sets are similar, the role of a corporate banking analyst
     slightly differs from an investment banking analyst
                           Low     Somewhat Low   Medium   Somewhat High   High

Financial Modeling

Credit Analysis

Valuation

Pitching/Presentation

Deal Execution

Client Interaction

Hours in the Office


      Investment Banking   Corporate Banking
Credit Risk Management Overview
What is Credit Risk Management?

  • Analyzes, monitors, and mitigates credit risk for individual clients by
    evaluating new transactions and managing a loan portfolio
  • Participates in deal teams with primary focus on the bank’s credit
    exposure to the client
  • Manages credit approval process (including preparation of credit
    approval memos)
  • Responsible for approval decision as to whether to lend/commit
  • Works with Banking (Investment Banking and Corporate Banking)
    and Product partners on client strategies relating to capital structure
  • Monitors the aggregate portfolio risk for corporate clients
  • Completes hedging strategies to mitigate risk from distressed loan
    exposure
Credit Risk Management

  • Group Interaction
                                         Investment Banking
                                     •     Work together on
                                           extending financing on
                                           M&A, LBOs
       Derivatives and other                                                 Corporate Banking
                                     •     Bridge Loans
         Traded Products
                                                                         •    Work together on
   •      Risk required to approve                                            extending credit for capital
          any credit exposure                                                 structure financings and
          relating to derivative                                              other banking products
          positions




                                          Credit Risk
                                         Management
       Cash Management /                                                   Loan Capital Markets
       Treasury Products                                                 (Leveraged Finance and
   •     Risk required to approve                                              High Grade)
         any credit exposure
         relating to cash                                                •    Work together on
         management positions (ie.                                            structuring financings and
         Letters of credit,                                                   negotiating credit
         overdrafts, etc.)                                                    agreements
                                                 Legal
                                     •     Work together on
                                           identifying credit risks in
                                           credit agreements
Credit Risk Management

  • Role of an Analyst:
     o   Prepares transaction credit approval memos
           Focusing on credit quality of the borrower and bank’s commitment
           Participates in due diligence process
     o Prepare financial models projecting cash flows and ability to repay debt
     o Compose annual and quarterly credit reviews to determine risk ratings of clients
     o Complete valuations of companies (discounted cash flow analysis, comparables)
       to determine loan to value
     o Perform portfolio stress testing to determine potential portfolio losses
     o Complete periodic industry and sector overviews, primarily focused on industry
       performance
     o Design hedging strategies (CDS purchases, asset sales) to mitigate outsized risk

				
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