Investment Banking

What Do Investment Bankers Really Do, When Working On A Deal?

• You meet/have calls with the company you are advising, and ask them to send you the materials you need to create the required materials (management presentation, financial models, etc.)
  • These materials are created by the analyst and associate level employees, and audited/reviewed at the VP/MD level.
• IB teams come up with a list of potential buyers/sellers – usually the bank has a lot of contacts that allow them to reach out to companies they think are a good fit.
• IB teams are constantly creating materials that are presented to the client or the companies the client is interfacing with. These materials take a lot of time to create and the creation process can sometimes be very repetitive but necessary.
• Additionally, you run financial analysis at all stages to understand what price you want to sell at or to justify to potential buyers the price you want to sell at.
  • Some model examples are: DCFs, Comps analysis, Precedents, AVP analysis, etc.
• You craft the story through the management presentation and other data you provide so that you can maximize value and get the best price for the client.

Types of Investment Banking:

Bulge Bracket (BB) Investment Banks

For a BB bank you are placed in either a Coverage group (industry-focused) or a Product Group (a specific type of service). While a coverage group can be one of many industries, the most common Product Groups are:

• Mergers and Acquisitions (M&A) – When a company buys or “merges” with another company. This division advises clients on how to carry out this process and how to price/value the selling company.
• Leveraged Finance (LF/LevFin) – Provides advice and loans to private equity firms and corporations for “Leveraged Buyouts” (When Private Equity firms use big loans/debt to buy companies).
• Debt Capital Markets – Provides advice on raising debt/loans for acquisitions, refinancing of existing debt, or restructuring of existing debt.
• Equity Capital Markets – Provides advice to companies on raising equity capital (stock, warrants, options, etc.). Helps in the IPO process.
• Restructuring – Provides advice on the structure of a company, so that it can be more profitable and efficient.

Boutique Investment Banks

If at a Boutique Investment Bank that specializes in a particular Product (or service) you’ll likely be placed on a specific Industry-Focused Team (Coverage Group).

An example of a Boutique Bank is Evercore. Evercore doesn’t specialize in a specific industry (covers many) but specializes (and only offers) two products: M&A and Restructuring.

While BB banks tend to have all of these product groups, boutiques may specialize in a few of these products/services (perhaps within a specific industry as well).

What are the differences between Bulge Bracket (BB) Banks and Boutique Banks?

Bulge Bracket banks refer to the big banks that do it all (such as Bank of America Merrill Lynch, Barclays, Citigroup, Goldman Sachs, and more). Meaning, these banks work across numerous industries and offer a wide variety of products/services. In general, deal teams at BB firms are larger than at boutiques.

Boutique banks are generally smaller, more specialized/focused on one sector, etc. Despite this, many Boutiques have very prestigious reputations on Wall Street. Some qualities Boutique Banks have are:

• Smaller teams working on big deals.
• More responsibility per person (since fewer people for the same job).
• Each person on the team gets a larger piece of the pie (sometimes receive larger compensation than BB).
• Additionally, these specialized boutiques can attract clients looking for specific needs/services.

How is a Bulge Bracket Bank structured, organizationally?

Typically, a BB Investment banking division is separated into coverage groups and product groups:

Coverage groups

• As the name suggests, these bankers cover industries (like Healthcare, Consumer and Retail, Diversified Industries, Technology Media & Telecommunications (TMT), Power, etc.). 
• From this, these groups bring industry knowledge (like competitive landscape, industry strategy, etc.) to their services. 
• Usually work closely with product groups.

Product groups  

• These bankers have expertise related to a particular product/service and typically work with the coverage groups to help execute deals/transactions related to their particular product. 
• Some examples of product groups are M&A, leveraged finance, equity capital markets, and debt capital markets (explained in more detail in the next section). 
• These groups bring the technical product knowledge (experience doing many similar deals/transactions) to the larger deal team.

Some general examples of tools/methodologies an Investment Banker might use?

The main tools are:

• Powerpoint – Used frequently to create clean and professional presentations for clients and/or potential companies you interact with.
• Excel – Used regularly to analyze financial data and create “valuation models”, which are used to try and determine a price to buy or sell a company for.
• Other Office Tools– You are doing a lot of communicating and coordinating with your team and with clients. Knowing business etiquette and conveying your message through a concise email is valuable.

In addition, some tools you might use less often include: Capital IQ, Factset, Thompson Reuters, Bloomberg (learn on the job).

Typical Investment Banking Hierarchy:

What types of skills, mentality, tools are necessary to be a successful Investment Banker?

• Attention to detail – A lot of your work revolves around working on Powerpoint decks, and plugging data points into excel spreadsheets/valuation models. As a result, making sure this is clean, accurate and presentable is an essential skill to have.
• Ability to work incredibly hard – As an Investment Banker, you work very long hours and many weekends. Consequently, the ability to get things done efficiently and around the clock is very important.
• Verbal Skills – Communicating effectively with your team and/or clients is a necessity. 
• Business acumen – A strong understanding of the industry you/your clients are in allows you to provide better advice to your clients. Additionally, this will help identify where to look for future deals and synergies.
• Mental Fortitude – Need to be able to maintain a positive attitude despite a lack of sleep or working with difficult personalities