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How To Break Into Investment Banking

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You might’ve heard business school students or economics majors talking about DCFs, internship recruiting, Superdays and Goldman Sachs.

All of these terms are related to a popular post graduate career in the financial services industry called investment banking.

What is investment banking?

Investment bankers are primarily financial advisors to corporations in an important stages of their lives, such as during an IPO, financing for more capital, or during a sell.

Bankers Investopedia writes “investment banking activities include underwriting new debt and equity securities for all types of corporations, aiding in the sale of securities, and helping to facilitate mergers and acquisitions, reorganizations, and broker trades for both institutions and private investors.”

What types of banks are investment banks?

There are different types of banks that have an investment banking function. Most of the popular commercial banks are known as the bulge bracket investment banks. These banks you’ve typically heard of before.

The top nine bulge bracket banks are: Bank of America Merrill Lynch, Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and Union Bank of Switzerland (UBS).

Such banks often have other careers in the financial services industry such as wealth management, asset management, global banks, corporate finance, etc. 

In addition to these bulge brackets, there are smaller banks known as boutique firms that do not have a commercial side and only focus on M&A advisory.

Some global elite boutique investment banks are Allen & Company, Cowen, Perella Weinberg Partners, Lazard, Evercore Partners, Greenhill & Co, Blackstone, Houlihan Loeky, Jefferies & Co, Centerview Partners, Oppenheimer Partners, Sandler O’Neill Partners, and Moelis & Company. 

What is the investment banking recruiting process?

The investment banking recruiting process is a multi-step four year long process. Often, it can start as early as the winter of sophomore year. After a year of learning about the basics of finance and economics, most investment banks will open up the recruitment process nearly a year in advance for their junior summer internship program.

The application process to this internship is strenuous and has multiple rounds. First, prospective candidates may be asked to drop their resume to the recruiters. Recruiters will look at university, GPA, relevant work experience, and any leadership in clubs and activities.

The next round is a Hirevue, which is an online interview platform. Candidates will have a couple of minutes to answer behavioral questions about their interest in investment banking and any relevant experience.

Afterwards, candidates may be asked to complete a technical interview or a modeling practice session. Technical interviews are basic accounting and financial fundamentals.

Candidates will need to have a working knowledge of the three financial statements (balance sheet, income statement, and cash flow statement) as well as popular modeling techniques, the discounted cash flow (DCF), leveraged buyout model (LBO), and comparison analysis with other companies.

Lastly, candidates will be invited to a Superday interview onsite at the firm. Candidates will be flown out to the headquarters of the investment bank and participate in a multi-stage interview process with analysts, associates, and vice presidents to assess fit and interests.

How To Land Your First Internship

This whole process may take almost a month and can start as early as February of sophomore year and end as late as March before junior summer. 

This junior summer internship is a ten week long program that introduces students to the roles and responsibilities of the full time analysts. The interns take an immersive, generalist approach and explore the different divisions that the analysts specialize in, such as healthcare, technology, consumer retail, and industrials.

Interns may also provide assistance to bankers in projects such as pitch books and the execution of mergers and acquisition mandates. These internships are often based in a big city like New York City and are very well paid, ranging from $10,000 to $70,000 in one summer. 

After the internship, a select number of interns are given a return offer upon graduation. This return offer promises a full time job offer in a specific sector. Once the students graduate, they are promoted to the analyst position. 

What skills do investment bankers need?

Investment banking  requires both soft skills such as communication and teamwork as well as technical skills of analysis and math. Below are important skills that successful investment banks will need in their day to day lives as noted by the Corporate Finance Institute. 

  • Financial modeling – Performing a wide range of financial modeling activities such as building three statement models, discounted cash flow (DCF) models, LBO models, and other types of financial models.
  • Business valuation – Using a wide range of valuation methods such as comparable company analysis, precedent transactions, and DCF analysis.
  • Pitchbooks and presentations – Building pitchbooks and PPT presentations from scratch to pitch ideas to prospective clients and win new business. 
  • Transaction documents – Preparing documents such as a confidential information memorandum (CIM), investment teaser, term sheet, confidentiality agreement, and building a data room. 
  • Relationship management – Working with existing clients to successfully close a deal and make sure clients are happy with the service being provided.
  • Sales and business development – Constantly meeting with prospective clients to pitch them ideas, offer them support in their work, and provide value-added advice that will ultimately win new business.
  • Negotiation – Being a major factor in the negotiation tactics between buyers and sellers in a transaction and helping clients maximize value creation.

Why do investment banking?

Investment banking is a popular career path for many reasons. Investment banking is known for its high-pressure environments in a big city, long working hours, and established hierarchy.

It allows mastery for financial analysis skills. Most of all, it’s a great challenge in a dynamic and global environment. 

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Author: Lauren

Lauren is a college student, double majoring in Economics and Psychology.