The Insider's Guide To Investment Banking PDF

Copyright 2012-2013 iBanking Insider LLC
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Contents
Introduction ............................................................................................................................ 1
Part I: What is Investment Banking?

Chapter 1: What An Investment Bank Is ........................................................................... 5
(1.1) Overview Of An Investment Bank ............................................. 5
(1.2) The Functions Of An Investment Bank ...................................... 7
(1.3) Investment Banking Corporate Ladder ........................................ 9
(1.4) How Investment Banks Make Money.......................................... 10
(1.5) Commercial Banking vs. Investment Banking ........................... 11
(1.6) Other Finance Participants .......................................................... 12
(1.7) Changing Nature Of The Industry .............................................. 13
Chapter 2: The Major Players ............................................................................................ 14

(2.1) By Size ........................................................................................ 14
(2.2) By Region ................................................................................... 16
(2.3) League Tables ............................................................................. 18
Chapter 3: What The Job Entails ....................................................................................... 19

(3.1) By Types Of Staffings (Projects) ................................................ 19
(3.2) By Types Of Work Performed .................................................... 25
(3.3) By Groups ................................................................................... 28
(3.4) “Heard In The Bullpen” .............................................................. 31
Part II: Why Investment Banking?

Chapter 4: Publicly Available Positives ............................................................................. 38
(4.1) Compensation ............................................................................. 38
(4.2) Exit Opportunities ....................................................................... 40
(4.3) Unparalleled Learning Experience ............................................. 41
(4.4) Pedigreed Colleagues And Future Network ................................ 42
(4.5) Prestige ........................................................................................ 43
Chapter 5: Insider Positives ................................................................................................ 44

(5.1) Learning To Deal With Stress ..................................................... 44
(5.2) Badge Of Honor .......................................................................... 44
(5.3) Transferrable Skill Set ................................................................ 44
(5.4) Future Jobs Will Be Less Difficult ............................................. 44
(5.5) Full-Time Analyst Training ........................................................ 45
(5.6) A Humbling Experience ............................................................. 45
(5.7) Leadership And Management ..................................................... 45
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(5.8) Small, Exclusive Industry ........................................................... 45
(5.9) Industry Expertise ....................................................................... 45
(5.10) Ideal Starting Point ..................................................................... 45
Chapter 6: Publicly Available Negatives ............................................................................ 46

(6.1) Long Hours ................................................................................. 46
(6.2) Stress ........................................................................................... 46
(6.3) Big Personality Bosses ................................................................ 47
(6.4) Lack Of Fitness And Overall Health .......................................... 47
(6.5) Negative Public Image ................................................................ 47
Chapter 7: Insider Negatives ............................................................................................... 48

(7.1) Pay Is Lower Across The Board ................................................. 48
(7.2) Large Amounts Of Administrative Work ................................... 48
(7.3) Unnecessary, Unrecognized, Or Irrelevant Work Completed .... 48
(7.4) Limited Ability To Control Work Flow ...................................... 49
(7.5) Investment Banking Is In A Volatile State ................................. 49
(7.6) Low Bank Loyalty ...................................................................... 49
(7.7) Unrealistic Expectations For Exit Opportunities ........................ 49
Part III: How To Get The Job

Chapter 8: Step 1 – Evaluate Your Current Situation ..................................................... 51
(8.1) Are You At A Target Or Non-Target School? ............................ 51
Chapter 9: Step 2 – Excel In The Classroom ..................................................................... 53

(9.1) Major ........................................................................................... 53
(9.2) Essential Classes ......................................................................... 53
(9.3) GPA ............................................................................................. 54
Chapter 10: Step 3 – Get Involved On Campus .................................................................. 55

(10.1) Join The Right Student Groups ................................................... 55
(10.2) Form Your Own Student Organization ....................................... 55
(10.3) Honors Societies And Distinctions ............................................. 56
(10.4) Student Government ................................................................... 56
Chapter 11: Step 4 – Create And Perfect Your Resume .................................................... 57

(11.1) Format/Appearance ..................................................................... 57
(11.2) Detailed And Quantitative .......................................................... 59
(11.3) Results Driven ............................................................................. 60
(11.4) Finance Resume Structure .......................................................... 60
(11.5) Review Process (What An Insider Looks For) ........................... 64
(11.6) The Cover Letter ......................................................................... 66
Chapter 12: Step 5 – Network ............................................................................................... 67
(12.1) Whom To Network With ............................................................ 67
(12.2) Where To Network ..................................................................... 68
(12.3) How To Network ........................................................................ 70
(12.4) Non-Target Strategy: Going Above And Beyond ...................... 75
Chapter 13: Step 6 – Obtain Pre-Internship Internships ................................................... 79

(13.1) Types Of Internships ................................................................... 79
(13.2) How Different Internships Stack Up ........................................... 80
(13.3) How To Get These Internships ................................................... 81
(13.4) What To Take Away From Your Internships ............................. 83
Chapter 14: Step 7 – Prepare For Junior Year Summer Analyst Interviews .................. 84
(14.1) Action Item 1 – Talk To Experienced Peers ................................ 84
(14.2) Action Item 2 – Understand The Industry And The Job ............. 84
(14.3) Action Item 3 – Continue Networking ........................................ 85
(14.4) Action Item 4 – Master Your Story (Introduction) ..................... 86
(14.5) Action Item 5 – Prepare For Qualitative Questions .................... 88
(14.6) Action Item 6 – Study Technical Questions ............................... 89
(14.7) Action Item 7 – Conduct Mock Interviews ................................. 89
(14.8) Action Item 8 – Research The Banks ......................................... 90
(14.9) Interview Essentials .................................................................... 90
Chapter 15: Step 8 – Obtain Your Junior Year Summer Analyst Internship .................. 92
(15.1) Action Item 1 – Understand The Internship’s Importance .......... 92
(15.2) Action Item 2 – Stay On Top Of The Recruiting Cycle ............. 93
(15.3) Action Item 3 – Apply ................................................................ 93
(15.4) Action Item 4 – Network ............................................................ 94
(15.5) Action Item 5 – Continue Preparing For Your Interview ........... 96
(15.6) Action Item 6 – Dominate Your Interviews ............................... 96
(15.7) Action Item 7 – Follow-Up .........................................................102
(15.8) Action Item 8 – Choose An Offer ...............................................103
(15.9) So You Didn’t Get An Investment Banking Internship ...............105
Chapter 16: Step 9 – Excel During Your Summer And Secure The Full-Time Job ........108
(16.1) Getting Ahead .............................................................................108
(16.2) Excelling On The Job ..................................................................109
(16.3) Understanding The Summer Review Process .............................113
(16.4) Receiving Your Offer .................................................................115
Chapter 17: Step 10 – Full-Time Recruiting ........................................................................116

(17.1) Number Of Openings ..................................................................116
(17.2) Recruiting Cycle And Structure ..................................................116
(17.3) Assess Your Situation And Execute A Plan ...............................117
Chapter 18: Step 11 – I Did Not Get A Full-Time Job, Now What? .................................122
(18.1) You Still Want To Get Into Banking ..........................................122
(18.2) You Want To Do Something Else Finance Related ....................123
Part IV: How To Succeed On The Job And Next Steps

Chapter 19: How To Be A Successful Full-Time Analyst ...................................................125
(19.1) Preparing For The Job .................................................................125
(19.2) Full-Time Training ......................................................................125
(19.3) First Impressions 2.0 ...................................................................126
(19.4) Settling In ....................................................................................127
(19.5) “Things I Wish I Would Have Known” ......................................130
Chapter 20: Banking And Beyond ........................................................................................134

(20.1) Making It A Career .....................................................................134
(20.2) Exit Opportunities .......................................................................134
Part V: Technical Concepts & Interview Questions

Chapter 21: Technical Guide – Accounting, Valuation & More .......................................140
(21.1) Accounting Overview .................................................................140
(21.2) Financial Ratios ..........................................................................144
(21.3) Introduction To Valuation ...........................................................146
(21.4) Public Comparables Analysis .....................................................146
(21.5) Transaction Comparables Analysis .............................................148
(21.6) Discounted Cash Flow Analysis .................................................150
(21.7) Capital Structure .........................................................................155
(21.8) Options ........................................................................................158
(21.9) Mergers & Acquisitions ..............................................................159
(21.10) Leveraged Buyouts .....................................................................162
Chapter 22: Qualitative Interview Questions & Answers ..................................................166

(22.1) “Why…?” ...................................................................................166
(22.2) Understanding The Job ...............................................................169
(22.3) Character Attributes ....................................................................171
(22.4) Work & Personal History ............................................................174
(22.5) Macroeconomics & Microeconomics .........................................177
Chapter 23: Technical Interview Questions & Answers .....................................................180

(23.1) Accounting – Basic .....................................................................180
(23.2) Accounting – Advanced ..............................................................182
(23.3) General Valuation – Basic ..........................................................186
(23.4) General Valuation – Advanced ...................................................190
(23.5) Comparables Analysis ................................................................192
(23.6) Discounted Cash Flow Analysis .................................................195
(23.7) Leveraged Buyouts .....................................................................200
(23.8) Mergers & Acquisitions ..............................................................203
(23.9) Capital Structure & Debt ............................................................205
(23.10) Miscellaneous & Brain Teasers ..................................................212
Appendix A: Questions For The Interviewer ............................................................218
Appendix B: Email Address Formula List .................................................................219
Appendix C: Financial Crisis Overview ......................................................................221
In-Depth Table Of Contents ............................................................................................222
List Of Insider Insights ......................................................................................................231
Introduction
Investment banking is no ordinary job and breaking into the industry is no ordinary task. We are here to
help. This guide was compiled and written by a team of industry insiders (both current and past) with a
simple purpose: to provide you (the reader) with a behind-the-scenes look at the investment banking
industry and how to break in.
Along with insight from our own team, we have surveyed and collected information from investment
bankers of every rank at firms across Wall Street. Throughout this guide you will be exposed to their
insights, experiences, quotes, and recommendations.
In the pages that follow, we pull back the curtain to expose exactly what investment banking is, what the
job entails, how to break in, and how to succeed once there.
How To Use This Guide

The Insider’s Guide to Investment Banking is designed to accommodate individuals at all stages of the
recruiting process and with varying degrees of industry knowledge.
Our approach is tailored for students from all types of schools and backgrounds. The guide provides
specific content for both target and non-target students with differences clearly emphasized.
Our guide can be read from cover-to-cover or used as a tool for reference. We recommend that
individuals seriously considering a career in investment banking read this guide from front-to-back (it is
vital to have a comprehensive understanding of the job and the recruiting process). For those more
interested in our coverage of certain topics, feel free to jump around based on your individual needs by
utilizing our In-Depth Table of Contents.
Below we outline the basic structure of the guide and summarize important components:
Part I: What Is Investment Banking?

Chapters 1-3
Part I provides a comprehensive overview of the investment banking industry, the investment bank, and
the role of the Analyst. Notable topics covered in Part I include:
• The role of investment banks, how they are structured, and how different groups interact
• Different types of investment banks and the pros and cons of working at each
• What a job in investment banking entails for the Analyst and what to expect on a day-to-day basis

Chapters 4-7
Part II concentrates on the benefits and disadvantages of working as a junior employee in investment
banking. We detail commonly-known pros and cons and have chapters devoted to lesser-known pros and
cons that are only uncovered after working in the industry. Notable topics discussed in Part II include:
• A comprehensive breakdown of investment banking compensation by level, year, and rank
• Dozens of well-known and insider pros and cons of the job
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Chapters 8-18
Part III presents a comprehensive and chronological step-by-step action plan designed to help you secure
a job in investment banking. Notable topics covered in Part III include:
• The target school/non-target school distinction and its implications
• Academics and effective campus involvement
• A step-by-step guide to creating the perfect resume, complete with examples and a template
• Comprehensive networking overview, plan, and tools (including email templates)
• Different types of internships and how they are viewed by investment bankers
• An inside look at the interview process and tools needed to prepare
• A detailed breakdown of how to be a successful Summer Analyst
• Choosing a full-time offer and other full-time recruiting strategies

Chapters 19-20
Part IV focuses on steps to take after securing a job in investment banking. Notable topics covered in Part
IV include:
• Insight regarding how to be a successful full-time Analyst
• A detailed list of things full-time Analysts wish they had known before starting the job
• A breakdown of the most popular exit opportunities and the differences between each

Chapters 21-23
Part V contains complete coverage of the most important technical concepts used in investment banking
as well as 150 need-to-know qualitative and quantitative interview questions and answers. Notable topics
covered in Part V include:
• Technical guide covering accounting, corporate finance, and valuation concepts used on the job
• Qualitative interview questions and answers
• Technical interview questions and answers
Appendix
A-C
In the Appendix, we provide extra materials particularly helpful when preparing for investment banking
interviews, including:
• Questions to ask interviewers and investment bankers at recruiting events
• Bank email formulas
• A detailed breakdown of the 2008 financial crisis
Detailed Table Of Contents

Reference this section to pinpoint specific areas of interest, terms, and sub-sections.
List Of Insider Insights

Reference this section to browse insider insight topics and locate specific insights throughout the guide.
Call-Out Boxes
Throughout the guide we utilize various call-out boxes that emphasize and distinguish specific content:
Insider Insight
These boxes denote details, recommendations, tips, and words of wisdom provided by current and
former investment bankers. Proprietary to iBanking Insider, these cannot be found anywhere else.
Quote
We have compiled relevant quotes from past and current investment bankers spanning various levels
and banks. These first-person accounts provide commentary directly from the source.
Non-Target School
Developed by team members and insiders with non-target school backgrounds, these boxes
distinguish recommendations, actions, processes, and strategies specific to non-target students.
E-Mail Template
We provide customizable email templates to aid in networking and recruiting.
Example
To aid in a comprehensive learning process, these boxes contain relevant examples.
Pros & Cons
List of positives () and negatives () are provided throughout the guide.
From all of us at iBanking Insider, we hope this guide proves to be highly informative and useful. For
additional resources, including answers to user-submitted questions, please visit our website at
www.ibankinginsider.com. Here you can also find more information on our resume review services.
Please feel free to contact us with comments, suggestions, or questions at contact@ibankinginsider.com.
See you on the inside.
-The iBanking Insider Team
PART I
What Is Investment Banking?
Chapter 1: What An Investment Bank Is
Before obtaining a job at an investment bank, it is vital to have a clear understanding of what a bank does
and why. In this chapter we will detail what an investment bank is, how it is structured, and where it fits
within the larger finance space.
(1.1) Overview Of An Investment Bank

What Is An Investment Bank?
At its core, an investment bank is a financial institution that provides advisory services and helps clients
raise capital (money). These clients include individuals, private and public corporations, and
government entities.
In its capital raising capacity, an investment bank acts as the middleman between clients with money to
invest and those looking for an investment (both debt and equity). Investment banks often support
transactions by providing their own capital on a temporary or permanent basis.
• When raising debt capital, an investment bank will often use its own funds combined with funds
from other banks/investors to lend to the company seeking capital (i.e. the bank will agree to
“buy” $50 million of a $500 million loan while finding investors for the other $450 million).
• When raising equity capital, an investment bank markets its client to large investors in order to
amass potential buyers of the client company’s equity.
In its advisory role, an investment bank aids clients in making strategic decisions such as mergers and
acquisitions (“M&A”), restructurings, financings, and additional tactical uses of capital (i.e. special
dividends, stock buybacks, etc.).
Ancillary services provided by investment banks include “market making” (holding financial
instruments in inventory and acting as both a buyer and seller) and the trading of various financial
instruments (currencies, commodities, equity securities, fixed income securities and derivatives).
Insider Insight Importance Of Understanding Investment Banks

 Before landing a job in the industry, candidates must understand the inner-workings of an
investment bank. Although this information may seem dry, it pays off when holding
conversations with investment bankers and when trying to understand the different prospective
jobs that exist within a bank.
How Investment Banks Are Structured
Investment banks can be generally categorized into three main operating divisions: Investment Banking
Division (“IBD”), Sales & Trading/Research, and Other. Often times, IBD and Sales &
Trading/Research are classified as “Investment Banking Services” within the larger investment bank.
This guide will concentrate on IBD: this division has the most new hire Analyst positions (and is the area
in which most readers are interested). General references to “investment banking” will refer specifically
to IBD.
Investment Bank Divisional Breakdown
Sales & Trading / Research Investment Banking Division Other
Sales & Trading Corporate Finance – Industry Groups Financial Advisory / Private Client
 Equities  Convertible & Equity  Financial Institutions  Technology / Media / Advisory services for individual investors
 Commodities Linked (FIG) Telecom (TMT)
 Currencies  Mortgage Backed /  Industrials  Financial Sponsors
 Government Asset Backed  Aerospace & Defense  Municipal Finance Asset Management
Securities  Fixed Income  Natural Resources  Consumer / Retail
 Equity & Credit  Real Estate / Gaming  Healthcare Manage portfolios of various securities and assets
Derivatives / Leisure (REGAL)
Research Corporate Finance – Product Groups Insurance Services

 Equities  Leveraged Finance Provide individual and enterprise insurance
 Commodities  Mergers & Acquisitions (M&A) services
 Credit  Restructuring
 Ratings Advisory Commercial Banking
Bank and credit services for businesses
Private Equity & Merchant Banking Capital Markets Retail Banking

Invest in and lend to companies using both bank Equity Capital Markets Debt Capital Markets Bank and credit services for individuals
and/or private capital  Equities  Loan (includes acceptance of deposits)
 Convertible &  High Yield
Equity Linked  Municipal Finance Transaction Banking / Prime Brokerage
 Private Placements  Structured Credit
 Derivatives  Investment Grade Provides securities services and other services to
professional investors
The “Chinese Wall” (Public vs. Private Information Barrier)
There is an imaginary (sometimes even physical) divide between investment banking groups with access
to private information and their colleagues restricted to only publicly available information. This wall is
commonly referred to as the “Chinese wall” or “information barrier”. The wall is designed to prevent
conflicts of interest within the bank itself as one investment bank will commonly offer different services
on both sides of the public and private divide in a deal process.
More specifically, this “wall” blocks IBD (the Corporate Finance department and Capital Markets group)
from sharing private information with Sales & Trading/Research and other divisions of the firm (such as
Wealth Management) that are restricted to public information.
The wall is particularly relevant to bankers in IBD as they are frequently exposed to confidential
information from their clients. This information includes projected financials, pending strategic moves
(mergers, divestitures, etc.), and intimate corporate data (such as salaries).
There are stringent regulations on individuals with access to private information; within an investment
bank large internal compliance teams monitor the interactions among different groups every day to ensure
that the bank is following protocols and that private information is not being shared with the wrong
individuals.
Insider Insight Stock Trading Restrictions

 Upon becoming an employee at an investment bank, there are tight restrictions on managing a
personal stock portfolio. Each investment bank has a list of restricted stocks that cannot be
traded by individuals that work in IBD (that list increases with the size of the bank). Also, day
trading is usually not an option due to mandatory hold periods.
(1.2) The Functions Of An Investment Bank
Investment banks provide a full suite of services: different divisions and groups work together to solve a
client’s specific needs. Offerings from different groups complement one another and allow for
customizable services. Below we outline the different functions of the Corporate Finance and Capital
Markets departments (within IBD) as well as Sales & Trading/Research.
Corporate Finance
The Corporate Finance department builds and manages a pool of clients with the ultimate goal of
executing transactions for a fee. Senior bankers spend the majority of their time pitching new clients to
win business, soliciting existing clients with new transactions, and overseeing the execution of
transactions for new and existing clients. As displayed in the chart above, Corporate Finance is further
divided into two sub-categories: coverage groups and product groups. Both groups work together to
provide their clients with a full breadth of knowledge related to a proposed transaction:
Coverage Groups (or Industry Groups)
Bankers in coverage groups function as industry experts and focus on maintaining relationships with
clients in their specific industry. These teams typically lead pitching and prospecting efforts and
often act as the liaison between the client and investment bank during a transaction. Along with
focusing on a particular industry, bankers in coverage groups are expected to have a working
knowledge of the various transaction services the bank provides. Coverage groups work on a myriad
of transactions within one specific industry.
Product Groups
Bankers in product groups focus on deal execution and function as liaisons (with the exception of
M&A) between Capital Markets and the rest of the bankers on a deal. Expertise lies in a specific type
of transaction, as product groups focus on one financial product (i.e. Leveraged Finance,
Restructuring, M&A, etc.) within a variety of industries.
A more in-depth look at coverage and product groups and their impact on the Analyst experience is
covered in Section (3.3).
Capital Markets
The Capital Markets group is responsible for raising money for clients across a broad spectrum of
financial products. In a typical deal, a client company (issuer) will issue debt or equity that investors can
loan or purchase. Capital Markets investment bankers reach out to relevant potential investors in their
network and sell them various deal propositions: they seek to “fill a book” (raise the full amount of
money requested by a client looking for capital).
The selling process entails a back-and-forth negotiation between the Capital Markets banker and the
investor. Investors will agree to invest (“sign up” for) certain dollar amounts at given prices. This
process becomes a game of chess for the Capital Markets group as they attempt to fill an entire book at
the most favorable terms for the issuer (client).
Insider Insight The Role of Capital Markets
 During a debt or equity deal, investors will often place investment orders for varying amounts at
different prices. For example, in a bond transaction (debt), an investor could tell the Capital
Markets banker that they will buy $50 million in bonds at a 10% interest rate, $25 million at a
9.5% interest rate, $10 million at a 9% interest rate, etc. One of the most important functions of
the Capital Markets team is compiling all of these different orders and choosing the optimal
structure/price.
Capital Markets bankers typically function across all industries but specialize in a certain financial
product (for example, convertible debt, equities, high yield debt, leases, leveraged loans, preferred stock).
The Capital Markets group is technically a type of product group, but it is not classified in the Corporate
Finance department.
Relationship Between Corporate Finance And Capital Markets:
There is constant interaction between the Corporate Finance department and the Capital Markets
group. During the pitch and initial phases of a deal, Capital Markets plays an auxiliary role by
providing the Corporate Finance deal team with accurate, real-time market data used to assist in the
deal process. Once a specific financial product (bonds, loans, preferred stock, etc.) is chosen and the
deal is ready to be sold to investors, Capital Markets takes over. They play an integral role by raising
money and selling the deal/product to actual investors.
Below is an example to illustrate the relationship between the two groups:
Example
A casino operator approaches an investment bank to raise $300 million in debt to expand an
existing casino. Bankers from the Leveraged Finance group (a product group) will determine the
best structure for the transaction (a bond or loan). Next, Leveraged Finance will work with the
Real Estate, Gaming & Leisure group (a coverage group) to determine how to best position the
company to investors. Finally, Capital Markets will be brought in to sell the debt to investors and,
ultimately, fill the book (raise the full $300 million from a consortium of investors at the lowest
possible interest rate/best terms). Throughout the process, the Real Estate, Gaming & Leisure
group will oversee the transaction and manage the client’s interaction with various groups.
Sales & Trading/Research
The primary role of the Sales & Trading department is “market making” (the process of buying and
selling financial products, creating a marketplace that other players can enter). “Sales” refers to the role
of the bank’s sales force: a group that calls institutional and High Net Worth investors to solicit trades and
take orders. They communicate orders to the bank’s trading desks which then price and execute these
trades (a process called “trading”).
“Research” refers to equity and credit research, a division which plays an important role but typically
does not generate material revenues. The Research department’s main function is to provide assistance
(by providing industry knowledge or writing research reports) to traders, the sales force, and the
Corporate Finance team, as well as serving outside investors with investment advice.
Non-Target School
Some schools considered non-target for IBD recruiting ARE target schools for positions in Sales &
Trading/Research. It is not unheard of for students set on working in IBD to use their university’s
target status with these groups as a platform to break into the bank (later trying to transfer into IBD).
Other Departments
Investment banks generally have other departments and groups that provide support for the different
functions within the bank and offer services not covered by Sales & Trading/Research and IBD. These
functions include private wealth management, investment management, prime brokerage, principal
investing, credit and insurance services, and several others.
(1.3) Investment Banking Corporate Ladder

Investment Banking Hierarchy
Position Role Overview Tenure

 Responsible for creating financial models, conducting research, putting together
presentations, aggregating data, and performing countless administrative tasks required for
deal logistics
Analyst  Integral in the undergraduate recruiting process. Conduct interviews, sort through resumes, 2-3 years
and attend recruiting events. Help train new Analysts and interns
 Typically interact with clients only during deals (via email or phone); not responsible for
client management or relationship
 Responsible for managing day-to-day components of a deal, monitoring and reviewing

Analyst work (including models and presentation materials), drafting memos, creating
Associate presentation “shells” (drafts), and understanding more advanced technical concepts 3-4 years
 Integral in undergraduate and MBA recruiting
 Interact with clients frequently regarding deal logistics and often attend pitches/meetings
 Responsible for overall deal execution (hitting deadlines, developing client strategies,
coordinating meetings/conference calls, etc.), reviewing Analyst and Associate work, and
Vice President orchestrating interaction with other groups within the bank
 Involved with MBA recruiting and some undergraduate recruiting: mostly promote bank at
or events and conduct final round interviews 3-5 years
 “Staffers” are usually VP-level employees (individuals assigned to ensure proper
Director allocation of junior employee resources)
 Begin to establish client relationships, attend most client meetings, point of contact for
client regarding work or deal-related issues
 Similar role to VP, but less responsible for technical and logistical aspects of deal process
Senior Vice
and more involved in establishing and maintaining client relationships. The Senior VP’s
President
role will be more technical if no VP is on the deal team, or more client-focused if no MD
is on the deal team
or 3-5 years
 Sometimes involved with recruiting efforts by serving as a promotional tool for the bank;
occasionally interview candidates during final rounds
Executive
 Interact with clients daily: have established relationships and try to expand client base.
Director
Sometimes source and run their own deals
 Responsible for managing client relationships and winning business, negotiating deal
terms, running client meetings, and developing high-level deal strategies
 Report group results and discuss strategies with investment bank’s senior executives,
Managing
recommend hiring/firing decisions, and help determine pay. Sometimes interview Undefined
Director
candidates during final round
 Have established, long-term client relationships; usually act as the client’s point of contact
with the bank
Deal Teams
On any given deal, investment bankers organize themselves into teams to best serve their clients. These
teams are comprised of bankers from every level and from multiple groups (coverage groups and product
groups). Structure varies slightly from deal-to-deal, but generally the “deal team” is comprised of two
smaller teams (one coverage team and one product team). Each of these smaller teams will have one
member from every level of the hierarchy detailed above (Managing Director, Senior VP, Vice President,
Associate, and Analyst). Therefore, on a given deal there are usually two MDs, two VPs, etc, all working
together to address a client’s needs. Ancillary deal team members may include senior employees from
Capital Markets, Research, Credit Advisory, and other groups.
(1.4) How Investment Banks Make Money

The Investment Banking Division makes money via two primary fee types: advisory fees and
underwriting fees.
1. Advisory Fees
An advisory fee is charged to clients for advisory services and is usually based on a percentage of total
deal value (<1-3%, subject to certain minimum thresholds), or a set fee. Examples of services on which a
bank would earn an advisory fee include: “fairness opinions” (provide a professional opinion on
valuation and deal terms of a completed transaction to ensure that the deal was fair), mergers,
restructurings, and takeover defenses, among others.
2. Underwriting Fees
Underwriting fees are charged to clients when a bank helps raise funds for various purposes through debt
or equity transactions. These fees are based on a percentage of total deal value: 0.75-3.0% for debt
transactions and 4.0-7.0% for equity transactions. Examples of these transactions include: bond offerings,
follow-on offerings, IPOs, loan syndications, etc. Underwriting fees vary as banks offer two types of
underwriting structures: best efforts and firm commitment.
Best Efforts
The investment bank agrees to “try its best” to sell as much of a security as possible. The bank does
not guarantee that it will sell all of the securities the client wishes to offer. This structure limits the
underwriter’s risk (the client bears most of the risk) but also limits the underwriter’s reward as this
type of commitment garners a lower fee.
Firm Commitment
The investment bank agrees to purchase all securities from the issuer and, in doing so, assumes risk of
all unsold inventory. The client is guaranteed to receive the money it desires, and the bank attempts
to sell off as many of the securities as possible to other investors in order to limit its own holdings.
This higher risk warrants a much higher fee, often commission-based.
Investment banks also make money by committing capital on a temporary basis to support the
execution of transactions (often acquisitions). This is called a “backstop” and ensures the acquirer
will have the funds needed to execute a transaction. The bank often never needs to fund the
commitment itself as it attempts to syndicate/find investors willing to lend to its client.
Bookrunners vs. Co-Managers
In most underwriting transactions, more than one investment bank will help a client raise money.
Each bank is designated a specific title and role during a transaction; this role affects the amount of
work a bank must complete and the fees it will earn. The two major roles include “bookrunners”
and “co-managers”: there can be multiple bookrunners and/or multiple co-managers on a single deal.
Bookrunners run the deal and take the lead in managing the overall deal process. There is often more
than one bookrunner, in which case the “lead left bookrunner” is the bank that does the majority of
the work and takes responsibility for most of the securities issuance. Investment banks acting as co-
managers play a smaller role in the deal, handling tasks as delegated by the bookrunners and earning
fewer fees from the transaction.
Insider Insight Lead-Left Bookrunner

 The term “lead left bookrunner” originates from the position of an investment bank’s logo on
the bottom cover of a “prospectus” (legal document containing information related to a debt
or equity offering). Banks are listed left to right, in order of their prominence on a deal.
 Analysts working on transactions where their bank is a lead left bookrunner can expect to
complete the majority of the work for that deal.
The Sales & Trading division makes money by charging a fee (spread) on both sides of a market making
transaction.
(1.5) Commercial Banking vs. Investment Banking

Many prospective and soon-to-be investment bankers do not understand the distinction between
commercial banking and investment banking. “Commercial banks” accept deposits from individual
consumers and make loans to individuals and businesses. Typically, these loans are held on the
commercial bank’s Balance Sheet. On the contrary (as described in detail above), investment banks are
intermediaries that do not accept deposits; they advise clients, sell investments, execute transactions, and
commit capital to clients. The investment bank’s goal is to hold a loan for the least amount of time
possible prior to selling to investors (preferably 24-48 hours), as the process soaks up available capital
that could be used to generate additional fees for the bank.
Today, many investment banks are divisions of larger commercial banks (such as Bank of America,
JPMorgan Chase, etc.). These banks typically have access to a larger Balance Sheet and can engage in
transactions at a lower cost of capital (cheaper fees and/or better financing terms), providing an advantage
in the marketplace over competitors. Note that although these banks have large Balance Sheets, they
typically do not lend on their own and have other banks or investors join in on deals to diversify risk.
Until 1999, commercial and investment banks were required to operate separately according to the Glass-
Steagall Act. The passing of the Graham-Leach-Bliley Act in 1999 repealed these provisions and allowed
a single entity to provide both commercial and investment banking services. The 2008 financial crisis
brought to light some of the dangers of this model as the combined banks took on risky behavior. As a
result of the financial crisis, the two remaining independent/pure bulge bracket investment banks (Morgan
Stanley and Goldman Sachs) decided to reorganize into bank holding companies: the same classification
and treatment as commercial banks. This new classification limited their ability to take on risk but gave
these two banks access to the benefits of the Federal Reserve’s various lending programs. In reality,
Goldman Sachs and Morgan Stanley are “name only” commercial banks (they do not accept
widespread consumer deposits or engage in material commercial lending practices). No “true”
independent/pure play bulge bracket investment banks currently exist in the United States.
Quote
“ If someone that I’m interviewing or just talking to does not know the difference between investment
banking and commercial banking, they are instantly out of consideration for a job with my team. You
would be surprised how often it happens. ”
- Vice President, Bulge Bracket Investment Bank
(1.6) Other Finance Participants

Investment banks typically interact with various types of investor groups, mainly venture capital funds,
private equity funds, hedge funds, mutual funds, and other institutional investor groups. This set of
firms is also known as the “buy-side”. Buy-side investors that focus on purchasing controlling stakes in
companies are known as “Financial Sponsors”. In many cases, these Financial Sponsors are the bank’s
direct clients; in other cases, these sponsors are involved in a transaction as a separate party (i.e.
purchasing a client of the investment bank or providing funding to a client of the investment bank).
We detail each of the major buy-side firms below:
Venture Capital Fund
A venture capital fund is a group of investors that makes equity investments (privately negotiated deals
between a company and the investor for the purchase of non-public shares in the company) in early stage
and startup companies with high growth potential. These investors make long-term investments (5-10
years) and seek high returns resulting in exposure to high levels of risk.
Investment banks typically have minimal interaction with these investors as companies in this stage are
usually too small to solicit worthwhile investment banking transactions.
Private Equity Fund
A private equity fund is a pool of investors (mostly composed of institutional money from pension funds
and High Net Worth clients) that makes investments in later-stage companies. These firms tend to invest
in a company’s equity (public and private), but they may also invest in a company through lending (an
investment in debt). Private equity firms often buy controlling stakes in companies and use leverage to
boost returns (a process known as a “leveraged buyout” or “LBO”). These investors typically target a
five year time horizon before exiting an investment via a sale of the company or an IPO.
Private equity funds are major clients of investment banks and interact constantly with an investment
bank’s Financial Sponsors and Leveraged Finance groups. These funds look to investment banks to
provide loans/commitments to support acquisitions of companies, to find new companies to purchase, and
to help sell existing portfolio companies.
Hedge Funds And Mutual Funds
Hedge funds are managed investment portfolios that typically make riskier investments in a wide range of
assets: most commonly, very liquid assets in public markets. They are known for earning high returns by
utilizing complex and advanced trading techniques not available to many other investor groups. The term
“hedge” comes from a trading strategy which emphasizes offsetting trades to neutralize risk. Hedge
funds can have a variety of investment strategies, with some firms holding investments for years at a time
and others engaging in high frequency trading based on complex financial algorithms.
Mutual funds are similar in practice to hedge funds but are limited in their ability to make certain
speculative investments and are often less risky as a result. Hedge funds are only available to
sophisticated investors while mutual funds are open to most individuals.
Investment banks solicit hedge funds and mutual funds when raising money for a client in an
underwriting transaction. The Sales & Trading department maintains relationships with these funds to
solicit trading ideas and to execute trades on their behalf.
(1.7) Changing Nature Of The Industry

Wall Street has changed significantly since the “2008 financial crisis” (for more detail, see Appendix C).
Before pursuing or entering a job in investment banking, it is important to understand where the industry
is headed. Below we outline material changes to the industry and its competitive landscape over the last
several years. We detail the effect of these changes on future Analysts in Section (7.5).
Increased Regulation
The aftermath of the 2008 financial crisis led to significant reforms on Wall Street aimed at protecting
consumers and increasing transparency of the financial system. The major regulations include Dodd-
Frank and Basel III:
• Dodd-Frank: Passed in July 2010, this bill restricts risky actions (proprietary trading), increases
capital requirements, introduces new securitization laws, and establishes government agencies to
oversee banking practices and monitor troubled financial institutions. This bill issued the most
significant financial reform since the regulations following the Great Depression.
• Basel III: Agreed upon in 2010, these regulatory measures increase capital requirements for
banks and establish new requirements regarding bank leverage and liquidity.
The full implications of these new reforms is yet to be seen, but it is safe to say that the investment
banking industry will be subject to significantly more stringent regulation in the foreseeable future.
Loss Of Major Firms And Consolidation
One of the most significant outcomes of the financial crisis was the bankruptcy and consolidation of
several prominent investment banks: most notably, Bear Stearns, Lehman Brothers, and Merrill Lynch.
The “disappearance” of these firms has reduced the number of bulge bracket banks and exemplifies the
changing competitive landscape on Wall Street.
Wall Street Scrutiny
Wall Street as a whole has come under fire from politicians and the general public in the aftermath of the
financial crisis. Government bailouts and congressional testimonials shed light on the culture of “excess”
and risk that was prominent across Wall Street. Because investment banks took public funds to remain
solvent, their actions are closely monitored by the public to avoid misuse of taxpayer dollars.
Scrutiny and subsequent regulation has helped decrease risk at investment banks, but (as a byproduct) has
also lead to lower profits and thus lower pay for employees of these firms. In today’s environment where
excessive bonuses are chastised and publicized, pay is much more closely tied to bank performance.
Chapter 2: The Major Players
In this chapter, we focus on the specific investment banks themselves. We discuss how they are grouped
(within the broader categorization of both size and region), emphasize the differences between groupings,
and detail which specific banks belong in each category. Our focus is on banks within the U.S., but note
that there are slight variations to the below information when evaluating firms internationally.
(2.1) By Size
Investment banks can range in size from thousands of employees to just a few individuals; bank culture
and capabilities in these two scenarios are very different, as is the Analyst experience. Banks are
categorized by size into bulge bracket, middle market, and boutique (which includes elite boutique).
Although there is a generally agreed upon list of bulge bracket banks in the U.S., the dividing line blurs
when looking internationally or distinguishing between middle market and boutique investment banks.
Bulge Bracket
Recognized as the most prestigious and well-known banks, bulge bracket firms work on the largest deals,
have the most employees, and provide the widest array of services to their clients. All of these banks have
a global presence, with U.S. headquarters in New York City and geographic headquarters in major cities
across multiple continents.
These firms commonly execute deals over $1 billion, but deal sizes can be as low as $200 million: many
banks have minimum thresholds in the low-hundred million dollar range. These thresholds exist because
fees on smaller deals do not justify the resources and time of the larger banks.
The banks in the following list are generally agreed to be “bulge bracket” in the United States:
 BAML  Citi  Deutsche Bank  JP Morgan  UBS

 Barclays  Credit Suisse  Goldman Sachs  Morgan Stanley  Wells Fargo
Pros & Cons

 Prestigious firm and “front-page” deals.
 Better exit opportunities with more headhunter exposure – these are among the first firms that
headhunters reach out to regarding next steps for Analysts.
 Higher pay – these firms usually set the precedent for Analyst pay each year.
 Solid company infrastructure – well-established services within the bank make the Analyst’s life
easier (i.e. Presentations, Copy Room, and Information Services).
 Most bulge bracket banks (excluding a few notable firms) are known for accommodating (and
even helping) Analysts that pursue exit opportunities.
 Large Analyst classes provide better networking opportunities.
 Less intimate setting – you are an ant in the grand scheme of the firm; it is harder to get noticed
and more likely that you get lost or stuck in a bad staffing situation.
 Usually associated with longer hours.
 More regimented structure – when trying to complete a deal or win business from clients, you
will need to clear many internal hurdles and must complete a multitude of memos.
Middle Market
Middle market is the most amorphous investment bank categorization, with some firms acting more like
boutique banks and others closely resembling bulge bracket banks. Most of these banks provide a full
range of advisory and financing services to clients, but some do not offer all of the services that bulge
bracket banks can provide. Middle market banks typically have a decent international presence but are
not as global as bulge bracket banks. They range in size from several hundred employees to tens of
thousands (in rare cases).
As a general rule, middle market deals range from $200 million-$1 billion (with occasional multibillion
dollar transactions), but smaller middle market firms execute deals valued as low as $50 million.
Examples of middle market banks include: Jefferies, RBC, Piper Jaffrey, Houlihan Lokey, HSBC,
William Blair, RBS, BNP Paribas, Rothschild, Harris Williams, Macquarie and many more.
Pros & Cons

 More intimate office setting often leads to more senior exposure.
 Leaner deal teams – Analysts get the opportunity to take on more responsibility.
 Less red tape – less time is spent working on materials required for internal compliance.
 Lower pay (although larger middle market firms usually pay equivalent to or just below Street).
 Less well-known brand name – your friends and family may not have ever heard of your firm.
 Less willing to do “two and out” – middle market firms allow Analysts to work their way up
within the firm more often, and therefore are not always accommodating of Analysts going
through exit opportunity recruiting. Some firms may even threaten to fire you if they hear that
you are going through the recruiting process.
Boutique
Boutique banks are typically smaller than middle market banks and usually provide only advisory
services; their small or non-existent Balance Sheets exclude them from providing financing services. The
number of employees at boutique banks varies widely, but can be as high as a few hundred and as low as
a dozen. These banks tend to be regional and have only a few major offices.
Most boutique banks execute smaller deals, typically below $100 million, and often specialize in a
particular type of deal or focuses on a specific industry (i.e. healthcare, media, etc.).
Examples of these types of banks include CSG Partners, Silicon Valley Bank, Soneshine Partners, Stone
Key Partners, and thousands of others. Research boutique investment banks in your area to get a better
idea of which firms are near you.
Pros & Cons

 Very intimate/lean deal teams – by nature, deal teams tend to be smaller at these smaller firms,
leading to more responsibility and senior exposure for Analysts.
 Fewer hours – although this is not always true, many boutique banks have more laid-back
cultures and give Analysts a better work-life balance.
 Significantly lower pay – usually in the form of lower bonuses.
 Lack of infrastructure – these firms typically do not have the same auxiliary services that bulge
bracket and middle market firms have. Analysts will have fewer resources to help them on the
job, and might find themselves printing and binding their own pitchbooks.
 Minimal buy-side exit opportunities – headhunters rarely reach out to Analysts at these firms.
Elite Boutique
A few banks are designated as “elite boutiques”; these firms do bulge bracket deals ($1 billion+) and
have global a presence despite being small in size and offering fewer services. A few well-known elite
boutique banks have upwards of one thousand employees, but are considered boutique due to their small
(or non-existent) Balance Sheet which prevents them from offering financing and other services.
Elite boutique investment banks are well-respected across Wall Street and are known for paying Analysts
the same as bulge bracket banks. They also provide similar, if not better, exit opportunities compared to
most other firms.
Examples of elite boutique banks include: Moelis & Co., Lazard, Blackstone Investment Banking,
Evercore, Centerview, Qatalyst, and Greenhill.
Pros & Cons

 Share most of the same pros as bulge bracket banks – prestigious deals, better exit
opportunities/headhunter exposure, strong name brand (within finance), and very accommodating
for Analysts seeking exit opportunities.
 Additional benefit of a lean/intimate deal teams, resulting in more Analyst responsibility.
 Very little infrastructure coupled with high fees results in greater profits for the firm and often
high bonuses for the firms employees.
 These firms are uniquely positioned for growth, and upward mobility may be expedited.
 Known for having longer hours/intense cultures – these firms often become prestigious because
of the intensity and drive of the senior bankers that work there. This can translate to much more
work for the Analyst.
 Limited/no exposure to financings – because most of these firms do not have financing
capabilities, Analyst experience will come exclusively from advisory roles.
 Relatively unknown outside of the finance world – these firms do not look as prestigious to non-
finance employers or the general public.
(2.2) By Region
Investment banks span the globe, with the Analyst experience varying widely by region (even within a
single investment bank). The biggest investment banks have a presence (usually in the form of a
headquarters) in each of the major global finance hubs (U.S., South America, Europe, and Asia). To
maximize relevance, we will concentrate on three groupings of regions: New York City, regional
offices, and international offices. We will concentrate on bulge bracket banks and compare how a
difference in location affects the life of an Analyst.
New York City
New York City is the undisputed world headquarters of finance; any investment bank that is a major
player has a strong presence here. Working in this city provides a distinct experience; finance is an
integral part of the city’s history and culture.
Many banks have their headquarters in New York City with bulge bracket offices containing hundreds
(even thousands) of employees working in the same building. The culture of the bank is much more
prevalent in these headquarter offices: Analysts report feeling more like they are a part of the firm.
Insider Insight Working In New York City
 In New York City (“the city that never sleeps”) you can expect investment banking hours to be
long. New York is known for a “work hard, play hard” mentality. Hours here are often worse
than regional counterparts, but this fluctuates from bank to bank.
 Most investment banks are no longer actually on Wall Street, and instead reside in Midtown.
Offices are heavily populated from east coast and Ivy League schools, but there is also a large
international presence.
Regional Offices
Regional bulge bracket offices (also known as “satellite offices”) are much smaller than those in New
York; office size ranges from 10-40 bankers (with a few offices topping 100+). These satellite offices are
designed to establish a regional presence and service industries located outside of New York. Regional
offices are typically populated with bankers focused on specific industries, regional Financial Sponsors,
or non-industry specific regional coverage. In the past five years the vast majority of product specialist
roles have been relocated from satellite offices to the main offices in New York.
Below is a list of major regional locations and the industries they tend to cover (note that offices may
cover a variety of industries and that boutiques tend to have coverage in smaller cities such as Denver or
Atlanta):
• San Francisco (Technology)
• Los Angeles (Media, Leisure)
• Houston (Energy)
• Chicago (Industrials, Consumer)
• Boston
Compared to New York, these offices are sometimes known for being “slower paced” and having a more
laid-back attitude. They are often populated with students from top regional schools (i.e. Houston offices
recruit heavily from UT – Austin and Rice; Chicago offices recruit heavily from Michigan and Notre
Dame; etc.).
Non-Target School
Candidates from non-target schools outside of the New York area will have a much harder time
breaking into roles in the city. Even some of the candidates from regional target schools often have a
difficult time making their way to New York offices. Instead, most regional non-target school
candidates end up at regional offices nearby their university (as this is where their network lies).
International Offices
While New York acts as the main finance hub of the Americas, London fills a similar role for Europe
(and Hong Kong for Asia). Working in these cities is similar to working in New York, with major bulge
bracket banks all having large offices and presences here.
Although New York, London, and Hong Kong are the most robust, large countries generally have their
own sizeable finance hubs. These include Toronto, Sao Paolo, London, Frankfurt, Zurich, Dubai,
Mumbai, Singapore, Hong Kong, Shanghai, Tokyo, and Sydney. Foreign banks often have their global
headquarters in their respective countries (outside of the U.S.) in conjunction with maintaining a U.S.
headquarters in New York City.
Some students dream of working as an investment banking Analyst in an international office for a few
years and then returning to the United States. It is extremely difficult for prospective Analysts to break
into international offices from domestic universities. Understand that once you go to an international
office, you become “that region’s guy” (for example, if you begin your career working as Analyst in your
bank’s Hong Kong office, you become the “Asia guy” because your expertise lies in that region).
Insider Insight Working In International Offices

 The most likely route to move internationally is to work as an Analyst for two years in the
United States and then request a third year abroad.
 Students are often surprised that official international office languages tend to be English.
(2.3) League Tables

“League tables” are charts that rank investment banks based on specific metrics such as number of deals
completed, cumulative deal value, average deal size, percent of market share, and others. Parameters are
often set to differentiate by region, deal size, industry, type of transaction, etc. These tables are one of the
only ways that banks can numerically stack up against each other, but they are not taken as an absolute
truth as many are manipulated and contain certain exclusions.
Example 1: Example 2:
Source: Deal Logic, Wall Street Journal Source: Deal Book, Thomson Reuters
Individual banks and groups within banks create their own league tables to market themselves to potential
clients (group rank is included in many pitchbooks). These are often manipulated to reflect the most
favorable outcome for the bank (i.e. setting specific dates, choosing different deal parameters, excluding
certain competitors for a given reason, etc.). Several third-party companies create their own “unbiased”
league tables, notably Deal Logic (WSJ) and Thomson Reuters.
Insider Insight Investment Banking League Tables

 It is not uncommon to see each bank at the top of most league tables it creates. A more accurate
representation of “ranking” is the bank’s current reputation on Wall Street.
 Group is particularly important for league tables; you might see one group at an investment bank
at the top of its industry league tables and another group at the same bank at the bottom of its
industry league tables. For example, a bank’s Consumer Group may be #1 among Consumer
Groups on Wall Street, but the same bank’s Energy Group may be #10 among Energy Groups
on Wall Street.
Chapter 3: What The Job Entails
This chapter focuses on what a job in investment banking actually entails for the Analyst: the types of
projects on which you will work, the type of work you will perform, the difference between groups, and
an inside look at the things you will come across as an Analyst. After reading this section, you should
have a clearer understanding of what an Analyst does on a day-to-day basis.
(3.1) By Types Of Staffings (Projects)

“Staffings” refer to projects that you are assigned to work on. Each group (or office) has at least one
“staffer”, a more senior banker (typically a VP-level member of the group) who assigns work to the
Analysts (and Associates). Not all staffings are created equal; there are various types, described in detail
below:
Pitches
A pitch is a presentation to a client (new or existing) with the intent of soliciting business. When a bank is
pitching a client, they have not yet been hired. The end goal of a pitch is to have the client hire the bank
and pay a fee for the services rendered.
Below we outline four major types of pitches:
1. Introduction:
A high-level pitch to a new company or client that sells the bank’s team, its capabilities, and its
experience. The end goal is to establish a relationship with a client (with the intention of winning
future business).
2. Relationship Maintenance:
A high-level pitch designed to maintain a relationship with an existing client. The goal is to keep the
bank on the forefront of a client’s mind in hopes that they will use the bank to fulfill any future
business needs. These pitches will often take the form of an industry update or advice on general
strategic moves.
3. Propose A Transaction:
These pitches are specific in nature; a bank will approach a client with a specific transaction in mind
(i.e. acquire a specific target company, refinance a loan the client already has in place, IPO, etc.).
4. Participation In A Bake-Off:
In a “bake-off”, a client will approach multiple banks regarding a specific pending transaction they
plan to complete. The client will ask the various banks to pitch them on why their bank is best for the
transaction. Banks will create presentations and the client will judge the banks on items such as their
strategic plan, track record, fees, and existing relationships.
Pitches are presented by senior bankers in the form of a “pitchbook”: a PowerPoint presentation that is
used in print form. A typical pitch includes an executive summary, firm overview, team overview
(including bios and previous transaction experience), market overview, client positioning, and details of
the specific transaction being pitched. Transaction details vary widely depending on what specific
service is being pitched; examples include a preliminary valuation analysis, a list of potential buyers or
sellers, proposed financing structures, etc. Pitches vary in length: the amount of work and level of detail
that goes into a pitch is much higher for a bake-off than an introductory or relationship-driven pitch.
Making A Pitchbook
The Analyst sits down with a Vice President and Associate to go over the background and
purpose of the pitch
Post-conversation, the Associate and Vice President draw up pages for the Analyst to put together
(known as the “pitchbook shell”)
The Analyst is responsible for all components of the pitchbook: conducting valuation analysis, sourcing
data, transcribing text, creating graphics, and compiling and printing the presentation
Once a first draft of the pitchbook is complete, Associates and Vice Presidents check the work and return
a copy with noted changes (called a “markup”)
The Analyst then carefully corrects each item noted, a process called “turning” a markup. This process
repeats until sign-off is eventually received from a Managing Director or Senior Vice President
NOTE: In rarer situations, Managing Directors and Senior Vice Presidents play a more active role in
creating the pitchbook by providing markups and writing slides for the presentation. Pitchbook work
is usually split between Analysts from multiple groups (i.e. product and industry groups), depending
on which group has more availability.
Insider Insight Pitches

 Pitches are often the most time intensive and least rewarding staffings, but are also the most
common:
− Many times they lead nowhere.
− Sometimes pitchbooks are not used during the pitch, despite days or weeks of work.
− Completing pitches is not as helpful for exit opportunity recruiting, and it is not
looked upon with nearly the same value as live deals.
 Bank and group culture (especially senior banker personality) can greatly influence the level
of detail and length of a pitchbook.
 Most pitchbooks leverage previous work, often pulling pages or even sections from older
pitches. When creating a pitch, Analysts tend to do the least amount of work possible and
utilize shortcuts.
Deals
The type of deal that an Analyst is working on drastically affects the type of work completed. Each deal
has its own set of requirements, with different deal types providing different experiences (the experience
gained on an M&A transaction is significantly different than that of a debt deal). Below we outline a few
different deal types and discuss the deal closing process:
Debt Deals
In a debt deal, an investment bank helps a client (the debtor) raise money from investors (creditors)
for various purposes. The investment bank organizes a group of creditors to provide loans or bonds
to the client to support its needs. Examples of why a company would execute a debt transaction
include:
• Paying a dividend: Debt can be raised in order to pay out money (a special dividend) to
equity holders in a company (this transaction is called a “dividend recapitalization” and is
usually performed by a company owned by a financial sponsor).
• Financing an acquisition: A client will often approach an investment bank for financing to
purchase another company. This also includes loans to financial sponsors to support LBOs.
• General corporate purposes: A company may need money to aid in its normal course of
business (i.e. needing money for growth purposes, major capital expenditures, etc.).
• Refinancing a company’s existing debt: The client may have existing debt that is maturing
soon or may want to take advantage of better (cheaper) interest rates. They may approach an
investment bank to find investors to replace their old debt with new, cheaper debt.
Analysts working on debt deals become specialists in the financing process. As an Analyst on these
deals, you spend the majority of your time learning about different debt structures and financing
scenarios. You analyze what types and amounts of debt can be supported by the debtor, and model
the future implications of a contemplated transaction. Analysts can expect to interact with rating
agencies (S&P and Moody’s) and learn how to quickly comb through credit documents,
understanding where to find important debt-related information (i.e. existing covenants, maturities,
interest rates, etc.). You learn the ins and outs of financing models, including covenant analyses,
acceptable leverage levels, and different debt structures and their significance. Once analysis is
complete and structure is determined, Analysts spend the majority of their time creating marketing
materials and selling the debt to investors alongside the debtor’s management team.
Equity Deals
In an equity deal, an investment bank helps a client raise money from equity investors for various
purposes. Common reasons a company may want to issue equity include:
• Raise permanent capital: The client may need capital for a variety of reasons, including
general corporate purposes, paying off creditors, financing an acquisition, growth
opportunities, etc.
• Provide a means of currency: Once a company is public, its shares can be easily used as a
currency of exchange for both growth and acquisition opportunities.
• Increase access to other funding sources: Public companies must adhere to stringent
securities regulations which enhances transparency and increases credibility. This allows for
quicker and easier access to other sources of funding.
• Enhance investor liquidity and exit opportunities: Public equity markets are extremely
liquid and allow investors that have been tied up in private company stock to easily exchange
or sell shares.
Common equity deals include initial public offerings (“IPOs”), follow-on offerings, and private
placements.
• IPO: Often one of the most publicized forms of equity deals, an IPO involves a private
company marketing itself to public investors, “floating” a percentage of the company
(number of shares available to the general public), listing on a public stock exchange
(Nasdaq, NYSE, AMEX, etc.), and selling a designated number of initial shares to the
marketplace. There are two possible forms of transactions in an IPO: A) existing
shareholders can sell a portion of their holdings to the public market, and B) new shares can
be issued and sold to the public market (diluting existing equity holders). After an IPO, the
portion of the company floated can be bought and sold by both institutional and retail
investors (the general public).
Analysts working on IPOs spend a significant amount of time conducting due diligence (compiling
questions for management, finalizing projections, and building a company model), determining
valuation, drafting an S-1 (public prospectus), and clearing internal hurdles (restricted lists,
committee approvals, etc.). Analysts also play a role in the marketing process by organizing the
listing process, developing marketing materials for investors, updating valuation materials, targeting
investors, coordinating interactions with other underwriters/managers, and teaching the bank’s
salesforce about the client company. After a road show is launched, Analysts will be involved in
pricing communications and the closing process.
Insider Insight IPOs

 IPOs are much less common today; the likelihood that an Analyst completes an IPO in their
two year program is very low. Analysts working with companies in more growth-related
industries (Technology, Clean Energy, etc.) generally have the best chance of completing one
of these transactions.
Quote
“ IPOs are some of the most rewarding transactions. I still frequently come across a company that
I took public during my Analyst days. Seeing their ticker on CNBC always reminds me of that
deal. ”
- Associate, Bulge Bracket Investment Bank
• Follow-on: A follow-on offering consists of selling additional shares of a company’s stock

after it has already gone public (through an IPO). Unlike an IPO or private placement, the
price of the shares in a follow-on offering is fairly predetermined (based on existing market
prices).
Analysts working on follow-on offerings can expect to spend most of their time developing marketing
materials for the company. Investment bankers do not focus on valuation as the public equity
markets have been consistently valuing the company for as long as it has been public. Investment
bankers focus on developing a sales strategy and marketing the company to institutional investors.
• Private placement: In a private placement, equity capital is raised by selling shares of the
company in a privately negotiated transaction to a small, select universe of institutional or
High Net Worth investors. The selling company can be either private or public (the public
scenario is referred to as a private investment in public equity, or “PIPE”).
Analysts working on private placement transactions will encounter similar work to that of an IPO,
with a few major exceptions. Private placements are discrete and involve a much less robust
marketing process; only a handful of targeted investors are aware of the transaction. Additionally,
Analysts will not be required to deal with the various regulatory hurdles involved in an IPO process.
M&A Deals
In an M&A deal, an investment bank advises a buyer or seller on an acquisition, sale, or divestiture.
“Consideration” (the form of payment used in the deal) can be a combination of debt and/or stock.
The two major types of M&A deals include “buy-side” and “sell-side” deals.
• Buy-side: In this form of transaction, an investment bank is hired to find a potential
acquisition target for a client interested in purchasing another company.
• Sell-side: In this transaction, an investment bank is hired by a company to sell a portion or all
of itself to an interested buyer.
M&A deals can be further broken down into “targeted” or “broad”:
• Targeted deals: Concentrate on a small number of potential buyers or sellers to keep the
process efficient and quiet.
• Broad deals: Seek to maximize exposure and increase bidding competition by reaching out
to a wide range of potential buyers or sellers.
Sell-side and buy-side processes are very different from each other and greatly affect the type and
amount of work an Analyst completes.
Insider Insight Buy-side & Sell-side Deal Workflow

 Sell-side deals tend to occupy more of an Analyst’s daily time as they must interact with other
companies during business hours. For this reason, buy-side work tends to fill an Analyst’s
evening and night hours.
• Buy-side Workflow: Analysts working on buy-side deals initially spend the majority of their
time analyzing potential suitable acquisition targets. Once the universe of target companies is
narrowed down, the shift focuses towards analyzing combined entities and the implications of
the two companies merging (targeted buy-side processes start here). Analysts become
masters of merger models (accretion/dilution analysis, synergy analysis, etc.) and different
valuation methods (discounted cash flows, precedent transactions, equity comparables, sum
of the parts analysis, value creation, etc.). Once an acquisition target is selected and the
client decides to move forward with the acquisition, the shift focuses towards deal execution.
Analysts are then involved in the diligence process, working with financing partners,
negotiating a purchase agreement, finalizing a price, and conducting a fairness opinion.
• Sell-side Workflow: Analysts working on sell-side deals can expect to become experts on
the companies they are selling. Unlike a buy-side process, the focus here is on marketing the
client to potential buyers and obtaining the highest valuation/purchase price possible.
Interaction with potential buyers and the client’s management team is frequent. A significant
amount of the Analyst’s time is spent on administrative work in a sell-side deal (fielding
requests for information from potential buyers, scheduling meetings, updating potential
buyers lists, etc.). Preliminary work is focused on gaining an in-depth understanding of the
company and its operations in order to help management create projections. Lots of time is
spent creating marketing materials to show investors, while simultaneously reaching out to a
long list (broad sell-side) or selected list (targeted sell-side) of potential acquirers. These
marketing materials include the “teaser” (1-2 page company overview), “confidential
information memorandum” (or “CIM”), “management presentation” (50+ page sales
pitch), etc. Analysts learn how to evaluate different acquisition offers and their implications
for the client. Ultimately, a single buyer is chosen and Analysts help finalize deal terms,
legal documents, and final diligence with the acquiring company’s advisors.
Quote
“ Sell-side deals are awesome because the management team opens their books to you and
shows you EVERYTHING. In a sense, you are paid to learn about their company. ”
- Analyst, Bulge Bracket Investment Bank
Closing Process
Upon completion of a deal, the Analyst has a few major follow-up responsibilities (often a fun part of
any deal). Below are the major closing deliverables/tasks:
• Creating case studies and/or firm announcements: Once a deal has closed, the bank and
group will want to showcase the accomplishment. Most firms require Analysts to send out an
announcement containing the details of the deal that was completed and an attached case
study showcasing the specifics of the transaction.
• Creating deal toys: Post-closing, it is the Analyst’s job to come up with a unique “deal toy”
(or “Lucite”) design. These are plastic trophies/mementos that commemorate the closing of
a deal. Analysts will coordinate with a manufacturer regarding all aspects of the deal toy
from design to shipment.
Insider Insight Deal Toys

 Deal toys are not all fun and games: senior bankers want clients to have these in their
offices as a constant reminder of past interactions and the investment bank in general.
• Organizing the closing dinner: Investment banks commonly celebrate the completion of a
deal by organizing a large dinner with the client and other parties involved in the process
(lawyers, other advisors, etc.). Analysts are often responsible for planning and coordinating
the event and are sometimes able to attend.
Internal/Infrastructure Projects
Internal projects are assignments that do not involve a client. These projects are for internal purposes and
can vary greatly by type as well as amount of work required.
Types of projects include conducting weekly updates (industry updates, transaction tracking, firm
updates), tracking specific deals, organizing files on the drive, compiling lists of companies for potential
deal sourcing, organizing weekly team calls, creating reports for senior management, and many more.
Example
An Analyst in the Consumer Group is responsible for tracking and sending out a weekly update of
transactions that occurred in his specific industry (M&A, refinancings, IPOs, etc.). He also keeps
track of equity, loan, and bond pricing for all major companies in the industry to create industry
averages and compare relative company performance. On top of this, the Analyst uses Factiva to
conduct an industry “news run” for the past week, which he then summarizes and transcribes onto
one page. The Analyst inputs this information into set templates and graphics and creates a multi-
page PowerPoint presentation which is sent to the entire Consumer Group every Monday morning.
Many of these internal tasks rotate monthly, quarterly, or yearly and are quickly handed off to the most
junior banker in the group (i.e. 1st year Analysts or summer interns).
Insider Insight Working On Internal Projects
 For new Analysts, internal projects are good ways to gain exposure to Managing Directors.
However, once you are an established Analyst, try to hand-off these projects whenever possible;
internal projects are in addition to any other deals, pitches, or work.
 It is common for an Analyst to complete this work during lulls in daily tasks or over the weekend
(usually Sunday evenings).
Favors
Junior bankers are often asked to do favors by more senior employees. It is also common to get requests
from ex-Analysts who now work as junior employees at firms that are clients of the bank (especially buy-
side firms). Examples of these tasks include downloading and sending equity research (known as
“pulling” research), sending buy-side Associates prior projects they created while at the bank, and
pulling a LIBOR curve for a client, among others.
Insider Insight Performing Favors

 On rare occasions, Analysts may need to perform favors related to the personal endeavors of
senior bankers; you should embrace these favors as rare opportunities to earn brownie points.
(3.2) By Types Of Work Performed

Analysts perform various types of work when staffed on projects. The type of work performed can be
broadly categorized as administrative, technical, qualitative, and research. Different staffings will
require the Analyst to perform varying combinations and degrees of these work types.
Administrative Work
Administrative work consists of clerical, logistical, and organizational tasks necessary to keep a project or
deal running. Examples of tasks include scheduling meetings and conference calls, taking and
transcribing notes to distribute to the deal team, coordinating pitchbook printing and arranging couriers,
faxing senior bankers, maintaining logs for M&A transactions, pulling information from data rooms,
acting as a liaison between your team and third-party service providers (i.e. data rooms), creating deal
toys, printing internal materials, ordering food, and many others.
Analysts perform countless administrative tasks on a daily basis. Students tend to focus on the more
glamorous and technical aspects of the job and often neglect to recognize the amount of administrative
work required. However menial you may find these tasks, they are absolutely vital to running any deal.
Recognize and embrace this work as a significant part of your job description; in more grueling deals,
administrative tasks can take up to 80 hours of your week.
Insider Insight Administrative Work

 Being efficient at administrative tasks can help alleviate stress and free up more time for other
vital work.
 Do not neglect these tasks; people assume that all work will be correct, and errors indicate that
you are an incompetent Analyst.
 Do not complain. Although this work is rather menial, you are paid well to do it.
Technical Work
Technical work involves finance, accounting, and arithmetic-related operations. As an investment banker,
this includes building models, performing valuation analyses, creating graphs, comparing data,
calculating financial metrics (such as EBITDA or Beta), analyzing comparable companies and precedent
transactions, compiling debt trading levels, and many other operations. The job will entail varying
degrees of technical analysis (this is why the position is titled a “financial analyst”).
99% of technical work is performed in Excel. Analysts will become masters of this program and learn the
ins and outs.
Non-Target School
Non-target students (particularly those at universities without finance programs) are much less likely
to have classes that expose them to the technical aspects of the job, including thorough experience
with Excel. Becoming familiar with these topics and this program ahead of recruiting is necessary.
Technical work is the most mentally stimulating and most difficult work that the Analyst completes.
Learning and sharpening this skill set is one of the main draws of a job in investment banking. Through
technical tasks, Analysts add significant value to a deal, and it is here that prior financial knowledge and
training are most applicable.
Insider Insight Technical Work

 Complex math is typically not required in investment banking, but technical tasks require
knowledge of sometimes complex Excel functions.
 Most technical skills can be (and are) learned on the job, especially when coupled with a solid
accounting and financial knowledge base.
 Technical work can be more of an art than a science. It involves lots of judgment calls,
especially related to assumptions (these become better with experience).
Below we will outline the most common types of technical work:
Financial Modeling
The major (and most coveted) technical task performed by an Analyst is building financial models (or
“modeling”). Models are created for purposes of valuation or to more generally analyze historical
and projected financial performance. The Analyst is generally responsible for running all aspects of a
model: changing assumptions, updating the time period, creating financing scenarios, and (most
importantly) ensuring there are no errors. Model types include LBOs, financings, mergers, and
discounted cash flow (“DCF”) analyses.
Models vary greatly in size and complexity and can take anywhere from a few hours to more than a
week to create. There are two major structures of models: mini-models and full (three-statement)
models. The biggest difference between the two types is that mini-models do not incorporate a
company’s Balance Sheet and make simplifying assumptions about changes in working capital
(calculating the change in working capital is a major reason the Balance Sheet is included in a full
model).
Insider Insight Financial Modeling
 Modeling skills are highly relevant for buy-side roles and will be tested in buy-side
interviews. These firms seek out Analysts with strong modeling skills as this is a major
component of what junior buy-side Associates do on a daily basis.
 Full models involve extensive accounting know-how, especially regarding the detailed
interaction of the three financial statements.
 Models are one of the key ways to interact with the Chief Financial Officers (“CFOs”) of
smaller clients. When building or adjusting assumptions, you will often go straight to the
company’s source: the CFO.
Equity Comparables
In equity comparables analysis, valuation is obtained by averaging forward (projected) trading

multiples (Enterprise Value/EBITDA, Enterprise Value/Revenue, Price/Earnings, etc.) of comparable
public companies and applying those averages to the company you are valuing (i.e. find average
EV/EBITDA of seven competitors and multiply that average by your company’s projected EBITDA
to come up with an Enterprise Value).
The comparables are created by compiling the historical and projected financial metrics needed to
calculate these trading multiples. They are also necessary for evaluating your company’s operating
performance relative to its peers. Some of these metrics include Revenue, EBITDA, Net Income,
Capital Expenditures, capitalization, and share count. Analysts utilize these metrics to calculate
comparable benchmarks such as EBITDA Margin, Net Income Margin, EPS growth, leverage
multiples (Total Debt/EBITDA, Net Debt/EBITDA), and Enterprise Value, among others.
Debt Trading Comparables
In debt trading comparables, similar companies’ debt structures and financial metrics are analyzed to
assess what levels of leverage/debt structures they currently sustain. These are used in debt deals to
determine realistic financing expectations for the company you are dealing with, including maximum
leverage, assumed interest rates on debt, necessary covenants, and overall structure. For example, if
the average leverage (Debt/EBITDA) of your client company’s five closest competitors is 4.5x, your
client company can likely sustain this same amount of debt.
Precedent Transaction Comparables
In a precedent transactions analysis, valuation is obtained by analyzing historical transactions similar

to the one you are contemplating, and then applying average transaction multiples to your company’s
financial metrics (EBITDA, Net Income, etc.). The theory is that, all else equal, your transaction
should garner the same valuation as similar historical transactions. Common multiples used for
comparison purposes include EV/EBITDA, EV/Revenue, etc. Similar to equity comparables, the
average multiple is multiplied by your company’s financial metrics to reach a valuation.
Qualitative Work
Qualitative work is “non-technical” in nature and includes creating presentations and memos, writing, and
formatting. Analysts can expect to spend a significant amount of time doing this type of work.
Specific qualitative tasks include writing overviews for company and industry trends, giving explanations
of analytical work, profiling companies, and creating marketing materials (management presentations,
CIMs, pitchbooks). Each of these work products encompasses a massive amount of formatting: they will
be presented to other individuals inside and outside of the bank, and appearance is extremely important.
Associates do much of the heavy lifting when it comes to creating the basis for qualitative work, but
Analysts still spend a significant amount of time word processing and creating presentations. Associates
map out most presentations in detail, with Analysts expected to compile and create them (the latter takes
far more time).
Insider Insight Qualitative Work

 Qualitative work is subjective, so expect many iterations from the entire chain of command on
your deal team as differing opinions go up the ladder.
 Plagiarizing is generally not frowned upon, especially when creating overviews of companies and
industries.
 It is common to leverage prior work to increase efficiency, particularly when creating page
layouts and inputting content.
Research
Both qualitative and technical work is dependent on research in order to find vital information that will
act as inputs. Associates usually offer advice regarding where to find information, but the Analyst is
ultimately responsible for gathering and aggregating data.
Research is such a significant and vital part of the job that many banks have dedicated research teams
available to junior bankers. These teams have access to vast resources and paid subscription databases not
available to the public.
Common research tasks performed by Analysts include pulling equity research reports, combing through
company websites, searching through company financials, tracking down available market information,
creating public information books (“PIBs”), looking up fund sizes and past transactions, and countless
others.
Insider Insight Conducting Research

 Utilize research services at your firm and plan ahead; try to work in parallel with these teams for
maximum efficiency.
 Researching can be a huge time drain if you linger; spend the appropriate amount of time
searching for pieces of data and then move on (some things are not publicly available or simply
do not exist).
 Over time, Analysts get much faster at conducting research as they learn where to look for
information and how to utilize firm resources.
(3.3) By Groups
The type of work that an Analyst performs on a day-to-day basis is highly dependent on the type of group
they work in. Although a lot of the fundamental research, administrative, technical, and qualitative tasks
will not be very different, the overall deal experience will vary greatly. As discussed in Section (1.1), we
will distinguish between two main types of groups: industry (or coverage) groups and product groups
(further divided into Corporate Finance and Capital Markets; for purposes of this document). The two
groups interact intimately on almost any deal; the industry group provides industry expertise and likely
has the client relationship, while the product group specializes in the type of transaction being performed.
Industry/Coverage Groups
Industry groups do just as their name implies: they concentrate on a specific industry. Exact industry
groupings vary by bank but generally include Technology, Media, Real Estate, Consumer, Financial
Sponsors, Energy, Business Services, Industrials, Financial Institutions, Healthcare, and other more
specialized industries.
Investment bankers in industry groups focus exclusively on their respective industry. They are expected
to form industry expertise that encompasses a working knowledge of industry trends, the competitive
landscape, valuation metrics of public companies in the space, and historical transactions. While the
focus is on their industry, bankers in industry groups get exposure to a wide variety of deal types.
Quote
“ Although I concentrated on the retail industry, so far I have been part of an IPO process, a large
M&A transaction, and multiple debt deals. Being in a coverage group has given me a well-rounded
experience. ”
- Analyst, Middle Market Investment Bank
For industry bankers, much time is spent trying to generate new business by pitching new and prospective
clients. Therefore, Analysts in industry groups tend to be much more involved in the pitch process but
also gain valuable insight into the details of the company and its competitors. When industry groups are
excessively busy, Analysts in the product group will take on a larger role in developing the pitchbook.
At the Analyst level, technical work is often split with the product group, with the industry group
handling most of the initial company analysis (public comps, precedent transactions, operating model)
and the product group usually controlling the M&A/LBO model (depending on the type of deal).
Industry group Analysts control the operating model due to their company-specific knowledge. They are
able to leverage industry and company expertise to choose insightful assumptions when formulating a
company’s financial projections.
Product Groups – Corporate Finance
Corporate Finance product groups specialize in a specific type of transaction, such as M&A, Leveraged
Finance, or Restructuring (each of which is considered a product), across various industries.
The main focus for Corporate Finance product bankers is on execution of a transaction. They tend to
provide only ancillary roles when creating pitch materials but run most of the process once a deal is
mandated and goes “live”.
Analysts in these product groups are often known for developing stronger technical skills, particularly
with respect to their product’s transaction models (but this point is debated). Since the Corporate Finance
product group usually runs the deal process, the Analyst is responsible for the majority of administrative
tasks and is the point person for deal logistics.
Below is a brief description of the major Corporate Finance product groups:
Mergers & Acquisitions
The M&A group facilitates broad and targeted buy-side and sell-side transactions for clients, as well
as divestitures, spin-offs, and asset sales.
Leveraged Finance
The Leveraged Finance group structures debt financings (high yield, leveraged loans, etc.) and
performs credit analysis for clients to address a variety of needs including acquisitions, refinancings,
dividend recapitalizations, and project financings, among other things.
Restructuring
The Restructuring group works with creditors (i.e. funds that have invested in a company’s debt) and
debtors (i.e. the companies themselves) to address current or anticipated distressed situations (i.e.
pending bankruptcy) by advising on credit negotiations, seeking acquirers, or determining a new
capital structure.
Product Groups – Capital Markets
Investment bankers in Capital Markets focus on the market as a whole (debt or equity, depending on
group) and analyze overall market trends across various industries.
Debt Capital Markets (DCM)
Debt Capital Markets provides clients with advice on raising debt and executes debt-related
securities transactions: fixed income (preferred stock), high yield (bonds), and syndicated finance
(loans). DCM acts as a gateway for clients to access a global investment pool.
Equity Capital Markets (ECM)
Equity Capital Markets provides clients with advice on equity and executes equity-related securities
transactions: private placements (private equity investments), equity-linked (options, convertibles,
derivatives), and equities (stocks). The ECM group helps clients by structuring offerings,
determining valuation, and facilitating transactions.
Compared to Corporate Finance, the work in Capital Markets has a less technical focus, especially in
terms of modeling.
The Capital Markets group plays a limited role in pitches aside from providing pricing expertise. Capital
Markets Analysts are typically brought in during the later stages of a deal, providing execution support
for exact security pricing and interacting with the sales force and trading desks to ensure the best terms
possible on a deal.
In the United States, the Capital Markets group is located almost exclusively in the Tri-state area (New
York, New Jersey, Connecticut).
Insider Insight Product vs. Industry Groups

 When considering which type of group to join, it is important to determine whether or not you
want to be focused on a specific industry and experience multiple deal types or master a deal type
and learn about multiple industries.
 It is a common misconception that product groups feed into better buy-side jobs. In reality, it is
much more group and bank specific.
(3.4) “Heard In The Bullpen”
In this section we cover subjects that are commonly discussed in the “bullpen”, a term referring to the
area of the office where most Analysts sit. This inside look will shed light on investment banking culture
and other lesser-known aspects of being an Analyst.
Bonus Season And Reviews
Come June/July, Analysts tend to discuss bonus expectations with fellow Analysts in their office, in other
regions, and at other firms. Everyone is anxious to see if the long hours they put in and sacrifices they
made will pay off. For a detailed description of the bonus review process, see Section (19.5); for a
detailed description of bonus numbers, see Section (4.1).
Insider Insight Bonus Timing

 Goldman Sachs and Morgan Stanley pay Analysts a “stub” bonus in January or February of their
first year. This bonus is pro-rated for the fraction of the year the Analyst has been working full-
time. It is not until January/February of the second year that the Analyst receives a full bonus.
Culture
Overall bank culture plays a major role in the Analyst experience and differs by bank and specific group.
It is important to get a feel for the stereotypes that exist when evaluating different firms; oftentimes they
exist for a reason.
Most banks engage in non-work related activities to build teamwork and promote a better work-life
balance. These range from official bank sponsored events (holiday parties, happy hours) to unofficial
interactions (fantasy sports leagues, going out to bars).
A unique culture and bond exists among the Analysts themselves, especially those in the same class
(Analysts that start at the same time or share the same level are said to be in the same “Analyst class”).
Analysts often build strong camaraderie despite having very different interests and personalities. This is
due to the sheer amount of time they spend together in the office as well as the shared experience that an
Analyst class will endure together. These experiences range from training to dealing with the often harsh
environment of the job (stress, long hours, etc).
Auxiliary Staff Support
Prospective bankers are usually surprised to learn that even junior bankers have access to a host of
auxiliary staff (especially at bulge bracket banks). These groups include: additional staff to support
Analysts in presentation work and graphics support (“Presentations”), research/information services,
print/copy services, and sometimes an outsourced service team (usually stationed in India). Each team
contains experts in their respective tasks and helps make the Analyst’s life easier. Analysts are
responsible for staffing and managing these different groups.
Face Time
“Face time” refers to always being seen in the office and “showing face”, particularly when Analysts do
not have any meaningful work to complete. The underlying rationale is that the more Analysts are seen
around the office, the more it appears they are working hard and are dedicated to the firm. It is not
uncommon to see junior bankers hanging around until after their superiors leave, despite being done with
their work. Face time exists in varying degrees depending on firm and culture, but (in general) a lot of
this pressure is created by the Analysts themselves. As a result of face time, Analysts often fear being
away from their desk for prolonged periods, avoid taking vacations or vacation days, and minimize going
out for lunch/dinner for too long (or at all).
Friday Night Specials
A “Friday night special” refers to receiving a staffing on Friday afternoon, usually implying that the
weekend will be spent in the office. Unfortunately, getting staffed on Fridays is not uncommon;
investment banking is a client-focused job, which means that banks are at the whim of their clients.
These staffings are more common on Friday as this is when senior bankers often look at their next week’s
schedule and begin to plan ahead before heading home for the weekend.
Quote
“ I’ll never forget this one weekend where my parents came to visit me in New York. Receiving an
email from an MD on Friday at 3:30pm regarding a bake-off pitch due that next Wednesday was
about the worst thing possible. Needless to say, I didn’t see much of my parents that weekend… ”
- Analyst, Boutique Investment Bank
All-Nighters
Sometimes Analysts must pull all-nighters to complete tasks that have strict deadlines (i.e. an MD needs a
presentation before a 9:00am flight). These all-nighters are often unavoidable; senior bankers do not
intend to make Analysts stay up all night. Analysts expect to pull a few all-nighters each year (these are
more common when working on a live deal), but this can fluctuate based on firm, group, or economic
environment.
Insider Insight Pulling All-Nighters

 After having pulled an all-nighter, it is not uncommon for Analysts to either: A) leave to get a
few hours of sleep and return in the early afternoon or B) go home early the next
afternoon/evening. This luxury is not always possible depending on the circumstances.
“The Red Light Of Doom”
Every Analyst can relate to the red flashing light on their BlackBerry (one of the worst feelings for a
junior banker), signifying a new email or text; it could reveal hours of new work. Analysts are always on
call and are given a work cell phone to receive emails in real-time, even when away from the computer.
They are expected to respond to emails immediately (within 5-10 minutes) during normal waking hours.
Red Pen Markups
When an Associate or VP reviews and corrects an Analyst’s work, it often comes back in the form of a
red pen markup (no, the pen is not ALWAYS red). The page will have words or sections crossed out,
things noted to add, and wording to change. Changes can range from only needing to fix a few words to
pages covered in red ink with entire sections needing to be removed or re-worked. Investment bankers
are perfectionists: it is common to go back and forth multiple times, even on a simple slide. Every word
will be carefully chosen.
Insider Insight Turning Comments
 Sometimes a markup is unclear, illegible, inconsistent, or even wrong; this is where an Analyst’s
judgment comes into play. When turning comments, Analysts will often help each other decipher
handwriting before asking superiors for clarification.
 Diligent Analysts often highlight the edits on the markup (or a copy of the markup) as they make
the changes to ensure that none are missed.
Data Room And Lucite Companies Spoil You
As an Analyst, third party service providers will spoil you. These include “data room” providers
(companies that act as liaisons between clients and investors by hosting confidential content on a secure
server) and “Lucite/deal toy” manufacturers (companies that produce plastic trophies/mementos that
commemorate the closing of a deal).
These companies are always looking to generate business, and Analysts play an integral role in choosing
which company to use when creating a Lucite or setting up a data room. They will bring free food, take
Analysts out to dinners or sporting events, and even buy bottles at nightclubs.
ALT + Tab
Yes, Analysts work 100+ hour weeks, but there will often be down time (even if just in 10 minute
increments). The notorious keystroke “Alt + Tab” quickly switches between programs, instantly giving
the impression that an Analyst was working in Excel rather than browsing the internet. Master this
keystroke!
Attention To Detail
Investment bankers hate mistakes, and therefore love Analysts that pay attention to detail. Check, double
check, triple check, quadruple check your work: Analysts go to seemingly extreme lengths to ensure work
is correct.
A Day In The Life
Below we detail a typical day in the life of an Analyst (both weekday and weekend).
Weekday
This example profiles an Analyst in the Media group (coverage group) who is working on a live sell-
side advisory transaction for a company in his industry. This is a realistic depiction of what an average
day will entail; it has not been sugar coated or exaggerated.
• 7:45am – Wake up and immediately check my BlackBerry.
• 9:00am – Arrive at the office, grab coffee, more thoroughly read through emails that came
overnight, and check financial news.
• 9:30am – Double check changes I made to the model yesterday. Ensure there are no errors,
operating and financing assumptions are correct, etc.
• 10:15am – A fellow Analyst from training asks for updated Media equity comparables for
another deal that he is on. I run Capital IQ to update the file with numbers from yesterday’s
market close and send the attached file to him.
• 10:30am – Receive markup of management presentation I worked on the previous night (left
it on the VP’s chair). Unfortunately, the markup is extensive and my Associate and I need to
redo major sections of the presentation. We discuss it for five minutes and the Associate asks
if it is possible to see a draft of the changed presentation by 3:00pm so that he can review it
before we give it to the VP.
• 11:30am – Take a break from adjusting the management presentation to get on a call in my
VP’s office with the management team and our M&A team. The call is meant to update the
client on buyer outreach. At the end of the call, the client asks when they can see the next
draft of the management presentation. The VP promises to send it over this evening for them
to review in the morning; a 10:00am call is scheduled for tomorrow to discuss the changes.
• 12:00pm – Send out a meeting invitation for tomorrow morning’s call regarding the
management presentation to my deal team, the M&A team, and the management team.
• 12:05pm – Go back to turning the management presentation.
• 1:00pm – A fellow Analyst asks if I want to go grab lunch, but I do not have time. I hand
him $10 and ask him to get me whatever he is getting.
• 1:15pm – I notice that one of the changes in the management presentation markup will
require some population and GDP data. I email a request to the Info Desk (research) so they
can pull the information while I continue working on the other changes.
• 1:20pm – My fellow Analyst comes back with food. I quickly scarf it down at my desk
while I check Yahoo! Finance and ESPN.com.
• 1:30pm – Receive an email from a Media Analyst that I have never met from the San
Francisco office. His MD is currently on a flight to New York for a meeting tomorrow
morning. He would like me to print books and have them couriered to his MD’s hotel tonight
ahead of tomorrow’s meeting. This will only take me a few minutes, but it interrupts my
concentration on the management presentation.
• 2:00pm – The client’s CFO calls my VP for an impromptu discussion about the model.
Upon further review, he wants to tweak some assumptions that we discussed last week. The
VP calls my Associate and me into his office to be on the call. The changes are pretty basic,
but there are a lot of them; this will take me at least an hour. I need to make the changes now
because it will affect certain pages in the management presentation.
• 3:00pm – Finish the changes to the model and send it to the Associate for approval before
pasting the output pages into the management presentation. While he’s reviewing, I go back
to making my VP’s changes to the management presentation from earlier.
• 3:15pm – Receive the necessary data from the Info Desk and integrate it into the
presentation.
• 3:30pm – The Associate has finished reviewing the model and gives me the go ahead to paste
in the model output pages into the management presentation.
• 3:45pm – Receive an email addressed to several Analysts in our group. It looks like an MD
has a client meeting on Friday where he will be discussing a long list of acquisition
opportunities for the company. Unfortunately, there is a list of about 30 companies for which
he needs one-page profiles. Our staffer has decided to split the task among five Analysts (six
profiles each) and the VP on this deal has requested the first draft of the profiles by tomorrow
night (great, I have to do this on top of the management presentation; I will get to this later).
• 4:00pm – Finish changes to the management presentation, print it out, and hand it to the
Associate for review. I swing by a friend’s desk to ask if he wants to grab coffee; we take a
15 minute walk around the block to get some fresh air.
• 4:30pm – Receive an email confirmation that the print job for the Analyst in San Francisco is
complete. I go down to “flip the books” (review the printed presentations) and notice that
the page numbers stop after the first page. I check the PDF at my computer and notice that
the error is in the document, so I call the Analyst in San Francisco immediately to inform him
of his error. He does not answer his phone so I shoot him an email. He only sent me the
PDF, so I do not have the power to make the change myself (regardless, I would not want to
get involved in his work in order to avoid any chance of blame). The Associate is looking
through the management presentation, but I use my spare time to look for some high-level
formatting that I can perfect.
• 4:45pm – The SF Analyst calls me back frantically, thanks me, and sends the updated file to
the Copy Room to be reprinted. He asks me to keep checking in with the Copy Room to
make sure it is done as quickly as possible; the MD wants to have the presentation at the hotel
before he gets there.
• 5:00pm – The Associate swings by to discuss his comments/new markup of the management
presentation. He spoke with the VP who wants to add a few pages to the market overview
section, including some maps and detailed graphics. He also wants updated transaction
comparables to discuss on tomorrow morning’s call with the client. The rest of his changes
are fairly straight forward.
• 5:10pm – Call the Analyst from the M&A group on our deal requesting the transaction
comparables that we need. He says that he updated them last week and will only need to
check for any deals that happened in the last few days. Timing will not be an issue.
• 5:15pm – Draft a detailed email with instructions for the Presentations team regarding the
graphics and map that I need for the management presentation. I scan and fax the markup
pages incorporating the elements I need from them. I explain that it is urgent and if there are
any issues to call me.
• 5:20pm – A member of the Presentations team calls me and explains that they are backed up
and will not be able to start working on my project for at least an hour. I explain the urgency
but it is futile. I explain this to my Associate: he says to go ahead with the other changes in
the meantime, and give the book to my VP when I am done.
• 5:40pm – Copy Room informs me that the SF Analyst’s print job is complete. I call a courier
service before heading down to flip the books. Luckily, it looks like they are okay.
• 6:00pm – The courier has arrived. I run down to the lobby with the box of presentations and
hand it to the courier. I hand him a piece of paper with the MD’s name on it and confirm that
he is going to the correct hotel. Once he drops off the package, he is instructed to call me.
• 6:15pm – Finished the Associate’s requested changes and triple checked my work, but still
have not received the slides from the Presentations team. I print out a copy of the deck and
bring it to my VP; I tell him that we are waiting on a few of his requested additions, but the
rest of the book is complete. He is not very happy. He tells me that he will markup the
presentation and give me his changes before heading home.
• 6:30pm – The courier calls me and tells me that the package has been delivered. I email the
SF Analyst and tell him that the books are waiting at the front desk for his MD.
• 6:45pm – The other Analysts on my floor are ordering Italian food on Seamlessweb.com.
Two others are walking across the street to get Indian food; I decide to quickly go with them.
As we walk into the restaurant, I feel my phone vibrate, and it is an email from my VP. He
has some changes to the presentation and wants to discuss them before leaving. I tell my
fellow Analysts that I need to head back to my desk and ask them to grab me food.
• 7:00pm – Sit down with my VP and Associate to go over the new changes to the deck. He
wants to add several slides showing the model assumptions and wants to tweak a few of the
model output pages. The VP informs me that he will be heading home but will review the
next draft of the presentation “remotely” (while logged in from home).
• 8:30pm – Finish making changes to the management presentation/model, and the
Presentations team emails me with the completed graphics. I incorporate these and triple
check my work before sending the updated presentation to my Associate for his sign off.
• 8:45pm – The Associate gives me the go-ahead to send the presentation to the VP.
• 9:00pm – After taking a short break, I start working on my six company profiles. Each of
these should take 30 minutes to an hour. I technically have until tomorrow evening, but who
knows what tomorrow’s day will entail.
• 10:30pm – The VP says that the management presentation looks good. I send it off to the
deal team and the client so everyone has time to review it ahead of tomorrow’s call.
• 1:00am – Have made good progress on the profiles (five down, one to go) and decide that I
want to go home; I can finish the last bit of work tomorrow.
• 2:00am – After doing a 10 minute workout in my apartment and watching an episode of
Breaking Bad, it is time for bed. Tomorrow is another day.
Weekend
This example profiles a typical weekend for an Analyst in the Leveraged Finance group. On Friday, a
private equity firm contacted an MD in the Financial Sponsors group. The sponsor is looking at
potentially acquiring a retail clothing company and wants to get the bank’s financing views (what
debt structure the bank recommends, the expected interest rates, and the fees the bank would charge).
The private equity firm sent over projected financial statements and requested feedback by the end of
next week. The VP on the deal team wants to see a mini model and debt comparables by Monday
afternoon (therefore the Associate wants to see it on Monday morning).
Saturday
• 11:00am – Get into the office a bit earlier than usual. I am hoping to complete the mini
model today and get out by 2:00pm (I am going to the Knicks game at 5:00pm).
• 11:05am – Order brunch online; typically it takes longer to deliver on the weekends and I
know that I will be hungry by noon.
• 11:15am – Although I do not plan on starting the debt comps until tomorrow, I email a friend
from training (an Analyst in the Consumer group in Chicago). I ask him if he has seen the
debt comps for the specific companies I need in any deals/presentations that he has worked
on recently. It is good to reach out now because an Analyst’s availability is unpredictable
over the weekend. If he finds something, it could save me hours.
• 11:20am – Pull up an old mini model that I did a few weeks ago for a similarly structured
debt pitch. The Associate wants to see three different financing structures, so I will need to
build this into the model. Since I have a good model to reference, this should not be difficult
to complete in a few hours.
• 2:00pm – Look at the clock and realize that I will probably not get out of here for another
hour or so. As always, things are taking longer than I expected.
• 3:15pm – The mini model is working correctly, and everything should be good to go. I still
have not heard back from my friend in the Chicago office, but hopefully he will get back to
me before tomorrow morning. Even though I did not make it out by 2:00pm, this was not a
bad day considering I got to sleep in and have the whole afternoon and evening to myself.
Sunday
• 12:00pm – Wake up and check my phone; my friend in the Consumer group was able to
track down two of the six company debt comps that I need. Not bad.
• 12:30pm – Roll into the office after a long night out with friends. Unfortunately I did not
catch up on sleep despite waking up late. Many Analysts are in the office – I convince a few
of them to grab food from Five Guys with me.
• 1:00pm – Start working on the debt comps. I begin with the easier stuff: updating the debt
comps for the two companies that my friend sent over. I still need to dig through the
financial statements and update figures for the most recent filings.
• 2:30pm – Move to the other four debt comps. Depending on a company’s debt structure,
each comp will take between 20 minutes to two hours.
• 6:00pm – Finish updating the comps. I print out the mini model and debt comps and leave
them on my Associate’s chair for him to see tomorrow morning. I head home to relax before
a busy week ahead.
Part II
Why Investment Banking?
Chapter 4: Publicly Available Positives
In this chapter we provide insider knowledge on the better-known benefits of working in investment
banking. Aspiring Analysts knowingly cite these as reasons why they want the job: we call these
“publicly available positives”.
(4.1) Compensation
It is no secret that investment bankers make good money; few jobs offer the same level of pay right out of
college. Below, we dive into factors that affect pay and shed light on specific compensation numbers by
position and rank.
Factors that Affect Compensation
The following factors affect an investment banker’s compensation, in descending order of influence (most
important  least important):
1. How well the market does (general economic landscape) is THE most important
determinant of overall compensation: the better the overall economic environment, the more
deals are completed (and hence more fees are earned for the bank).
2. How well the bank does compared to other banks, and particularly how well a banker’s
division (IBD) does within the larger investment bank: if the investment bank has a good year
and IBD closes lots of deals, expect a better bonus.
3. How well a banker’s group does (or office does if they are a generalist): groups that earn
more fees for the bank will tend to get higher bonuses (or more top rankings to give junior
bankers).
4. How well a banker performs, benchmarked against his peers: many readers will be surprised
to see this is last.
Insider Insight Workload & Pay In Down Markets

 When the overall market is stagnant and deals are not closing, bonuses will be lower. However,
the workload (especially for Analysts) does not necessarily die down: pitches are frequent in this
environment as banks struggle to find deals and earn fees. This can be an unfortunate mix for an
Analyst.
Most bulge bracket banks pay VERY similar bonuses to their respective junior employees to attract and
keep talent: difference in pay from one bank to the next is usually within ~$5,000. The average of bulge
bracket bank compensation is called “Street” pay.
Typically, middle market banks pay slightly below Street pay. Middle market salaries are usually on-
par with the rest of Wall Street; the smaller overall compensation comes mostly from lower bonuses.
Note that some larger middle market firms are known for paying Street, though.
Compensation at boutique banks fluctuates widely, but overall pay is often significantly lower than
Street. This is usually reflected in both lower salaries and significantly lower bonuses. Elite boutique
banks (described in Section (2.1)) are an exception to this generalization: they are known for paying
Street (to slightly above Street) pay.
Insider Insight Overtime Meals
 Most investment banks pay for Analyst dinners during the week (when working beyond dinner,
which is every night) and all meals on the weekends. Weeknight stipends range from $20-$30
and total weekend stipends range from $40-$75.
 Analysts looking to save money will often purchase two meals with their dinner stipend and save
one for lunch the next day.
Junior Bankers
Junior bankers (Analysts and Associates) have virtually no control over bank or group deal flow.
Accordingly, compensation is not tied directly to the deals they work on (however, the fees from these
deals impact the larger bonus pool). Since junior bankers have such limited control over the bonus pool,
pay fluctuations are relatively small from person-to-person and bank-to-bank.
Analyst
Below is a breakdown of bulge bracket Analyst compensation data. These figures represent averages
over the last several years:
Base Bonus Total

Salary Bottom-Tier Mid-Tier Top-Tier Compensation
1st Year Analyst $70k $30k-$40k $45k-$60k $50k-$70k $100k-$140k
2nd Year Analyst $80k $30k-$45k $55k-$75k $65k-$85k $110k-$165k
3rd Year Analyst $90k $35k-$50k $60k-$75k $80k-$100k $125k-$190k
Note: 1st year Analysts typically receive a signing bonus of $10,000 at larger firms (sometimes lower
at boutique and middle market banks). This bonus is not reflected in the figures above.
As a general rule, bonuses typically range from 50%-100% of base salary. Top bucket 1st year
Analyst bonuses have reached as high as the $90,000 area (2006-2007), but have been as low as the
$40,000 area during the financial crisis. Lower-tier (or bottom bucket) Analysts often face the threat
of being fired, hence the drastic drop in bonus numbers in this tier.
Insider Insight Analyst Rankings & Bonuses

 Sometimes, the influence of just one person can make or break an Analyst’s ranking (and
hence, bonus size). Because of this, Analysts should try to maintain good standing with all of
the senior members of their group: if one person is adamant that you are a poor employee, it
will likely be reflected in a lower ranking.
 Investment banks usually assign a set number of top/middle/bottom rankings per group based
on the group’s performance that year. It is possible to work just as hard as an Analyst in
another group but receive a lower bonus because your group had fewer top-tier slots or fiercer
competition among Analysts.
Associate
Below is a breakdown of bulge bracket and larger middle market Associate compensation data.
These ranges represent top-tier and lower-tier compensation over the past several years (hence the
wide range):
Base Bonus Total Average
Salary Range Compensation Compensation
1st Year Associate $110k-$125k $55k-$145k $165k-$270k $200k
2nd Year Associate $120k-$145k $70k-$160k $190k-$305k $250k
3rd Year Associate $130k-$160k $90k-$190k $220k-$350k $290k
Note: Associates have been known to receive little-to-no bonus in very poor years. Over the past
several years, Associate base salaries have been increasing and bonuses have been shrinking (this
varies from bank-to-bank). Well-known bulge bracket banks have sometimes been known to promise
3rd year Associates all-in compensation in the $450k area.
Senior Bankers
Unlike junior bankers, senior bankers (Vice President and above) play a client-facing role and are
responsible for sourcing and closing deals. Senior bankers have direct control over how much money the
firm makes; accordingly, their compensation is tied to deal flow, and they experience very wide
fluctuations in pay.
Insider Insight Senior Banker Compensation

 Bonuses for senior bankers tend to become a much larger percentage of total compensation,
especially moving up the corporate ladder (salaries do not increase nearly as much). This gives
an investment bank flexibility to pay employees less during off years.
Vice President
• All-in pay ranges from $250k to $750k.
• This range covers entry-level Vice Presidents in a bad year to those higher-level VP’s that are
soon-to-be-promoted.
Senior Vice President

• All-in pay ranges from $300k to $1.25 million.
Managing Director
• All-in pay can fall as low as $300k if Managing Directors are given zero bonus (typically in very
poor years), but normalized pay ranges from the $700k to $3 million area.
• Well known Managing Directors that close lots of deals (“big hitters”) can make $10 million+ in
stellar years.
(4.2) Exit Opportunities

Investment banking opens the doors to countless exit opportunities, ranging from other jobs in high
finance to business school. For a more detailed look at exit opportunities, see Chapter 20.
The Buy-side
It is common knowledge that investment banks are often the gatekeepers for positions with private equity
firms, venture capital funds, and hedge funds (some of the most lucrative corporate jobs in the world).
Beyond money, candidates are lured by the promise of a better lifestyle (including better hours) and the
opportunity to obtain investor expertise.
The typical path to a career in the buy-side is outlined below:
Investment Banking Buyside Business School Buyside

(2-3 years) (2-3 years) (2 years) (indefinite)
Although the above graphic outlines returning to a buy-side role after obtaining an MBA, candidates with
this level of experience (post-business school) are highly qualified to go back into investment banking or
to seek out a corporate job (with the potential to work their way up to the executive level, such as CEO,
CFO, COO, etc.).
Business School
Business schools look highly upon individuals with investment banking backgrounds, and top candidates
at well-known banks often feed into some of the best MBA programs. Investment banking and buy-side
senior employees often help junior bankers break into their business school alma maters. Although it is
more difficult to go straight into business school after only working a few years, some ex-Analysts DO
get into good programs (especially when their experience is coupled with a good GMAT score).
Other
Banking provides a unique technical skill set that qualifies bankers for a variety of corporate finance and
other jobs. Corporations often prefer to hire former investment bankers for their internal finance and
corporate development departments where modeling and financial analysis are required.
Also, investment banking provides many important advantages for entrepreneurs: namely, capital and an
inside look at how businesses run. Banking can provide a quick and worthwhile foundation for those
interested in starting their own business.
(4.3) Unparalleled Learning Experience

Investment banking Analysts have the opportunity to learn far more in a few years than many working
individuals learn in double the time. The responsibility and senior banker exposure that junior bankers
experience, along with the qualitative and technical skills gained, are extremely valuable going forward in
an Analyst’s career.
Responsibility
The responsibility and difficulty of the work in investment banking necessitates quick learning. There are
very few jobs where entry level employees (often in their early twenties) play such an integral role in a
deal process. Analysts run the presentations and underlying technical work of every deal, from start to
finish, and are required to make important judgment calls.
Hours
Investment bankers work extremely long hours, experiencing in one year what nine-to-five workers do in
two years (or more). In most cases, working more translates to learning more.
Teamwork
Everything in investment banking is done in teams. Each deal or pitch involves bankers from every level
working together in a deal team. For more information regarding a deal team, see Section (1.3).
Material Deals
Investment banking Analysts work on real deals, often with material outcomes for the investment bank’s
clients. Analysts do not merely provide auxiliary services; their work is an underlying factor in large
decisions that may involve millions of dollars, change the marketplace, and affect the lives of thousands
of individuals.
Technical Skills
As detailed in Section (3.2), Analysts develop complex technical skills including, but not limited to,
modeling, accounting, valuation, and general corporate finance. These hard skills follow a junior banker
long after their Analyst career.
Senior Exposure
Analysts are constantly in contact with experienced and high-level employees. This includes executives
of client corporations as well as Managing Directors within the Analyst’s own deal team. Often times,
the Analyst will be the main liaison between the client and bank for the technical aspects of a deal (i.e. the
point person for the model, interacting with the client’s CFO). These interactions develop confidence and
teach an Analyst how to interact with senior executives.
Quote
“ In my first six months on the job, I spoke constantly with the CFO of a large technology company.
We would walk through the model together as we tweaked assumptions and developed our valuation
story to sell to strategic buyers. ”
(4.4) Pedigreed Colleagues And Future Network

Investment banks populate their Analyst classes with students from the top colleges in the world. Being
among these students has its advantages: not only do you learn from the best and brightest, but you also
build a network of people that are poised for success.
Insider Insight Learning From Colleagues

 When working at an investment bank, you will be surrounded by many accomplished and
intelligent individuals. Learn from your colleagues of every rank: Analyst to MD. Keep in
contact with fellow Analysts, and build and maintain your network of industry insiders. Many of
these individuals will go on to do interesting things in finance and other fields.
(4.5) Prestige
Investment banking has always been surrounded by a cloud of mystery and prestige, especially in the eyes
of the general public (though lately this has faltered). The media often likes to portray the lifestyle of a
Wall Street employee as lavish and high profile. Yes this does exist, but VERY few bankers come
anywhere close to fitting this mold.
The main factors of investment banking that produce a sense of prestige are:
• High compensation
• Difficulty of obtaining the job
• Prime offices and office locations
• Chance to work on high profile deals (large transactions, Fortune 500 clients, senior executives)
Insider Insight Displaying Humility

 Many new bankers are surprised to find that the average employee is much more boring than
Gordon Gekko: smart and ambitious (but down to earth), wise with money, and family-oriented.
 Interviewees and new Analysts should avoid flashy behavior, especially in front of senior
investment bankers.
Chapter 5: Insider Positives
Beyond the publicly available positives, there are many lesser-known benefits to working in investment
banking. These benefits are less obvious and are often unknown without an insider’s view. For this
reason, we refer to these as “insider positives”.
(5.1) Learning To Deal With Stress

Although the Analyst job is very stressful, learning to deal with it is a valuable skill. Analysts are
constantly staffed on multiple projects at any given time, so learning to multitask is essential. In addition,
Analysts learn to manage deadlines and prioritize efficiently; not every project can be completed on time.
The Analyst must also learn to problem solve by accepting and completing tasks that they do not know
how to accomplish. Although stressful at first, this helps Analysts become more resourceful.
Most Analysts will experience one or more “fire drills”, projects (such as models or presentations) that
need to be completed in an extremely short time frame. These test and train an Analyst’s judgment as
they are forced to make quick decisions in pressured situations.
(5.2) Badge Of Honor

Completing an investment banking Analyst program is a form of to “earning your wings”. As mentioned
in the previous chapter, the high barriers to entry along with the difficulty of the job itself are common
knowledge. Future employers, colleagues, and business partners will respect your experience and will
know you are smart and hard working. Regardless of what job an Analyst chooses to pursue post-
investment banking, this badge will exemplify their ability to handle any tough task or situation.
(5.3) Transferrable Skill Set

Many of the skills learned during investment banking are highly applicable to whatever a junior banker
decides to do down the road. Technical skills (valuation, modeling, accounting) and other deal-related
knowledge (processes, deliverables, etc.) are highly relevant for other jobs in finance. More general skills
(presentations, communication, and organization) are transferrable to a broad range of jobs and other
areas of life. Working as an Analyst builds business acumen: this includes how to write emails, address
managers, lead calls, etc.
(5.4) Future Jobs Will Be Less Difficult

Not many jobs are comparable to investment banking in terms of long hours, intensity, lack of sleep, and
stress. Analysts experience one of the harshest corporate environments that exists, and future jobs will
likely be more inviting.
Insider Insight Boredom With Future Jobs

 Some bankers complain of intellectual boredom after leaving banking. Once accustomed to
dealing with high-level employees and running major components of deals, it can be tough to
take on a more normal, junior corporate position. Some people underestimate their fondness of
the fast-paced environment.
(5.5) Full-Time Analyst Training
A major benefit that is often overlooked by incoming Analysts is the full-time summer training program
offered by most major investment banks. Full-time training typically consists of a 4-8 week paid
professional training program in New York City (a more in-depth description of what training entails is
discussed in Section (19.2)). Analysts gain valuable knowledge, build their network, and receive many
useful training materials to keep for future reference.
(5.6) A Humbling Experience

Being an Analyst is a humbling experience. The investment banking atmosphere opens Analysts’ eyes to
how many smart and hard working people exist. The humility that is developed from this work
environment is a useful attribute for any job going forward.
(5.7) Leadership And Management

As mentioned in Section (3.4), Analysts manage a team of auxiliary staff that specializes in various tasks
to make their lives easier. From this experience, Analysts learn how to manage the distribution of tasks
among different individuals as well as how to communicate directions and monitor progress. Also, full-
time Analysts will have summer interns that report directly to them and look to them for advice and
directions.
(5.8) Small, Exclusive Industry

As an investment banker, Analysts become members of a small, and sometimes exclusive, group: they are
one of only a few thousand people in the field (specifically IBD). If staying in finance, Analysts gain a
valuable skill set that the vast majority of people in the world do not have.
(5.9) Industry Expertise

The nature of the work in a coverage group requires Analysts to gain industry expertise and gives them an
in-depth knowledge of that industry in just a few years. Also, Analysts often form ties and relationships
with industry insiders.
(5.10) Ideal Starting Point

Investment banking is a very good option for those without a set career in mind. This job exposes
Analysts to a variety of industries and opens many doors due to the various reasons stated above,
including:
• Skill set that is transferrable to other finance and non-finance-related jobs
• Known difficulty of obtaining the job gives Analysts an edge in recruiting for other positions
• Well-established network of successful people opens doors in the future
• Interaction with senior employees at client firms can lead to jobs with these companies
• Industry expertise and specialization prepares Analysts well for corporate jobs in those industries
Chapter 6: Publicly Available Negatives
In this chapter, we provide insider knowledge on the commonly known negative aspects of working in
investment banking. These are the unpleasant parts of the job that people are aware of; we refer to these
as “publicly available negatives”.
(6.1) Long Hours

It is common knowledge that junior investment bankers work exhaustive hours, upwards of 120 hours in
a week under extreme circumstances.
During a typical week, Analysts can expect to work 80-100 hours; “normal” days consist of arriving at
the office around 9am and leaving between 10pm-2am.
Quote
“ The worst deal I ever worked on was a sell-side for a company that specialized in healthcare
technology. There was a 3-month period where I must have been averaging at least 110 hours per
week. Looking back on it, I don’t know how I survived. ”
- Analyst, Elite Boutique Investment Bank
Insider Insight Leaving The Office Early

 Although the job is hour-intensive, it is not unheard of to see established full-time Analysts
occasionally leave right after dinner. Workflow typically comes in waves, sometimes giving
Analysts a few slower days or weeks.
On the weekends, Analysts are always on-call; it is not uncommon to work both Saturday and Sunday,
but at a minimum Analysts can expect to work a good portion of at least one weekend day. On the
weekends, most Analysts will catch up on sleep, arriving at the office around lunch time.
Insider Insight Working Weekends

 Most prospective Analysts understand that the job will require working during the weekends, but
few truly understand the implications. Make sure you fully consider what it means to work most
weekends after working all week, as well. For a full discussion regarding long hours and
working weekends, refer to Section (19.5).
(6.2) Stress
Investment banking is a pressure-intensive environment with high expectations. The overall stress of the
job is sometimes overwhelming; it is common to be juggling various projects while watching work
continue to pile up.
One of the most stressful aspects of the job is unpredictability: as an Analyst you have very little control
over your schedule. New staffings can arise at any moment, and deals presumed dead can come back to
life.
Quote
“ One of the biggest stresses of the job is the fear of what might be coming next. Just when you think
you are wrapping up a project or that you are done for the day, something new can pop up. I try to
avoid making too many set plans because I constantly need to cancel things last minute. ”
- Analyst, Boutique Investment Bank
Insider Insight “Red Light of Doom”

 As discussed in Section (3.4), a stress all junior bankers can relate to is the blinking “red light of
doom” on their BlackBerrys as it may be a sign of new or additional work.
(6.3) Big Personality Bosses

Many Type-A personalities are drawn to investment banking because of its competitive nature. Be
prepared to work with big ego individuals that are extremely demanding and often micromanage work. It
is not uncommon to for senior bankers to yell and curse when an Analyst messes up.
(6.4) Lack Of Fitness And Overall Health

Without special focus, fitness and health are some of the first things to go for many Analysts. Reasons
include: eating takeout for nearly every meal, difficulty establishing a consistent gym regiment, lack of
sleep, excessive caffeine intake, and living an overall sedentary lifestyle. Additionally, many people
resort to eating junk food to deal with stress. We offer tips to help stay in shape in Section (19.5).
Insider Insight Establishing A Gym Regiment

 After building credibility with co-workers, establishing a gym regiment is not uncommon.
Analysts can work out during lunch or leave the office after dinner for a quick workout before
returning to complete their work.
(6.5) Negative Public Image

Recently, investment banking has been the target of negative press regarding claims of corruption,
excessive pay, and government bailouts. Although this has little effect on an Analyst, it may deter some
people from pursuing jobs in the industry.
Chapter 7: Insider Negatives
In this chapter, we dive into negative aspects of investment banking that most industry outsiders are not
aware of: we call these “insider negatives”.
(7.1) Pay Is Lower Across The Board

Pay across Wall Street is down (even if only slightly), with many industry veterans of the belief that it
will never again reach previous levels. Since the financial crisis and subsequent regulatory changes,
investment banks can no longer take on the same levels of risk that were once commonplace. Without
high-risk, high-reward opportunities, profits are generally going to be lower (per capita) than before,
leading to lower pay (note, this is all relative; investment banking pay is still much higher than most other
corporate jobs).
Quote
“ Lower pay is not limited to Analysts; the decline in compensation has created motivation and
morale problems for some mid-level and senior-level bankers. ”
(7.2) Large Amounts Of Administrative Work

As discussed in Section (3.2), Analysts spend lots of time completing administrative tasks such as
scheduling meetings, staying organized, filing documents, and finding buried information. The
abundance of administrative (and sometimes menial) work is often overlooked by prospective bankers.
(7.3) Unnecessary, Unrecognized, Or Irrelevant Work Completed

Every so often, an Analyst must complete work that he knows is irrelevant or unnecessary. Many
business prospecting efforts (pitches) must be done even when the Analyst knows there is no chance of
winning the business.
Analyst work going unrecognized is another common scenario. More often than not, senior bankers will
have no idea how long it took to complete certain task. In rare instances, senior bankers are even unaware
of which Analyst completed work for them (this is more common with pitches or random projects where
the Analyst may not have any interaction with the Managing Director).
Insider Insight Working On Unused Materials

 Many Analysts can relate to staying up late working on a pitchbook, only to attend the client
meeting and never use the materials. It is not uncommon for only a few select pages to be used
and the rest of the meeting to be a casual conversation.
(7.4) Limited Ability To Control Work Flow
Analysts have limited control over what they work on and with whom they work. Even if an Analyst is
proactive and tries to get on certain types of deals or deal teams, work flow is ultimately controlled by the
staffer. As we mention in Section (19.3), try to get on good terms with the staffer as this may help give
Analysts some control.
(7.5) Investment Banking Is In A Volatile State

Since the 2008 financial crisis, the investment banking industry has been under intense scrutiny:
• Hiring pools are smaller (and shrinking)
• Some banks are moving away from the 2-year Analyst program, making it more difficult for
Analysts to transfer to the buy-side
• There are increasing amounts of red tape, making the job itself more difficult
• Constant risk of layoffs
(7.6) Low Bank Loyalty

Investment banking is characterized by little-to-no bank loyalty. Many senior bankers can easily be
incentivized to switch firms, with loyalty lying at the group-level (sometimes entire groups switch firms
together). Examples of these en masse moves include:
• Jefferies Aerospace & Defense transferred to Lazard (May 2008)
• Barclays Energy Group transferred to UBS (June 2009)
• UBS Healthcare Group transferred to Jefferies (September 2011)
(7.7) Unrealistic Expectations For Exit Opportunities

Many individuals enter investment banking with the intention of exiting for greener pastures after two
years. In many cases, exiting to a private equity firm is just “Banking 2.0” in terms of the type of work
completed (and in some cases, long hours). Also, exit opportunity recruiting is not a simple task: it can
last for over a year and requires a large amount of studying and constant interaction with headhunters
(eating away at the limited free time Analysts have). Ultimately, there are not enough buy-side jobs for
every investment banker, once again narrowing down the playing field.
Very few exit opportunities outside of buy-side roles are “promotions” from a position as an investment
banking Analyst. Pursuing a job in corporate finance offers very few roles that will act as an “upgrade”
from the Analyst program. The lifestyle may be better, but it is very likely that junior bankers will take a
pay cut and their overall responsibility will go down.
Part III
How To Get The Job
Chapter 8: Step 1 – Evaluate Your Current Situation
Understanding your current situation is the first step towards breaking into investment banking.
Recognize where you are in the recruiting process and how your specific background will affect your
strategy.
(8.1) Are You At A Target Or Non-Target School?

Your approach to landing a job at an investment bank will be very different depending on what university
you attend. Not all colleges are treated equally for recruiting purposes. Below we dive into the two broad
categorizations of undergraduate schools: “target” and “non-target”.
Target Schools
A target school can generally be defined as a university where investment banks actively recruit students.
Banks post job opportunities through the college’s career center, host information sessions on campus,
hold interviews on campus, and are integrated with relevant campus student groups. In summary: if you
go to a target school, investment banks come to you.
Within the target school category is a subset called “regional target schools”. Regional offices of larger
investment banks actively recruit from these universities. Regional target schools are high caliber
colleges: their students tend to qualify for New York-based investment banking jobs (but will have to go
out of their way to recruit for positions outside of their school’s region).
The distinction between target and non-target school (and even between target and regional target) can be
blurry. As an ultimate test, if a bank comes to your school to recruit, then your school falls into the target
category.
Below is a select list of target and regional target schools:
 Amherst  Duke  Northwestern  UCLA

 Boston College  Emory  NYU  UPenn
 Brown  Georgetown  Princeton  USC
 BYU  Harvard  Rice  UT – Austin
 Carnegie Mellon  Indiana  Stanford  UVA
 Columbia  Michigan  Swarthmore  WashU
 Cornell  MIT  UC Berkeley  Williams
 Dartmouth  Notre Dame  UChicago  Yale
Insider Insight What Makes A Target School A Target School

 Year after year, target school candidates prove to be successful investment banking Analysts,
causing the investment bank to continue recruiting at these universities and further solidifying
their status as “target schools”. In addition, many current investment bankers have attended
target schools themselves and look favorably upon prospective students from their alma maters.
Non-Target Schools
Unlike target schools, non-target schools generally do not have a strong presence on Wall Street
(especially in IBD), and most major banks do not actively recruit on their campuses. Instead, candidates
from non-target schools must be proactive in their pursuit of positions on Wall Street.
Non-target schools are not necessarily academically weak universities; investment banks only have so
many resources devoted to recruiting and cannot recruit on every campus. These schools may be smaller,
lack finance programs, be lower in national rankings, etc.
Despite the disadvantage of not having campus recruiting, many students from non-target schools make it
into Wall Street each year by working hard and networking well. If you go to a non-target school,
additional actions will be necessary to break into the industry. The largest hurdle for these students is
getting a first round interview. Once they pass this obstacle, non-target students are often just as
competitive in the recruiting process, as well as on the job.
Non-Target School
In Part III in particular, we highlight many differences required to get a job in investment banking as
a student from a non-target college. Non-target students: pay close attention to these highlighted
areas as your experience and strategy will differ significantly compared to students from target
schools.
Chapter 9: Step 2 – Excel In The Classroom
An important factor in the Analyst recruiting process is educational background. Investment banks look
for students with business and finance knowledge or with backgrounds that convey a genuine interest in
the finance field. Choosing the right major or conveying an interest in finance is a vital step towards
breaking into the industry. Below, we explore important academic factors that investment banks take into
consideration, including major, essential classes and GPA expectancy.
(9.1) Major
No particular major is required to get a job in investment banking. However, certain majors are preferred
by investment bankers and tend to funnel into the industry due to their relevance to the job. More
important than your major, though, is conveying a keen interest in finance.
Heavily targeted majors are those in the areas of Finance, Business, Accounting, and Economics.
Relevant minors and concentrations (Accounting, Finance, Math, Statistics, etc.) are also viewed
favorably.
Technical majors such as Mathematics, Engineering, and Physics are also desirable to recruiters,
especially when coupled with a minor in accounting or finance. This combination conveys technical
aptitude as well as an interest in finance.
Non-Target School
It is especially important that non-target students have a highly relevant major: bankers want to see
that you are familiar with the industry and the technical aspects of the job. Whereas target school
students with less relevant majors are still considered, non-target students with less relevant majors
are usually not in the running.
Majors categorized as liberal arts (unassociated with economics) are viewed as non-relevant by
investment bankers: students pursuing these majors will have a harder time breaking in. Examples
include Political Science, Communications, and English majors. Bankers who review resumes categorize
these as “easier” and expect a near-perfect GPA. However, it is not impossible for these students to break
into Wall Street, especially if they show commitment and a genuine interest in the job. As a liberal arts
major, it is essential to learn the relevant accounting and finance concepts independently.
Insider Insight Pursuing Non-Finance Minors

 Non-finance related (but interesting) minors are a good way to stand out when coupled with a
relevant major. These help convey passions, display well-roundedness, and often serve as talking
points during interviews.
(9.2) Essential Classes

Taking essential classes is another way to convey your interest in finance and to learn relevant knowledge
required for the job. Regardless of major, it is essential to take the below classes before starting an
internship or job in investment banking:
• Basic accounting – usually 1-2 quarters or semesters of managerial accounting should suffice.
At a minimum, you need to know what a company’s three financial statements are, what they
look like, and how they interact.
• Basic finance, with an emphasis on valuation – one class is most likely enough; banks have
rigorous training programs to fill any gaps. If your school does not offer any finance classes, you
need to engage in a self-study program. We recommend various resources in Section (16.1).
• Algebra – anything math related that is more complex will be done by a computer (in Excel).
Insider Insight Academic Classes That Get You Ahead

 Additional classes that will get you ahead include: basic financial modeling, in-depth valuation
courses, and more advanced accounting. Not many schools offer financial modeling classes, so
taking a third-party training course is another way to stay ahead of the competition.
 Advanced math classes are mostly irrelevant for investment banking (prospective students do not
often realize this).
(9.3) GPA
Aside from work experience, GPA is the most important factor of a resume in the investment banking
recruiting process. When reviewing candidates’ resumes, investment bankers usually set the bar for
acceptable GPAs at 3.5 or higher. Anything above this number makes the first cut, with higher
numbers looked upon even more favorably. GPAs between 3.0 and 3.5 fall into a grey area; at this point,
prior experience or other factors from a candidate’s resume may bridge the gap to break the 3.5 barrier.
When looking at GPA, bankers consider difficulty of major and slide the threshold accordingly. As
discussed above, technical majors such as Engineering are considered harder while liberal arts majors
such as Communications are considered easier. For example, a Political Science major with a 3.3 is much
different than an Electrical Engineering/Computer Science major with a 3.3.
NOTE: References to GPA are based on the 4.0 GPA scale, most common to universities in the U.S.
Insider Insight GPA Considerations

 On your resume, round GPA to one decimal point (if more favorable). For example, an
individual with a 3.46 should round to a 3.5.
 Many colleges offer “easy A” classes that may not be relevant to finance or your major but help
boost GPA: take these.
Chapter 10: Step 3 – Get Involved On Campus
Investment bankers like well-rounded candidates, and students who show initiative in joining campus
organizations (especially those related to finance) have a better chance of getting into Wall Street. There
are many benefits to campus involvement, including resume building, networking opportunities, and the
ability to demonstrate leadership, accountability, and responsibility. Being involved in more than just
academics while maintaining a high GPA shows that you can handle a demanding schedule (an important
skill for the job).
(10.1) Join The Right Student Groups

Highly relevant student organizations include general undergraduate business groups and finance-specific
(or finance-related) organizations. Try to join the largest and most well-known business organizations on
campus as these usually have access to the best resources and largest number of employers. Seek out
groups that interact with the investment banks (workshops, round tables, networking) and join them.
Insider Insight Student Group Considerations

 During the recruiting process, alumni from your respective college will usually review your
resume and quickly discern whether the groups you are involved in provide meaningful value.
We discuss this more in Section (11.5).
 Business and finance clubs are often gatekeepers for meeting industry professionals in investment
banking. The networking opportunities that these groups provide are vital.
 It is better to be ACTIVELY involved in only a few groups (working your way up to leadership
positions), rather than being in 10 groups as a general member.
 It is beneficial to hold finance-type leadership positions (such as Treasurer) as these require skills
relevant for the job.
 Involvement in student groups is important, but do not spread yourself too thin: commitment to
student groups is no excuse for a low GPA. If forced to choose between a higher GPA and more
student group involvement, GPA should almost always take precedence.
(10.2) Form Your Own Student Organization

The main benefit of starting a campus group lies in the leadership and responsibility it requires. Starting a
student group is a good way to convey passion and personality. Founding a lack-luster club for your
resume’s sake is not recommended: bankers will usually see through this when discussing it with you.
Non-Target School
Without a large presence on Wall Street, there is a higher likelihood that your school does not have
well-established finance clubs. This gives you a perfect opportunity to create a meaningful club or
have a top position with a relevant club on your campus. Reaching out to investment banks as a
representative for your organization is an extremely effective networking tool.
(10.3) Honors Societies And Distinctions
Many schools offer honors and fellowship programs that link students with valuable resources and
networks. These distinctions signify that you are at the top of your class and they are instantly recognized
on an applicant’s resume.
(10.4) Student Government

Student government, although not directly related to investment banking, shows leadership and an
inclination to make important decisions. Bankers like students that demonstrate leadership capabilities.
Chapter 11: Step 4 – Create And Perfect Your Resume
Perfecting your resume is one of the most important steps in landing an internship or job in investment
banking. Before you can get your foot in the door, you need to get your resume selected from a pool of
hundreds (or thousands) of applicants. Serious candidates should dedicate a significant amount of
time to perfecting their resume. Get the opinions of multiple people; the more eyes the better.
Bankers spend only 30 seconds looking at each resume, so it needs to be aesthetically pleasing, concise,
and well-organized. Investment banking and finance-specific resumes have four defining attributes:
1. Appropriately formatted
2. Detailed and quantitative
3. Results driven
4. Properly structured
We refer to a resume with #2 and #3 applied as being “financed up”. These two attributes distinguish a
good finance resume from others and will make you stand out.
***A RESUME EXAMPLE/TEMPLATE IS PROVIDED ON THE NEXT PAGE. THIS RESUME

WILL BE REFERENCED THROUGHOUT THIS CHAPTER.***
(11.1) Format/Appearance
Format and appearance are extremely important parts of a finance resume. Analysts and Associates spend
much of their time on the job checking for formatting errors and are very good at catching mistakes. This
means your formatting needs to be perfect. In addition, you must make the relevant parts of your resume
stand out; knowing what to highlight is essential.
Insider Insight Importance Of Resume Formatting

 If you cannot format a resume correctly when given all the time in the world, bankers will
assume that you cannot format well on the job.
Quote
“ I have thrown out dozens of resumes over the years because of a typo or inconsistent formatting. If
you don’t care about details when you’re selling yourself to me, you won’t care about details when
I’m trying to sell my banking services to a company. ”
Follow the below guidelines to ensure that you have a well-formatted resume:
• The resume should never exceed one page
• Your general font should be no smaller than 9pt and margins should be .5” or larger
• Your name should be center aligned on the top of the document and should be in a font that is
larger than your general font
• Dates and locations should be right-aligned, and all other information should be left-aligned
• Major section headers should be bolded and underlined (Education, Work Experience, etc.)
• Employers and organizations should be bolded
• When describing experience and roles, list information in bullet format
Joseph T. Schmoe
5555 Walnut Street | Philadelphia, PA 19104
(555) 555-5555 | joe.schmoe@wharton.upenn.edu
EDUCATION
The Wharton School, University of Pennsylvania Philadelphia, PA
Bachelor of Science in Economics, Concentrations in Accounting and Finance, Class of 2014 September 2010 – Present
• Cumulative GPA: 3.53 | Major GPA: 3.76 | SAT I: 2260 (800 M, 720 W, 740 V)
• Relevant Coursework: Corporate Finance, Financial & Managerial Accounting, Corporate Valuation
PROFESSIONAL EXPERIENCE
Booteek Capital Investment Bank New York, NY
Investment Banking Summer Analyst June 2012 – August 2012
• Engaged in pitches and industry analysis related to all aspects of the gaming industry, including online gaming,
regional casinos, destination casinos, and gaming equipment manufacturers
• Created mini models for discussion materials intended to show buyout opportunities of multiple casino operators
and gaming equipment manufacturers to financial sponsors
• Analyzed strategic alternatives for $2bn+ regional casino operator which involved creating an LBO model and
evaluating potential debt capacity, investor returns and creating forecasts based on a profitability assessment of each
casino location and its market
Lynch Barney Philadelphia, PA
Wealth Management Intern November 2011 – March 2012
• Leveraged firm databases and conducted independent research to generate over 100 client leads with a focus on
acquiring west-coast based individuals with net worth greater than $5 million
• Personal efforts resulted in 15 new client conversions, translating to over $50 million dollars in new AUM for the
firm. Presented the results and client acquisition strategies to a team of three Vice Presidents
Food Retailers, Inc. Seattle, WA
Marketing Intern June 2011 – August 2011
• Responsible for developing and implementing print advertising strategies targeting 300 west coast suburban
locations with a $25,000 budget
• Compiled data for 1,000+ advertising campaigns and conducted analysis on successful strategies
LEADERSHIP
Undergraduate Finance Group Philadelphia, PA
Vice President September 2012 – Present
• Responsible for oversight and management of governing body for an organization with a membership base of 2,200
• Implemented new professional speaker series and increased corporate sponsors by 57%
International Investment Society Philadelphia, PA
Treasurer September 2011 – May 2012
• Responsible for managing an annual budget of $10,000 and overseeing all group expenses
• Migrated accounting system to an online platform and reduced expenses by over $1,000
EXTRACURRICULAR ACTIVITIES
Wharton Business Abroad, South America May 2012
• One of 20 applicants accepted for 2-week course; studied microfinance strategy and interacted with local businesses
Member of the Wharton Private Equity Club September 2012 – Present
Mentor for West Philadelphia Student Mentorship Program January 2011 – Present
SKILLS & INTERESTS

• Fluent in Spanish and English
• Proficient in Bloomberg, Capital IQ, and MS Office
• Interests include fly fishing, soccer, completing international triathlons, and performing stand-up comedy
(11.2) Detailed And Quantitative
A great finance resume must:
1. Be detail oriented
2. Include specific numbers
3. Use finance terms
We dig into each component in greater detail below. Let us start with the example of a basic wealth
management internship description and build on it:
• Generated leads and made sales calls to get new clients
1. Detail Oriented
When describing your experience, be as detailed as possible: include anything that provides one more
level of specificity. You want to emphasize relevant points and make your descriptions more interesting.
Continuing with our example, you see below that we incorporate geographic concentration and explain
what type of clients we reached out to:
• Generated client leads, concentrating on west-coast based individuals with a high net worth
2. Specific Numbers
Include specific numbers wherever and whenever possible. The more the better, especially if they are
material, relevant, or impressive. Providing numbers helps paint a full picture by quantifying your
experiences and proving relevancy. If you worked on deals, what size? If you generated leads, how
many? If you were president of a student group, how many members did you manage?
Furthering our wealth management internship example, we describe how much was contributed in terms
of phone calls, clients, net worth, etc.:
• Generated over 100 client leads, concentrating on west-coast based individuals with net worth greater
than $5 million
3. Finance Terminology
Use finance terms whenever possible. In some cases, you may have to stretch what work you actually
performed to fit the finance terminology mold. For example, call physical presentations “pitchbooks” or
technical work related to lending “underwriting”. Try to incorporate the below words into your resume:
 Acquisition  Comparable(s)  Distressed  Merger/Acquisition  Projections

 Analysis  Credit  LBO  Model  Research
 Assets  DCF  Leverage  Pitchbook  Underwriting
 Capital  Diligence  Memo  Present Value  Valuation
Insider Insight Finance Terminology on Your Resume
 Be selective when using more advanced finance terms on your resume. Some of these words
increase the likelihood that you will get grilled on those topics during an interview. However, it
looks doubly impressive when you are able to answer questions related to these topics. When
exaggerating, use this guide to become well-versed on the relevant topics listed on your resume.
Notice in the example below that we were able to add multiple finance terms to our sales-related
internship example, an experience that involved no real finance work:
• Leveraged firm databases and conducted independent research to generate over 100 client leads.
Concentrated on acquiring west-coast based individuals with net worth greater than $5 million
(11.3) Results Driven

After providing a detailed description of what you have contributed to the job or organization, you must
communicate the results of these efforts. What were the fruits of your labor? What benefit did your firm
experience as a result of your work? Try to quantify and pinpoint numbers, even if it requires rough
estimations. If results cannot be quantified, include relevant next steps or changes that were enacted as a
direct result of your work. Investment bankers are results-driven and love to see that you can produce.
Below we add results to our wealth management example:
• Leveraged firm databases and conducted independent research to generate over 100 client leads with a
focus on acquiring west-coast based individuals with net worth greater than $5 million
• Personal efforts resulted in 15 new client conversions, translating to over $50 million dollars in new
AUM for the firm
Stress Exposure To Senior Employees
If you had any interaction with senior employees (Partners, Managing Directors, Vice Presidents, or
managers), communicate this through your resume. Employers want to see that you can interact well with
senior employees and that you took on responsibility.
• Leveraged firm databases and conducted independent research to generate over 100 client leads with a
focus on acquiring west-coast based individuals with net worth greater than $5 million
• Personal efforts resulted in 15 new client conversions, translating to over $50 million dollars in new
AUM for the firm. Presented the results and client acquisition strategies to a team of three Vice
Presidents
(11.4) Finance Resume Structure

Your resume should convey the following (in order of importance):
• You are smart
• You have relevant experience
• You are hardworking (willing to put in the hours)
• You pay close attention to detail
• You can multitask
The structure outlined below will best position you to reflect these qualities in an organized and concise
manner.
Major Sections
1. Name and Contact info

2. Education
3. Professional Experience
4. Leadership
5. Extracurricular Activities
6. Skills & Interests
1. Name And Contact Info
At the top of the page, include your full name and (below that) your physical address, email, and
phone number.
2. Education
Mandatory
• Name of university and the location
• Major and concentration or minor, GPA, expected graduation date. Round GPA to one
decimal point if it is more favorable (i.e. 3.46 rounds up to 3.5)
• Honors and academic awards (if applicable)
Optional (but recommended for cases in parentheses)

• Major GPA (if it looks more favorable than overall GPA)
• SAT I scores (if they are above 2100)
• GMAT score (if above 700)
• Relevant coursework; limit this to five classes (accounting or finance-related courses; include
grades in specific classes if overall GPA and major GPA are both below 3.5)
• Study abroad or other educational programs
Insider Insight Importance Of SAT Scores

 SAT scores are taken into consideration more than you would imagine. Very high SAT
scores are respected and can even make up for a lack of experience or a non-stellar GPA.
Exclude
• Anything related to high school unless unbelievably impressive or prestigious (i.e. went to
one of the highest ranking prep schools or were the Valedictorian)
3. Professional Experience
• Limit this section to 2-3 relevant jobs and internships
• Describe full-time summer positions and more applicable jobs or internships in more detail
• Unless highly relevant (or you are lacking current experience), avoid putting pre-college jobs
on your resume. If you must resort to this, embellish as much as possible
• It is especially important in this section to concentrate on “financing up” your resume;
provide specific details and numbers and focus on results produced
• Limit your description to three bullets unless the job significantly outweighs the others that
you are highlighting (i.e. a previous investment banking internship, private equity experience,
etc.)
Start with a summary bullet describing your role and tasks performed:
• Engaged in pitches and industry analysis related to all aspects of the gaming industry, including online
gaming, regional casinos, destination casinos, and gaming equipment manufacturers
Tailor each of the next two bullets to describe a specific project or task, the work you did for it, and
the results. Use action words such as “built, created, constructed, determined, performed, analyzed,
generated, etc.” to emphasize the nature of your work:
• Created mini models for discussion materials intended to show buyout opportunities of multiple
casino operators and gaming equipment manufacturers to financial sponsors
• Analyzed strategic alternatives for $2bn+ regional casino operator which involved creating an LBO
model and evaluating potential debt capacity, investor returns and creating forecasts based on a
profitability assessment of each casino location and its market
4. Leadership Roles
• Limit this section to 2-3 leadership roles
• The total number of professional experiences and leadership roles should be no more than six
entries
• If possible, focus on leadership positions with finance or business-related organizations.
Related social organizations or student government are also good reference points
• Once again, it is important to concentrate on “financing up” this section; provide specific
details/numbers and focus on results produced
• Limit descriptions to 1-2 bullets (unless you need to fill space due to a lack of professional
experience)
In the first bullet, describe what your role was in the organization followed by a brief overview of
what the organization does (if it is not obvious). Emphasize details that legitimize the group and your
responsibilities (i.e. membership base, number of people you managed, third parties you interacted
with, etc.):
• Responsible for oversight and management of governing body for an organization with a membership
base of 2,200
Next, describe specific achievements during your tenure. Include events that you planned, programs
or committees you created, membership growth, additional funding you received, etc. Use numbers
where possible:
• Implemented new professional speaker series and increased corporate sponsors by 57%
The more responsibility you can convey in your “Leadership” section, the better. The best possible
leadership role would be President, Vice President, or Treasurer of a large finance or business-related
student group. Other significant leadership roles include forming a finance-related club, joining the
executive board of your business fraternity, working in student government, becoming President of a
philanthropic organization, and countless others.
5. Extracurricular Activities
• This section should be very brief, 1-3 lines total
• Describe more important extracurricular activities with a maximum of one bullet. List out the
activities in which you are involved
• Include non-academic (but school-related) activities here. These include workshops that you
attended, fraternities/sororities/societies you are a member of, clubs and organizations in
which you do not have a leadership role, and charity involvement
• Also include any research projects or ancillary work with professors and academic/non-
academic competitions, if applicable
• Try to focus on things that make you look accomplished and interesting
6. Skills & Interests:
This section should be extremely brief, 1-2 lines total.
Start with skills, including:

• Languages you know and your aptitude
• Proficiency with computer programs (MS Office, Capital IQ, Bloomberg, Factset, etc.)
• Additional technical skills (basic financial modeling, programming languages, etc.)
Insider Insight Considerations When Listing Skills On Your Resume

 Remember that everything on your resume is fair game. If you put modeling or investing
under “Skills”, you may get grilled on it during interviews (i.e. name a stock you own and tell
me your investment rationale).
Next, discuss interests:

• Put legitimate things that interest you and that may be interesting to the reader
• When possible, provide a statement with one more level of detail rather than a single word.
For example, instead of “travel”, write “travel to remote countries and cities”. Instead of
citing “movies”, cite “films by Martin Scorsese”.
Insider Insight Considerations When Listing Interests On Your Resume

 Think carefully about what you highlight in the “Interests” section of your resume. Anything
that sounds strange, immature, or dorky can ruin your chances of landing an interview.
Essential Resume Do’s And Don’ts
DO DO NOT
 “Finance up” your resume  Lie
 Have multiple people review your resume, even  Have any spelling, grammar, or formatting
if just for formatting mistakes
 Emphasize responsibilities  Exceed one page in length
 Choose only the most relevant experience
 Embellish
(11.5) Review Process (What An Insider Looks For)
Knowing how your resume is going to be reviewed will provide valuable insight when creating it. In this
section, we provide an overview of the resume review process and concentrate on specific aspects that
insiders look for. Consider the review process as you create and perfect your own resume.
The Resume Packet
Investment bankers will receive a resume packet consisting of all of the resumes from your school (yours
will be among them). The number of resumes received varies depending on size of bank, type of group,
office location, and school. As would be expected, bulge bracket banks and corporate headquarter
locations receive the highest volume. The group of resumes is narrowed down to around 15-20 per 100
received; those chosen will move on to first round interviews.
Non-Target School
Resumes from non-target students are treated differently than target school resumes. Firstly, non-
target school resumes are usually put into the hands of investment bankers and HR concurrently,
exclusive of any resume packet. This is due to the fact that there is no resume drop on campus. HR
tries to compile non-target school resumes, but note that there is no guarantee that your resume makes
it into the right person’s hands. Be proactive in the process and cover all bases by submitting your
resume to both bankers and HR. Once non-target school resumes are lumped together by HR, they
are not necessarily distributed to bankers at the same time as target school resume packets. For these
reasons, your best chance to get included in the resume review process is to have an established
relationship with an investment banker that will not only forward along your resume to HR, but will
also give them a positive recommendation.
Quote
“ We usually field non-target candidate resumes from students and bankers alike and keep them in a
folder until the recruiting season begins. Unless a candidate really stands out or is highly
recommended by a banker, we will not look at this folder until we have a better idea of how our target
school recruiting efforts are going. ”
- HR Executive, Middle Market Investment Bank
Who Reviews It
Your resume will normally be reviewed, first and foremost, by alumni from your school that work
within the bank. These alumni bankers will be most familiar with specific majors, groups, and awards at
your university and are therefore able to provide the bank with the most qualified opinion on the facts you
present. These individuals know which student groups are meaningful and which are filler, appropriate
GPA expectancy by major, and other school-specific insight. Other bankers will also weigh in with their
opinions.
HR typically plays a limited role in the resume review process, usually only conducting preliminary
screens to determine which candidates make it into the larger resume packets. The actual review process
is conducted by the bankers themselves (with HR coordinating the rest of the process). Analysts and
Associates are the primary resume reviewers, with Vice Presidents providing their opinion depending on
their capacity.
Insider Insight Resume Review at Smaller Banks
 Senior bankers will be much more involved in the resume review process at smaller, boutique
investment banks.
 These banks are also less likely to have formal resume packets.
How An Insider Reviews Your Resume
The entire review of your resume is usually done in less than 30 seconds; with hundreds of resumes,
investment bankers often cannot afford to devote more time to each one.
Here is the 30 second breakdown of what we look at, in order:

• Name/hometown
• School, major, and GPA
• Work experience: company and position of each (before looking at the descriptions)
• Description of one or two jobs that seem interesting; specifically look for key words and phrases
(without even reading the whole bullet)
• Leadership opportunities: group and title before reading descriptions
• Description of leadership opportunities that stand out
• Glance at extracurricular activities
• Read interests/skills
Insider Insight Resume Review Considerations

 Analysts pay attention to interests because it is the one “fun” thing in an otherwise dull and
monotonous process. However, your interests will never outweigh other strong factors on a
resume (GPA, work experience, etc.).
 Do not forget that the task of reviewing resumes is in addition to the banker’s other work. The
process can become a chore, especially when a banker is busy, and judgment calls are made as
quickly as possible.
Selection Process
Upon receiving all of the resumes, the recruiting coordinator instructs the investment bankers on how
many first round interview spots there are for a particular school. Bankers then review the resumes
independently and select the top candidates to fill the appropriate number of spots. The group of
reviewers gets together and cross references their selections to find consensus picks. The remaining
openings are then debated among the investment bankers. The entire process is completed in a matter of
hours.
Non-Target School
Before non-target school candidates are officially selected for a first round interview, they are usually
pre-screened over the phone to validate their competency. HR often handles these calls.
***For tailored resume review, please consider iBanking Insider’s resume review services at
www.ibankinginsider.com/resume. Our team of professional insiders will help you hand craft the
perfect investment banking resume.***
(11.6) The Cover Letter
Some banks require that you submit a cover letter with your resume; hardly anyone reads it. Accordingly,
we keep the below overview brief and highlight main cover letter structure. The cover letter is an easy
area to make a fool out of yourself; there is very little upside but heavy downside.
Keep your cover letter simple, and make it as concise as possible: it should be about half of a page.
Joseph T. Schmoe
5555 Walnut Street | Philadelphia, PA 19104
(555) 555-5555 | joe.schmoe@wharton.upenn.edu
[Month Day, 20XX]
To Whom It May Concern:
I am applying for the [Summer Analyst] position that is currently posted on the [University
of Pennsylvania Career Center web site]. I am a [junior] at [The Wharton School], pursuing a degree
in [Economics] with concentrations in [Accounting and Finance]. My interest in this internship
position at [Morgan Stanley] is based on my career goal of working in the investment banking
industry upon graduation. [Morgan Stanley’s] prestigious identity as a major bank and its long
history of investment banking draws me to the company.
I am confident that my [professional work experience, leadership roles, work with student
organizations, and success in team environments make me an excellent candidate for this position].
I am continuing to expand my knowledge of financial markets and have gained relevant experience
from my internship at [Booteek Capital Investment Bank] this previous summer. My experience
working on [pitches, models, and industry analyses] taught me essential skills that I believe are
directly transferrable to a position with your firm.
Thank you for your time and consideration. I welcome the opportunity to meet with you
further to discuss the [Summer Analyst] position with your organization. If you have any questions,
please do not hesitate to contact me at [(555) 555-5555] or [joe.schmoe@wharton.upenn.edu].
Sincerely,
Joseph T. Schmoe
Cover letters should be in a three paragraph format:

• 1st paragraph: what firm and position you are applying to and why
• 2nd paragraph: describe yourself, your relevant background, and why they should choose you
• 3rd paragraph: thank the readers for the opportunity and provide your contact information
Have a cover letter template that only requires changing a few names in the document (minimal moving
parts); addressing the wrong bank or bankers is the easiest way to mess up.
Chapter 12: Step 5 – Network
Networking is one of the most important skills you can learn; the earlier you start, the better. Meeting the
right people and maintaining the right relationships will greatly increase your chances of landing a job in
investment banking. Keep in mind, the end goal of networking is to obtain a job offer. We provide
insider advice on investment banking-specific networking below; we discuss with whom to network,
where to network, and how to network (outlining an exact plan of attack).
Note: this section is geared towards investment banking-specific networking (we reference reaching out
to “bankers”, going to “investment banking” recruiting events, etc.). Employ these same tactics to obtain
other finance-related jobs or non-investment banking internships.
Non-Target School
Section (12.4) below contains a comprehensive overview of the networking process as it relates to
non-target students. It will also be helpful to familiarize yourself with the general networking section
beforehand as non-target strategies incorporate many of the same processes and insights.
(12.1) Whom To Network With

In this section, we outline specific people to network with and why.
Current Upper-Classmen
Seek out upper-classmen who have completed investment banking internships. These “semi-insiders” can
provide insight into the job itself and the recruiting process: they recently went through investment
banking recruiting and proved successful.
Senior students with full-time investment banking offers often act as liaisons between the investment
bank and their school. Forming relationships with these students can prove to be useful as recent
graduates of summer internship programs are often consulted by banks when hiring new candidates. A
“positive” review from these individuals will give you an advantage during the recruiting process.
Alumni
Alumni (especially younger ones) are often eager to stay involved with their schools and help students at
their alma mater. Utilize these connections to get your foot in the door. With alumni, you have the
immediate benefit of an established common ground (providing you with an excuse to reach out to them).
Alumni connections are often underutilized by students: you might be surprised by the list of alumni from
your university that work in finance-related jobs.
Alumni from specific campus organizations are also great resources (i.e. fraternities/sororities, business
organizations, secret societies). Members of these groups share a connection one level deeper than just
the school itself. Industry-specific groups (undergraduate finance or business groups for example) will
likely have the most alumni in the field, increasing your chances of networking with a worthwhile
contact.
Family And Friends
If you have any family or friends connected to investment banking, utilize them. No one would like to
see you succeed more than this group of individuals. Spend some time exploring possible family and
friend connections even if you believe none exist; try to uncover relationships a few degrees of separation
away.
Other Industry Insiders
Ideally, insider connections will fall into at least one of the above categories. When all else fails, reach
out to investment bankers with whom you have no connection. We dig into this “cold networking”
strategy later, but (as a general rule) reach out to more junior employees or HR departments first. These
individuals will be more involved with the recruiting process and, perhaps, more willing to help you.
Insider Insight Whom To Contact In HR

 There is often a team of HR recruiters headed by one coordinator that runs the recruiting process.
Get in touch with each firm’s HR department and build a relationship ahead of the recruiting
process. This can prove to be useful.
(12.2) Where To Network

Serious candidates should network everywhere. Below we discuss relevant organizations and resources
that exist to help you find and cultivate relationships that will lead to job offers.
Student Groups
The most relevant student groups for networking are undergraduate business and finance-related
organizations. These student groups often host workshops and investment banking-specific events
(described in Section (12.3)); some are designed exclusively to network with industry professionals.
Investment banks interact with these student groups with the intent of meeting (and screening) candidates
ahead of recruiting.
Year after year, business fraternities send candidates to Wall Street as these organizations are designed
to build a professional network between alumni and current students. Alumni from these groups attempt
to hand pick members for employment in order to perpetuate the cycle.
Although business is not their stated purpose, social fraternity and sorority networks are heavily
represented on the Street. Members of these organizations share very strong ties and alumni look to help
out the younger generation.
Alumni Center
Almost every university will have a center dedicated to connecting alumni and current students. These
centers carry a database of alumni (contact information, where they work, etc.) and host alumni-specific
events that provide a useful platform for you to meet recent graduates. Attend alumni events and use the
database to seek out investment bankers that attended your university.
Career Center
Every school has a career center designed to connect students with jobs. These centers hold industry
panels and information sessions where investment banks come to network and speak to prospective
students. Attend as many of these events as possible; they are often intimate and extremely useful
networking tools. Some colleges offer “investment banking tours” in which a group of students takes a
university-organized trip to visit different firms on Wall Street (or regionally) and network with alumni.
Attend these tours if your school offers them or try to initiate one if not offered by your university.
Insider Insight Attending Information Sessions

 Investment bankers usually track attendance at information sessions and other networking events.
Firms compile attendance data from various events leading up to the resume drop and utilize this
information to gauge a student’s interest in their firm. They also begin recognizing the names of
candidates who attend multiple events.
Firm Events
Some investment banks hold receptions to which students must apply ahead of time. These receptions are
usually intended for juniors that will be recruiting shortly thereafter and are used as a way to introduce the
office to potential candidates from nearby schools (attending as a sophomore is a good way to get ahead).
Keep an eye out for application deadlines through your career center. If you are not sure whether local
investment banks hold these receptions, consider emailing someone from within your existing network at
the bank.
Online
Social media is becoming more and more important in the networking landscape. Utilize it wisely.
Use LinkedIn to stay connected with industry insiders. Create a profile and connect with industry
professionals as you meet them. Also, use the site as a platform to introduce yourself to investment
bankers you would not otherwise meet.
Utilize Facebook to find and stay connected with relevant student groups. This social network is a great
way to stay informed of upcoming events and meetings.
Insider Insight Utilizing Facebook & LinkedIn

 LinkedIn is one of the tools most underutilized by current students. Professionals are much more
receptive to networking with strangers on this site, so take advantage of this opportunity.
 DO NOT request to be friends with investment bankers on Facebook: this is not the right medium
for networking.
 Be smart about what you share on your Facebook profile: do not have offensive pictures or
information on your page. Investment bankers and HR sometimes check Facebook profiles when
screening candidates.
(12.3) How To Network
As a college student, there are two major avenues through which you can expand your network:
1. Reaching out to individuals to form new relationships or further existing ones
2. Attending events designed to introduce you to dozens of new industry contacts
The networking process is non-time specific: it should be done actively throughout your undergraduate
career. Those seeking last minute jobs should reference “cold calling” in Section (12.4) below.
Approach the networking process with the understanding that you need to build personal relationships
with your contacts. Come resume submission time, you want to be viewed as more of a “friend” than a
generic college student. This takes time.
Our networking plan of attack will consist of four major steps:

1. Prepare
2. Execute
3. Follow-up
4. Maintain and Exploit
1. Prepare
You need to understand how to make initial contact with industry insiders and how to prepare for
networking meetings. Action Items 1-2 (below) are relevant specifically when reaching out to individuals
independently. Follow Action Items 3-6 (below) to prepare for both networking events and personal
meetings.
Action Item 1 – Make a list of the people in your network and their contact information. Include
individuals connected to investment banking or any other related business/finance field (focus on
individuals in the groups described earlier). If you do not have someone’s contact information, use our
email address formula list in Appendix B.
Action Item 2 – Send personalized emails to everyone on your list. Introductory phone calls should be
avoided unless the contact is a close friend or a family member. The email should be short, only a few
sentences, and should convey the following: who you are, what school you attend, how you know the
individual or obtained their contact information, and the purpose of your email/next steps.
E-Mail Template
Robert,
My name is [John Doe] and I am currently a [sophomore] at [University of Pennsylvania] pursuing a

degree in [Finance]. I obtained your email address from [our alumni network on campus]. I am
reaching out to you because I am very interested in a career in investment banking and was hoping
that you could provide me with some of your insight. Is it possible to have a quick phone call or grab
coffee sometime next week to discuss your background and address a few questions I have related to
the field and your firm? Thank you in advance.
Best,
John
(555) 555-5555
No reply? Send a follow-up email after a week or so with your original email attached. Keep this second
email even more brief – a sentence or two should suffice.
E-Mail Template
Robert,
I just wanted to follow-up regarding the email I sent you last week. Are you free over the next week
for a quick introduction?
Best,
John
If they do not respond to this email, try a different means of contact. Other options include reaching out
via LinkedIn or calling (we address the risks of cold calling in Section (12.4) below). If you still fail to
get a response using the above methods, try again in a month with another email.
Action Item 3 – Research the firms, groups and/or persons before speaking with your contact: look up
recent finance news, notable deals, company happenings, etc. Your goal is to speak intelligently and
sound prepared; do not go overboard (spend 30 minutes maximum on this Action Item).
Insider Insight Researching Individual Bankers

 If possible, get the inside scoop on your networking contact before speaking with them. Learn
about their academic history, career path, interests, etc. to gain an edge. If they like the New
York Knicks, this is something you should weave into the conversation.
Action Item 4 – Be up to date on industry news. Spend a few minutes reading the headlines from the
week. Good sources include:
• Yahoo! Finance
• Google Finance
• WSJ
• Dealbreaker
• Dealbook
• Bloomberg News
Action Item 5 – Prepare well-thought out questions. Examples of questions include:

• What drew you to the group that you are currently in/firm you are currently with?
• What is your favorite aspect of working at your firm?
• What path did you take to get into investment banking/finance?
• Is there anything you would recommend to someone in my shoes to better position myself to get
into investment banking?
• Could you walk me through your typical day?
DO NOT ask questions that will be very difficult for the person to answer. Ask open-ended questions as
they allow your contact to speak openly and cause them to feel better about the conversation.
Action Item 6 – Update your resume and have it on hand. Casually reference the fact that you brought
your resume with you if they care to look at it. If the person with whom you are speaking does not ask for
a copy, do not force it upon them.
2. Execute
Now that you have set up personal meetings, you are ready to begin networking; it is time to execute. In
this section we detail how to successfully form personal relationships through one-on-one meetings, as
well as how to stand out during networking events.
One-on-One:
Action Item 1 – Place the phone call or head to the meeting (arrive early).
Action Item 2 – Upon meeting, break the ice with small talk regarding how you know each other.
Open the conversation by discussing your background and why you are interested in the field. Be
ready to answer questions such as “Why investment banking?” and “How did you hear about the
industry?”.
Action Item 3 – Ask the banker intelligent questions and focus the conversation on their
experience. Be ready to provide a few follow-up questions after they answer.
Action Item 4 – Once the conversation is wrapping up, propose a way to maintain the relationship.
This can be done by asking if it is okay to reach out with future questions or seeking advice.
Networking Events:
The point of networking events is to meet investment bankers and follow-up with them. Think of this
as an ice breaker and a way to begin a one-on-one dialogue with these individuals after the event.
Fringe benefits include meeting bankers from different banks and groups, getting a feel for the
culture, and learning a little bit about the job itself.
Action Item 1 – Approach a banker not already talking to a lot of students.
Action Item 2 – Be slightly aggressive and introduce yourself as soon as you can.
Action Item 3 – Ask the banker intelligent questions and focus the conversation on their
experience. Be ready to provide a few follow-up questions after they answer.
Action Item 4 – Stand out from other students by having an interesting story, asking a random but
relevant question, or trying to momentarily divert the conversation away from the job (perhaps about
sports or undergraduate experience). Good examples include “How did you end up in the city you
work in?” and “What do you think of that city?”. These tactics create memorable encounters and
produce reference points to include in a follow-up email, increasing the likelihood that the banker
remembers you.
Insider Insight Networking Event Conversation Tips

 Analysts particularly enjoy talking about college days, so bring these up.
 You are not alone in feeling that these events are awkward; many times bankers feel the same
way. Getting bankers to talk about themselves is usually an easy way out for both parties.
Action Item 5 – Get the banker’s business card and make a clean exit.
Example
“Joyce, I’m going to continue networking with the rest of the people here, do you mind if I get
your business card? Thanks, and again, my name is John Doe. It was a pleasure meeting you.”
Insider Insight Networking Event Strategies

 During networking events, reiterate your name upon leaving the conversation. This will
greatly increase the chances that the banker you spoke with remembers whom you are.
 After walking away, write down a few of the highlights from your conversation on the back
of that person’s business card while they are fresh in your head. These notes will come in
handy when following-up.
Action Item 6 – Repeat items 1-5 until you have either A) met all relevant people at the event or B)
the event ends.
Essential Do’s And Don’ts
DO DO NOT
 Be likeable:  Hog time or linger:
− Bankers want to work with candidates they − For personal meetings and networking
like events, do not linger or waste the
− Do not come off as 1-dimensional; there individual’s time. Recognize when the
should be more to your story than your conversation is becoming stale, and make
love of finance a clean exit
− Always thank the banker for their time
 Dress for the occasion:  Talk about money or hours:
− Wear full suits at formal networking − Unless talking with a close friend
events. Three-piece suits and cuff links
should be avoided at all costs
− If meeting someone for coffee or lunch, as
a general rule, wear what they will be
wearing
 Be confident (but not arrogant):
− You do not know more about the job than
they do
3. Follow-Up
Following-up with contacts after meeting them is an extremely important step in the networking process.
Send a follow-up email several hours later (or the next day) thanking the person for their time and
mention how you hope to stay in contact. If you met the person at a networking event, remind them of
whom you are by mentioning something unique about yourself or that you talked about (reference the
notes you took on the back of their business card). Also, it is good practice to include your resume in
the follow-up email, even if the person did not request it. Below is an example of a follow-up email:
E-Mail Template
Joyce,
It was a pleasure meeting you yesterday afternoon at the [UPenn] networking event. Just to remind
you, I was the sophomore that discussed [how the Eagles would have been better off trading Michael
Vick]. I really appreciate the insight you provided on [Goldman Sachs], and I look forward to
keeping in touch throughout the upcoming recruiting process. As a reference, I have attached a copy
of my resume. Thanks again for your time.
Best,
John
(555) 555-5555
Stick to follow-up emails only; unexpected follow-up phone calls are a “no-no”.
Insider Insight Sending Follow-Up Emails

 Use a generic email template when sending follow-up emails to different banks.
 When emailing members of the same bank, especially those that are fellow Analysts, personalize
the emails and stagger sending them. Analysts often sit in close proximity and sometimes
discuss follow-up emails from students.
 It is not uncommon for careless emails to circulate around Wall Street: be careful! Less is more.
4. Maintain And Exploit The Relationship
Do not forget that the primary purpose for networking is to get an interview and ultimately a job.
Therefore, it is very important to keep in touch with key contacts periodically. As a general rule, reach
out to your contacts every 1-2 months to stay relevant (any more often and you become a nuisance, any
less often and you fall off of their radar). Ask additional intelligent questions or seek advice.
When seeking internships as a freshmen or sophomore (and after establishing worthwhile contacts), it is
important to know how to ask for an interview or internship. For companies without a formal recruiting
process, candidates must make their desire for an internship known. For a detailed explanation of how to
utilize your network to obtain pre-internship internships (including examples), refer to Section (13.3).
When pursuing a junior year investment banking Summer Analyst internship, your network plays a vital
role during the application, interview, and follow-up process. Maintain a running dialogue with your
network of contacts up to the point of submitting your resume. After securing an interview, reach out to
your contacts at that bank ahead of the meeting (to build goodwill). Whether or not you land an
internship, stay in touch with your contacts as they could prove useful in the future. For a detailed
explanation of how to utilize your network to obtain a junior year investment banking Summer Analyst
internship (including examples), refer to Section (14.3).
(12.4) Non-Target Strategy: Going Above And Beyond
Non-Target School
Note: This section is dedicated to non-target student networking strategies.
For non-target students, networking is the most important step towards landing an investment banking
job. As a non-target student, banks will not actively seek you out; it is up to you to get your foot in the
door and convince someone on the inside that you are capable of succeeding on the job. Students at non-
target schools will need to take extra steps to break into the industry.
For this group, alumni connections in the industry, friends and family, and social media will be
particularly useful. As a non-target student, you need to hustle: below are some additional steps you can
take to make your way into the interview process.
Start Early
Coming from a non-target school, you need every advantage possible. Get on investment bankers’ radars
early to emphasize your interest in getting a job. Networking is not done overnight: forming
worthwhile relationships requires significant time and investment on the part of the student. You want to
come across as a friend and not someone looking for a handout.
Attend (Or “Crash”) Nearby School Events
For students enrolled at non-target schools, do everything possible to attend nearby target-school events
put on by that school’s career center or student groups.
When at these events, emphasize to the investment bankers and recruiters that you go to [your non-target
school’s name], a non-target, but you have been coming to events at nearby target schools. The firms
may be surprised to meet someone from a different school, but they will be impressed by the dedication
you are showing by going out of your way to meet them.
Quote
“ During my junior year, I drove 45 minutes once a week to attend an investment banking workshop
at a nearby college. One time, I even drove three hours to attend an investment bank’s information
session. My commitment paid off, and investment bankers would frequently comment on my
dedication. ”
How Do I Find These Events?

1. Go to campus websites, find the relevant student groups (and their respective websites) and
check them periodically – they will typically post upcoming events online. If events are not
posted, email group officers (find their contact information online) and ask if they have an events
schedule.
2. Join business organization mailing lists at local target schools.
3. Call or visit local target-school career centers and pose as a student. Ask about upcoming
events they will be hosting for finance-related companies.
4. Reach out to friends who attend these schools and ask about their recruiting events.
5. Hear from an industry insider who is attending: sometimes events will come up in your
networking email conversations. Bankers may mention that they are attending an event on a
certain date (or you can ask them).
Insider Insight Strategies For Contacting Other Schools

 When reaching out to other schools (or organizations at these schools), use a non-school
related email account (i.e. Gmail, Yahoo!, etc.). Individuals will most likely assume that you
are student at their school and will be much more informative and candid when speaking with
you. If they do not ask, do not tell them that you go to another school.
How Do I Get Into The Events?
Many of these events are closed to students from other schools, but there are ways around this. First
and foremost, request attendance with the organizer. If this does not work, below are several other
strategies:
1. Act as if you belong (just walk in)
2. Tag along with a friend from the school
3. “Forget” your student ID (if asked)
4. Sneak in
5. Borrow a student ID card from a friend
6. Linger outside to meet the firm representatives as they leave (note: some bankers may find
this slightly awkward)
This is where hustle comes into play. Students have even been known to drive several hours every
week during the recruiting season just to attend a 30-minute event.
Reaching Out “Cold Turkey”
If you are not establishing sufficient industry connections, you need to resort to more aggressive
measures. Reach out “cold” to industry insiders to initiate some sort of conversation. Although your “hit
rate” with these people might be low, do not get discouraged: there are A LOT of them.
Below we detail strategies for “cold turkey” networking. Some students may find these approaches
uncomfortable, but it may be a necessary step to obtain a job in investment banking.
Ask To Be Introduced
Gain instant credibility with a new contact by having someone introduce you to them. Although you
might not know the contacts in your investment banking network very well, you may need to ask for a
favor in this regard. Leverage your contacts to introduce you to A) other people within their firm and
B) friends at other firms.
Build credibility before asking your contacts to put you in touch with other companies; it may be best
to build a relationship and meet in-person at least once before making this request. Bankers are
hesitant to spam their friends with undergraduate candidate introductions and will not risk their
reputations on individuals they do not know very well.
LinkedIn
A great way to initiate contact with investment bankers is via LinkedIn. On this network, most
individuals are not very discriminating when it comes to accepting requests to connect. Utilize the
website in the following ways:
1. Connect with (add) industry insiders: you can search by company, industry, city, etc. and find
relevant contacts at banks.
2. Look at the individual’s background to find talking points when making initial contact.
3. Use LinkedIn’s messaging system to reach out to these new connections OR utilize their
name and bank to figure out their work email address (see Appendix B for bank email address
formulas).
4. Once connected to industry insiders, browse their list of connections to find more individuals
to network with. Repeat steps 1-3 with these connections.
Insider Insight Contacting Insiders: Email vs. LinkedIn

 Industry insiders will be more likely to respond to work emails than LinkedIn messages:
whenever possible, initiate contact via work email. If this fails or you are unable to track
down their email address, send a LinkedIn message. Try to move the conversation to work
email as quickly as possible.
Search Online
Utilize search engines to find new banker names and their contact information. Although difficult to
find, search online for names of investment bankers at bulge bracket firms. Put together a list of
middle market and boutique investment banks that you are interested in and search these companies’
websites: many firms list out each employee and often provide contact information on their website.
If you come across the names of investment bankers but are unable to find their contact information,
browse the bank’s website or utilize search engines to find the company’s standard email suffix
(@xxxxxxxx.com). Finding the email prefix will be more difficult.
In Appendix B we list the email address formula for all bulge bracket banks and provide you
with a general rule for email prefixes that you can follow to correctly guess a banker’s email
address.
Cold Email
After employing one of the above strategies to find a “cold contact”, you need to have a well-thought
out plan to make initial contact. It is much more difficult to be taken seriously and establish a
relationship than it is to find a banker’s contact information. Keep the email short so the insider does
not feel burdened reading it. Convey why you are worth their time by bringing up relevant
experience and strong interest in the industry.
Be direct and honest; many investment bankers will appreciate your drive. Mention that you are
trying to expand your network and learn more about the job and specific firms.
E-Mail Template
Wayne,
My name is [Kelly] and I am currently a [junior] at [UC San Diego] studying [Economics] with a
minor in [Accounting]. Through my networking efforts, I came across your contact information
and wanted to reach out to introduce myself. I am very interested in pursuing a career in
investment banking and have been trying to position myself to break into an internship role.
[This past summer I completed a valuation internship with Duff & Phelps which only furthered
my interest in corporate finance]. I would love to learn more about your firm and your experience
there; are you free sometime next week for a quick phone call?
Attached is my resume for your reference. Thank you in advance for your time.
Best,
Kelly
(555) 555-5555
Insider Insight Cold Emailing Considerations

 Cold emailing is a crap shoot. Reach out to a lot of people to increase your chances of
finding someone willing to help you. Some investment bankers will appreciate your
proactive approach and enjoy helping ambitious students. Others will delete your email
immediately.
Cold Call
Investment bankers have mixed feelings regarding cold calls from prospective Analysts. Utilize this
strategy as a last resort. It will be extremely difficult to find bankers’ phone numbers, but you can
come across them online (especially at smaller banks), be tipped off by a friend, or call the bank’s
general office number and make your way past the receptionist.
When calling an investment banker, be prepared to have a 10 minute conversation on the spot (even
though this is unlikely). Introduce yourself and give them a brief background. Mention that you are
extremely interested in investment banking and that you are simply trying to expand your network
and learn more about breaking into the industry. As always, tell the banker that you want to hear
more about their background and their firm. Try to keep the conversation extremely brief and
propose an in-person meeting for coffee (this helps prevent seeming like a nuisance and gives you
time to regroup and ask more thoughtful questions). Ask for their email address to make further
communication efficient.
Let Your Personality Shine
When reaching out to bankers, be personable. Many students that reach out are “robotic” and come
across as generic. As a non-target student, it is especially important that bankers like you as an
individual; be someone that they want to hang out with outside of work. Take the conversation
beyond banking; you need to build a PERSONAL relationship. Discuss outside interests and avoid being
too formal or scripted.
In the end, someone will need to put their name on the line for you. Bankers will be more willing to do
this for students with whom they have a more personal connection.
Chapter 13: Step 6 – Obtain Pre-Internship Internships
The best way to break into investment banking as a full-time Analyst is to obtain a junior year investment
banking Summer Analyst internship (going forward we call this the “junior year Summer Analyst
internship”) and get a full-time offer. It is nearly impossible to obtain this crucial junior year internship
without relevant experience on your resume; you need to complete internships during your freshman and
sophomore years. We call these internships that lead up to your junior year Summer Analyst internship
“pre-internship internships”.
There is no single must-have internship required to break into banking. However, not all internships are
viewed the same. Below we provide insight on what type of internships exist and which internships
insiders prefer and look for.
(13.1) Types Of Internships

Summer Internships
Broadly speaking, these are full-time internships, approximately 8-12 weeks long, and they offer the
closest thing to full-time job experience. Investment banks place a high value on summer internships
because there is a higher probability that you complete meaningful work.
Summer internships can be paid or unpaid, but (in general) they are more likely to be paid than
internships during the school year. Investment banking candidates need at least one meaningful summer
internship before applying for their junior-year Summer Analyst internship (ideal candidates have two).
Insider Insight Sophomore Summer Programs

 Several investment banks offer freshman and sophomore internship and mentorship programs.
These are extremely hard to get but look amazing on a resume. Some firms that offer these
internships include: JPMorgan, Goldman Sachs, Morgan Stanley, Citi, UBS, and BAML.
Part-Time, School Year Internships
As a lower-classman, it is easier to obtain part-time, unpaid internships during the school year than during
the summer. Companies often look to local universities to provide a cheap and qualified workforce to
take care of random tasks. These positions usually will not provide you with much meaningful
experience as it relates to investment banking, but they will act as resume builders. Part-time, school year
internships are NOT substitutes for getting summer internships: they act as a complement.
Non-Target School
Part time internships during the school year are usually very accessible for non-target students and
will make you more competitive when trying to get summer pre-internship internships.
(13.2) How Different Internships Stack Up
Below, we describe various forms of internship opportunities, from best to worst in the eyes of an insider.
High Finance Internship
These internships include positions at an investment bank (IBD or Trading), hedge fund, private
equity firm, or asset manager. Nothing looks better when applying for a junior year Summer Analyst
internship than having already worked in these areas of finance: especially investment banking
internships, as they are directly relevant.
High finance summer positions are not easy to obtain as underclassmen: we recognize that most of you do
not have family connections to help get you the job. Your best chance of securing one of these jobs is by
applying for positions at boutique firms. However, as mentioned above, some bulge bracket banks offer
freshman and sophomore rotational programs.
Insider Insight Unpaid Internship Considerations

 If necessary (and financially feasible), an unpaid internship in investment banking or the buy-side
is always preferable to those below.
General Corporate Finance/Consulting/Accounting
These internships include corporate development, accounting, valuation, and general finance
positions. Positions within this category provide an experience with elements that are directly relatable to
investment banking.
• Examples: PWC Valuation, Duff & Phelps Valuation, Disney Corporate Development, Coca Cola
Financial Planning & Analysis, Deloitte Consulting, E&Y Audit, etc. (here we mention “big
name” firms to give you some ideas, but smaller companies and boutique accounting/consulting
firms are your best bet)
General Financial Services
This category includes internships in wealth management, insurance services, private banking, etc.
Investment bankers know that these jobs are heavily sales-related, especially at the intern level, but they
look good on paper if positioned well. Bankers understand that it is very hard to obtain meaningful work
experience during your freshman and sophomore years. These internships convey passion for finance and
an intern’s role can be embellished.
• Examples: Merrill Lynch Private Client, Northwestern Mutual Financial Network, AXA
Advisors, Smith Barney
Financial Education Programs
These are paid programs that teach participants a variety of financial concepts, with some concentrating
on investment banking in particular. Programs are diverse and include modeling workshops, investment
banking boot camps, and summer extension finance classes, among others. These are not technically
“internships” but are looked upon favorably as they teach candidates highly relevant skills for the job.
• Examples: Swiss Finance Academy, Training the Street, Wall Street Prep, college extension
courses
Other
If you are unable to complete internships or training programs in any of the above-mentioned categories,
try to obtain any general office job (this can include any field: marketing, sales, etc.).
Otherwise, consider doing a study abroad program or some other form of unique experience (such as
volunteering somewhere exotic) that builds a worthwhile story you can present when interviewing.
Traveling or studying during the summer is better than admitting that you could not secure an internship.
These types of experiences are more acceptable during the summer after your freshman year.
Nevertheless, doing NOTHING is the worst thing you can do.
(13.3) How To Get These Internships

Attempt to land positions with bigger firms, but recognize that the highest probability method of securing
a worthwhile internship as a freshman or sophomore is to aim for boutiques and smaller companies.
Non-Target School
Obtaining pre-internship internships is an extremely vital step for non-target students. You are on
more of an even playing field here than when applying for junior year summer internships. Also, pre-
internship internships are a way to distinguish yourself from the competition: if you have several
worthwhile internships before junior year Summer Analyst internship recruiting begins, you have a
much better shot of getting your foot in the door.
Start Small
The first internship that you attempt to get will be the hardest. Start small and work your way up the
hierarchy by seeking out wealth management and financial services positions as your first internship.
After obtaining at least one of these internships, you will be better positioned to obtain internships that
provide a more worthwhile experience for investment banking. Use this as a stepping stone to pursue
general finance and high finance jobs. If you can skip these steps and secure a banking internship without
them, do so (however, this is very unlikely).
Start small in the high finance space by seeking out jobs with small boutique investment banks. These
firms are much more likely to provide internships to lower classmen (although these may be unpaid).
These positions can serve as fall-back options and also open new doors as bankers at these firms
frequently have relationships at larger banks.
Non-Target School
Students from non-target schools in particular should concentrate on internships with smaller firms
that hire underclassmen. These firms tend to not have set hiring policies and do not always solicit
interns through campus career centers.
Below, we outline some good starting points to find pre-internship internship opportunities:
Friends & Family Connections
Having a connection is the best way to get an initial internship. Many companies, especially the major
players, do not actively seek freshman and sophomores for internships because they have several years
before graduation, and there are plenty of upper-classmen with more experience looking for these roles.
Career Center
Seek out internship postings specifically for freshmen and sophomores. You can apply to postings for
juniors, but the likelihood of getting these is low. At a minimum, check for new job postings weekly.
Insider Insight Gaining Actual Interview Experience

 Even if you do not think you want the job, it does not hurt to apply for various internship
opportunities: you may get some “free” interview practice and experience along the way. Real
interview practice is especially valuable to younger students.
Networking
The highest probably method of obtaining an internship as an underclassman is to utilize your network of
finance contacts. Reach out to industry insiders and see if they have positions available for someone in
your current situation. As many pre-internship internships tend to be offered by smaller firms, candidates
must frequently ask employers for a position (versus applying through a school’s career center or going
through a formal recruiting process).
A typical “ask” should:

1. Build credibility by referencing past interactions and strong interest in the firm
2. Gently propose your desire for an internship (the “ask” itself)
3. Leave the door open for alternatives (create an internship, unpaid jobs, mentorships, part-time)
4. Include your resume
5. Propose next steps and alleviate your contact’s responsibility as your gatekeeper with their firm
(offer to speak with someone else at the firm, ask to have your resume forwarded to HR, etc.)
For the best results, build well-established and personal relationships with industry contacts before asking
for favors. An example email is detailed below:
E-Mail Template
Brian,
I appreciate all of the insight you have provided me over the last few months regarding the [wealth
management] industry and [Smith Barney] in particular. As my [sophomore year] summer
approaches, I am beginning to look into various summer internship opportunities in the financial
services field. Knowing you and your firm, I feel that I would be a great fit and would love to
experience first-hand everything that we have discussed. Is your firm offering any internship
opportunities this summer? If so, I would greatly appreciate being considered for an interview. If
not, is there any way I could be considered for some form of internship or job with your company? I
have attached my resume for your reference and am more than happy to speak with anyone else at
your firm regarding any potential opportunities. Thank you again for everything.
Best,
Scott
If their firm does not offer an internship program, offer to work part-time or for free in exchange for some
form of mentorship. If this fails, ask them for references or recommendations on where else to look for
an internship. For a full discussion of networking see Chapter 12.
Online Job Boards
Although not exclusive or specifically designed to hire interns, online job boards can provide positions
not offered through your school. They can uncover internships and companies that you did not know
existed. Some of these websites (i.e. Craigslist.org) will offer very small, one-off (but sometimes highly
relevant and useful) internship opportunities. Some of these are finance specific, and others are general
job boards with robust finance categories. Examples include:
 Careerbuilder.com  Doostang.com  FinancialJobBank.com  Monster.com

 Craigslist.org  eFinancialCareer.com  Fins.com  SimplyHired.com
(13.4) What To Take Away From Your Internships

Pre-internship internships are more than just names on a resume; they are an opportunity to learn relevant
skills, and they increase your human capital and value to future employers. Focus on the below items
during your summer experience to walk away in the best position:
• If the internship entails it, learn relevant finance and accounting concepts as applied on the
job. These will serve as major talking points during future interviews.
• Use Excel and PowerPoint as much as possible.
• Start building organizational and file-management skills.
• Get comfortable in a professional setting.
• Learn how to interact over the phone and via email.
• Understand office dynamics and politics.
• Learn about the finance industry as a whole.
• Seek a return offer to leverage next summer (although many of these firms will not provide an
opportunity to return).
Insider Insight Pre-Internship Internship Takeaways

 One of the most important takeaways from pre-internship internships is establishing worthwhile
relationships with employers so that you can use them as valuable references in the future.
 Keep a list of deals, projects, and tasks that you work on, with brief overviews; this will come in
handy not only during interviews, but also when building your resume.
Remember, these internships serve as stepping stones for skills learned, and also improve how you look
on paper (resume building).
Chapter 14: Step 7 – Prepare For Junior Year
Summer Analyst Interviews
Junior year investment banking Summer Analyst internship interviews are no “walk in the park”; they
entail pressured environments and test technical aptitude. Effective interview preparation is essential;
treat this preparation process as (or more) seriously than you would treat a class. Anyone can
become a master of the investment banking interview process with sufficient amounts of studying and
repetition.
These interviews are designed to test several major areas, including general intelligence, knowledge of
the job, technical aptitude, attitude (candidates often overlook this), and interest in the position.
Technical and non-technical items are equally important and both can be prepared for.
(14.1) Action Item 1 – Talk To Experienced Peers

Find upper-classmen who went through the most recent recruiting cycle and gain as much insight as
possible by talking with them about their experience.
In particular, discuss things such as materials studied, differences between interviews, bank cultures and
reputations, and interview logistics specific to your university. Maintain good relationships with these
individuals as you will undoubtedly reach out to them several times throughout the interview process.
Non-Target School
Peers that have been through the investment banking interview process are very important at non-
target schools: they provide insight on how they broke in from your school. They can tell you whom
to reach out to, let you know which banks are the most receptive, and provide you with a behind-the-
scenes look at the recruiting process. If your school has no direct affiliations with Wall Street,
consider reaching out to friends at other schools to see if they can put you in touch with their peers.
(14.2) Action Item 2 – Understand The Industry And The Job

Candidates can no longer memorize interview questions and answers; the recruiting process has become
too competitive. Bankers know how to spot memorized and coined responses (industry insiders have
seen all of the same how-to guides that you have).
Interviewers want to see that you have a solid understanding of what the job entails and that your decision
to start your career as an Analyst is well thought-out.
Use Part I of this guide as a primer for understanding the industry and job. At a minimum you should:
• Know what an investment banker does and understand the role of the Analyst
• Know a bank’s role in the marketplace
• Maintain a working knowledge of the different financial markets
Convey this knowledge whenever possible. Doing so will impress industry insiders and is a great way to
stand out and get a leg-up on the competition. Your knowledge can be reflected in questions you ask
investment bankers, discussions you have with them, and questions you answer.
Quote
“ My favorite question to ask aspiring undergrads is: ‘Why investment banking?’. Next, I often hear
a coined, memorized response. My favorite follow-up to that is: ‘Okay, can you describe to me what
it is that you think you will be doing day-to-day?’. You would be amazed by the number of people
that cannot answer the second part of that question. ”
- Managing Director, Middle Market Investment Bank
(14.3) Action Item 3 – Continue Networking

Having a good network of contacts becomes ESPECIALLY useful during this time.
A few months ahead of junior year Summer Analyst internship recruiting (late fall/early winter),
concentrate your networking energy specifically with the aim of landing interviews. As interviews
approach, banks put on events designed to screen applicants and promote their banking team. These
information sessions are generally held during fall and early winter on campuses of target schools.
Attend as many events as possible.
Non-Target School
Try to attend information sessions at nearby schools, particularly during fall and winter of your junior
year. When attending, ask how you can be considered for a job with the rest of the applicant pool.
For a detailed discussion regarding these strategies, refer to Section (12.4).
Some banks offer winter receptions which require candidates to apply during the fall. Keep an eye out
for these application deadlines through your school’s career center or reach out to the banks in which you
are interested. Ask if they offer any such programs (use this question as an excuse to reach back out to a
contact and try to set up a one-on-one meeting shortly before internship interviews begin). Winter
receptions are a rare way to visit a bank’s office and meet senior bankers that usually do not attend on-
campus events.
Insider Insight Networking Event Repetition

 You can often meet the same individual two or three times before applying for an internship just
by attending different networking events. The more interaction you have with the same bankers,
the more committed you appear. After seeing you enough times, they will remember you.
At this point, it is vital to re-engage prior contacts at firms to which you plan to apply. Two weeks to
a month before applying for a job, email your contacts asking how to best position yourself to land the
interview. This interaction reinforces your desire to work for the company and intent to apply in the near
future. Not only do you gain valuable insight regarding the firm’s application process, but you also stay
on the front of your contact’s mind. For a detailed description of how to network, see Section (12.3).
E-Mail Template
Sam,
Hope things are treating you well. I am reaching out to let you know that I plan on applying for the
[Summer Analyst position] next month. You have been a great resource thus far, and I was just
curious if you had any insight on how to best position myself to get an interview. After hearing about
your experience at [Goldman Sachs], it sounds like a great fit for me. Thanks again for all your time
and insight, and I look forward to hearing from you.
Sincerely,
John
(14.4) Action Item 4 – Master Your Story (Introduction)

At the beginning of every interview you will be asked a derivation of the following question: “Tell me
about yourself” (or “please walk me through your resume”). The answer to this is your “story”.
The story is arguably the most important part of the interview: it is your first impression, it encompasses
everything that has led you to this point, and it offers you a way to grab the reins and steer the
conversation to your advantage. This is the most “trainable” of all qualitative questions you will come
across; expect to be asked for your story nearly 100% of the time.
Your story should be no more than 2-3 minutes and should come across naturally (not scripted). It
will consist of four parts, detailed below:
1. Background
2. Why Finance?
3. The Road to Investment Banking
4. Why this Interview?
Write down an outline of your story and practice it over and over: it must sound natural!
1. Background
Briefly discuss where you are from, give a sentence about your high school highlights, and say which
university you chose to attend and why.
Example
“I was born and raised in San Jose, CA. I attended Mission San Jose High School where I was the
Senior Class President and played varsity basketball. Going into college applications, I had a strong
interest in business and therefore applied exclusively to schools with undergraduate business
programs. I ended up getting into UPenn, and couldn’t pass up the opportunity to attend Wharton.”
Insider Insight Your Story For Regional Offices

 If you are applying to a regional office, your background is a great way to convey strong roots
and interest in staying in a particular location. Regional offices seek candidates with a long-term
commitment to the city in which they are located. As an example: “I’ve always wanted to be
back in San Francisco given that my family is located here.”
2. Why Finance
Explain what sparked your interest in finance and include specifics; the earlier you found the spark, the
better. Examples include: a class you took, a professor you reached out to, a student group you got
involved in, family and friends, people you have met, exposure to the stock market, and countless others.
Example
“I first became interested in finance (in particular) during my first accounting class freshmen year: we
had a project that required each student to pitch a stock to the class. This was my first real
introduction to the stock market, and I was instantly hooked. Studying financials and different
metrics used when analyzing stocks was intriguing. This process was arguably the most fun I had in
any course up to that point. I found myself wanting to learn more, and I ended up opening my own
brokerage account shortly thereafter.”
3. The Road To Investment Banking
The point of this step is to bridge the gap between your initial interest in finance and decision to apply
for a job in investment banking. What milestones influenced your decision?
• Use this step to walk the interviewer through key highlights in your resume: weave in your
involvement in relevant student groups, leadership activities, and internships.
• Give a chronological answer and clearly describe the progression step-by-step.
• Choose 3-4 major events and show how they connect.
• When describing internships, explain what you learned, what you liked about it, and what led you
to the next experience.
Example
“After that experience, I joined a few finance clubs on campus and continued to take basic accounting
and finance classes. I wanted to gain a more hands-on approach, so I obtained an internship at Merrill
Lynch in their Private Client division. I learned a lot about the markets and handling clients, but the
job was a bit too ‘salesy’ for me. I returned to school, took more advanced finance courses, and
became the Vice President of the Undergraduate Business Group. This allowed me to expand my
network, which I utilized to get an internship at Disney in their Financial Planning and Analysis
department. I learned basic financial modeling and budgeting concepts, but I wanted to dive deeper
than just elementary forecasting. I described my dilemma to some upper classmen, and they
recommended investment banking as a perfect fit for me. I learned more about investment banking
and, after taking a week-long workshop, discovered that I was extremely interested.”
4. Why This Interview
This part of your story should convey why you applied to this bank or group specifically.
• Limit this to a sentence or two.
• Emphasize different people you have met throughout the process, group culture, and specific
products or industries that they cover.
Example
“I spent the fall semester doing research and networking with different investment banks. I became
particularly interested in mergers and acquisitions and the implications of company combinations. I
know that your M&A group has a strong reputation on Wall Street, so I am very interested in working
with your team. Meeting some of your colleagues only solidified my desire to work with your group.
That is how I ended up here today.”
Non-Target School
Your “story” will play a particularly important role in interviews. Non-target students need to focus
on conveying a strong passion for finance and that their experiences have prepared them well for the
job. Emphasize (subtly) the lengths you have gone to in order to break into investment banking.
(14.5) Action Item 5 – Prepare For Qualitative Questions

Approximately one-third to one-half of each interview is qualitative. With these questions, investment
bankers aim to learn more about you: your background, personality, character, ethics, etc.
Understand what types of fit questions there are. Some of the general categories include:
• Academic background
• Commitment to the job
• Cultural fit
• Ethics
• Strengths and weaknesses
• Teamwork
• Understanding of the job
• Why banking
• Work background
Stand out during qualitative questions by conveying a strong understanding of what the job entails.
Understanding Part I of this guide will be extremely helpful.
Non-Target School
There is a high likelihood that you are asked more questions related to “what is banking” to gauge
that you have a thorough understanding of the job.
Preparing for non-technical questions is not as easy as memorizing coined answers. You must think of
your own way to tailor responses and formulate “your story” well. Arm yourself with specific examples
and past experiences that you want to highlight in your responses. Practice your answers by saying them
aloud or by conducting mock interviews with fellow classmates (we dive into these in Section (14.7)).
***SEE CHAPTER 22 FOR A LIST OF THE MOST COMMON AND RELEVANT

QUALITATIVE QUESTIONS AND ANSWERS.***
(14.6) Action Item 6 – Study Technical Questions
Generally, one-half (or more) of each interview is focused on technical questions, especially in earlier
rounds of interviews. These are designed to screen candidates for the technical aspects of the job and will
cover accounting, valuation, and finance concepts.
At the latest, begin studying for these questions over winter break during your junior year. Allocate AT
LEAST one month to study.
Insider Insight Making Time To Study For Interviews

 Some candidates will intentionally take a lighter course load during winter quarter/semester to
give themselves more time to study and prepare for interviews.
Non-Target School
Non-target students will likely be tested more heavily on technical questions compared to students
from target schools; know these cold.
If applicable, study old class materials (such as accounting). Focus on understanding how the
statements interact, different methods of valuation, etc. (helpful, but not very necessary).
For those with more time to prepare, the following books and guides provide in-depth overviews of on-
the-job technical skills. These cover more than you would ever need to know for an interview, but act as
a great primer for technical training related to the job:
• Investment Banking: Valuation, Buyouts, and Mergers and Acquisitions (Rosenbaum and Pearl)
• Vault Career Guide to Investment Banking (Lott)
• The Practitioner’s Guide to Investment Banking, Mergers & Acquisitions, Corporate Finance
(Castillo and McAniff)
Insider Insight Understand Concepts, Not Answers

 Bankers enjoy taking commonly-known interview questions and framing them in a different way
to see if you understand the concept, not just the answer.
***SEE CHAPTER 23 FOR A LIST OF THE MOST COMMON AND RELEVANT TECHNICAL
QUESTIONS AND ANSWERS.***
(14.7) Action Item 7 – Conduct Mock Interviews

“Mock interviews” are practice interviews (often between peers or with the career center) designed to
imitate the real thing; they provide a taste of what real interviews are like and give candidates the
opportunity to gain feedback and correct any interview shortfalls.
It is essential that you practice interviewing: your first interview experience should not be with an actual
job on the line.
• Conduct as many mock interviews as possible (mastering the interview becomes easier with
repetition).
• Start practicing at least a few weeks before internship interviews begin.
• Ideally, conduct mock interviews with students that have already been through the recruiting
process (these people will know what to ask and what to look for when interviewing you).
• Alternate among friends also going through recruiting, and take advantage of mock interviews
through your school’s career center.
Insider Insight Mock Interview Strategy

 Often times you can check out the actual interview rooms in the career center to conduct mock
interviews in: this helps get you “into the zone”.
What To Focus On
• Content: your story, why you want the job, fit questions, technical questions, and questions for
the interviewer
• Body language: eye contact, firm handshake, sit upright, no fidgeting
• Confidence: voice does not trail off, assertive attitude
• Tone of voice: smooth, proper volume, enthusiasm
• No “likes” or “ums”
Conduct good mock interviews by recreating a professional setting (attire, location, tone):
• Ask the person to tell their story
• Ask them a few qualitative questions
• Ask them a few technical questions
• Leave a minute at the end for the interviewee to ask the interviewer some questions
• Keep the exercise under 30 minutes
• Spend 5-10 minutes after the interview giving the other person feedback
(14.8) Action Item 8 – Research The Banks

It is important to walk into each interview with an arsenal of bank-specific information. Investment
bankers will want to see that you are interested in their specific bank and that you have been on top of
recent bank developments.
A day or two before your interview, research and memorize the following:
• Major news associated with the bank
• Large deals the bank recently closed
• Stock price, if public
• Key executives (mainly CEO)
• Groups and industry offerings (especially if regional)
• Bank reputation
(14.9) Interview Essentials

There are a few things that every interviewee needs to be prepared for. Below we dive into must-knows
and some essential do’s and don’ts related to the interview process.
Back Pocket Items
Going into any interview, be prepared with the following:
• Current market prices: Dow Jones, S&P 500, Nasdaq.
Insider Insight Quoting Stock Prices

 When quoting stock or index prices during interviews, do not give exact prices. Instead, give a
small range so that it does not seem memorized from that morning. Bankers ask this question to
gauge whether or not you follow the markets.
• Be able to explain the financial crisis and other current events. A detailed explanation can be
found in Appendix C.
• Stock to pitch: a very common question from interviewers that is used to truly see if you follow
the markets or not. You need to know things like the current stock price, trading multiples (i.e.
P/E), and the company’s relative positioning to competitors, growth prospects, and major risks.
This is discussed more in-depth in Chapter 22.
• A joke: some interviewers try to catch people off-guard with this. Make sure yours is appropriate.
• A recent book that you have read (non-finance related).
Words of Wisdom
• You only get one internship recruiting season, so do not procrastinate.
• Avoid getting too personal during the interview. It is important to have memorable anecdotes,
but do not bring up any sad, traumatic, or uncomfortable experiences. The interview is a
professional environment and you should act accordingly.
• Understand everything on your resume. Anything on your resume is fair game for the
interviewer: if you put down a specific deal, job, club, etc., be ready to discuss it in detail.
• Focus on the job you are currently interviewing for. When discussing why you want the
position, do not go into too much detail regarding exit opportunities (make it seem like your
desire to do banking is well-thought out and that banking is not merely a means to an end).
• Prepare 3-4 good questions to end the interview on a strong note. Asking boring or dumb
questions leaves a bad taste in an interviewer’s mouth. These questions are an opportunity to not
only show deep insight and understanding of the industry, but also gain valuable knowledge.
Convey that you have done your homework and that this is a serious decision you are making.
For a detailed list of questions to ask after an interview, see Appendix A.
• When interacting with bankers and recruiters, always have a firm handshake and smile.
Chapter 15: Step 8 – Obtain Your Junior Year
Summer Analyst Internship
Steps 1-7 have culminated to this point. You have excelled at school, gotten involved on campus, met the
right people, obtained relevant work experience, perfected your resume, and prepared for interviews.
Now it is time to execute and land a Summer Analyst position.
In this chapter we break down each step of the internship recruiting process and provide insight on what
you can expect during each round of interviews.
(15.1) Action Item 1 – Understand The Internship’s Importance

It is important that you understand the significance of the junior year Summer Analyst internship before
you begin recruiting.
Internships Lead To Full-Time Jobs
Investment banks hire the majority of their full-time Analysts out of the summer internship program. If it
can be avoided, banks do not want to go back to colleges in the fall for full-time recruiting; they aim to
fill 100% of their full-time Analyst class with successful interns. For this reason, banks put the majority
of their yearly recruiting resources into summer intern recruiting. It is much harder to get a full-time job
without a summer internship.
Non-Target School
Investment banks (especially larger ones) rarely give full-time Analyst offers to non-target students
that lack junior year Summer Analyst internships. Getting a summer internship (even at a small
boutique investment bank) is a must.
Find The Right Fit
The summer internship is a way for the bank to test you as an Analyst and for you to test out the bank.
Think of this as a 10-week trial on the part of both sides: does the bank think you fit in and can you
succeed as a full-time Analyst? Do you like the bank culture and Analyst experience?
Many summer internships (especially at middle market and bulge bracket investment banks) are
“generalist programs”. This means that interns are not assigned to a specific product or coverage group,
but instead work with bankers from various teams. Summer Analysts can expect to work within various
industries and transaction types. After receiving a full-time offer, a group selection process occurs
whereby interns are matched with a specific group that they will join as a full-time Analyst. Analysts that
do not have a summer internship do not have the luxury of experiencing different groups and finding a
good fit.
Can You Handle Investment Banking?
Beyond testing out a specific bank and group, the internship is also a way to test if you can handle the
industry. A large number of interns quickly realize that the stress of the job and the long hours are not for
them. It is better to learn this heading into your last year of college rather than after graduation.
(15.2) Action Item 2 – Stay On Top Of The Recruiting Cycle
Understanding and monitoring the recruiting cycle is essential to knowing when to study, when to
network, and which firms are recruiting (and when). The main investment banking Summer Analyst
interview cycle runs from January to April of your junior year; for the purposes of this guide we call this
the “recruiting cycle”.
Bulge bracket banks are usually the first to start interviewing; some start as early as the first week of
January, depending on which school you attend. Smaller banks have a wider recruiting window and may
hire right up until (or even during) the summer, with the smallest firms hiring on an as-needed basis.
Pay attention to which banks and offices will be recruiting at your school, as well as resume drop
deadlines. Expect the process to conflict with classes and exams, and plan accordingly. DO NOT miss
resume deadlines: if you fail to apply on time, you are out of luck. Discovering which banks are
recruiting at your school also allows you to determine which banks are NOT coming to campus (you need
to contact these independently); reach out to your contacts at these firms to find out how you can be
included in their recruiting process.
(15.3) Action Item 3 – Apply

Target Schools
Check your school’s career center website daily for new or existing resume drop deadlines and submit
your resume as early as possible. Get it out of the way because if you miss the deadline, you are not
going to be considered for the job.
Often times, regional and international offices will not recruit on your campus, even at target schools.
Contact HR at the different banks, and find out how to apply to these positions. Recognize that the
recruiting cycle and/or timing may be different for these internships. If you have met contacts from
different regions, email them to find out how to best pursue an opportunity with their office.
Non-Target Schools
Non-Target School
Note: This section is dedicated to non-target student internship application strategies.
Non-target students do not have a set application process to follow (i.e. career center resume drop) and
instead must rely on their network of industry insiders to apply for interviews. Your ideal means of
applying is by sending your resume to an investment banker that you have been in contact with. The
banker then hopefully forwards it along and even “goes to bat for you” by telling colleagues that you are
worth an interview. Recognize that these bankers need to go OUT OF THEIR WAY to give you a chance
to interview and that their reputation is on the line. An example email is provided below:
E-Mail Template
Michael,
Hope things are treating you well at [Barclays] and that you had a great holiday. I am reaching out to
inquire about your Summer Analyst recruiting process. As we have discussed, I am very interested
starting my career in investment banking (especially with your firm). I recognize that my process
will be different coming from a non-core school, but I would like to apply. What steps can I take to
be considered for this year’s recruiting process? Is there someone else at the bank or in HR that I
should reach out to? Attached is my resume for consideration. Thank you so much for all of the
help, and I look forward to hearing back regarding next steps.
Best,
Sarah
Ideally, after sending an email like the one above, your contact will simply forward your resume along
with their recommendation. If you are told to reach out to someone else, do so, and copy your contact on
the email.
Recommendations from senior bankers are regarded highly and will instantly put a candidate on
the bank’s radar.
Quote
“ If a Senior Vice President or Managing Director contacts us with a strong candidate
recommendation, we usually give that individual a phone screen (and in some cases a first round
interview). If they blow us away, we lump these candidates into the rest of the recruiting process. ”
- Vice President of Human Resources, Bulge Bracket Investment Bank
Without a recommendation, your resume will usually be grouped with other non-target students
into a “side folder”. Under normal circumstances, this folder is not tapped unless an investment
bank does not secure all of the candidates it desires from target school recruiting.
HR is a useful resource for the application process, but DO NOT RELY ON HR ALONE. As a
formality, apply on the bank’s website so HR knows you are interested in an internship (even though this
process is often futile).
Timing is extremely important. Reach out too early, and you will be forgotten by the time the bank starts
recruiting; reach out too late, and the bank will have already filled its intern class. Therefore, reach out to
your network no later than the first week of January, and make your intentions to apply clear: do not be
afraid to come across as very forward. Ask what the process is for someone in your situation; is there a
deadline date or can you send your resume across now for consideration in this year’s recruiting cycle?
Always stay one step ahead of target-school recruiting: there is a chance that the banks fill all of
their spots before giving you the opportunity to interview.
(15.4) Action Item 4 – Network

At this point, you will have attended recruiting-specific networking events (information sessions, winter
receptions, etc.) and re-engaged your insider contacts (letting them know that you plan to apply for the
job).
After applying for internships, there are a few areas where networking can come into play. Reach out to
your network of contacts:
1. After Securing An Interview
Upon obtaining a first round interview, reach out to your contact at that bank to update them on your
situation. Reiterate your enthusiasm for their firm and convey how excited you are to have this
opportunity. Let them know that you look forward to meeting their team in person. Employ this form of
networking to reinforce your commitment and stay on the banker’s radar.
E-Mail Template
Jared,
I am reaching out to let you know that I was selected for a first round interview with your firm. As
we have discussed before, [JP Morgan] is my top choice and I am extremely excited for this
opportunity. I look forward to meeting with your colleagues next week. Thanks again for all of the
insights you have provided me over the last few months.
Best,
Alex
2. When Trying To Leverage Other Interviews
If you have received one or more first round interviews with other firms, leverage them to help you land
an interview with other desirable banks. Use this strategy for the following situations:
A) The bank you are reaching out to has not communicated interview acceptances yet (sometimes
resume deadlines are staggered).
B) You failed to receive a first round interview with the bank you are reaching out to but would still
like to be considered for an interview (i.e. if five bulge bracket banks accept you for first round
interviews, you can ask a sixth bank to reconsider your application).
When reaching out, emphasize that other firms have showed interest in you. The more desirable you
seem, the more likely it is that these banks will interview you. Bankers will appreciate the transparency
and may appreciate your perseverance.
3. To Stay On A Firm’s Radar After Failing To Secure An Interview
Keep in touch with investment bankers whether or not you are able to land an interview with their firm.
These contacts may come in handy in the future (full-time Analyst recruiting). Emphasize that you
appreciate their help and that you would love to stay in touch regarding future opportunities with their
firm.
Non-Target School
After the application process, networking for non-target students is very similar to that of target
students, with a few major differences.
Non-target students need to be more proactive when talking with their contacts at different investment
banks. It is much easier for non-target resumes to “slip through the cracks” as they are not submitted
through a school website. Mitigate this risk by being in constant contact with investment bankers and
HR, especially after submitting a resume. Follow-up every 3-5 days to ensure that your resume is not
forgotten.
Leveraging other interviews (#2 above) is extremely important for non-target students. Banks face
larger risks when hiring non-target students as their academic backgrounds and experiences are less
tested than students from target schools. Also, individual bankers that “go to bat” for these students
face reputational risk. Non-target students with interviews at other banks have proven themselves
worthy of consideration for an internship. After having passed one (or more) bank’s “test”, non-
target students are more likely to be given an opportunity to interview with the bank they are reaching
out to.
In some cases, larger investment banks may not have the capacity to interview non-target students
(competition is too high, fewer internship openings, etc.). Stay on good terms with members within
your network, even after being denied an interview; these contacts can sometimes refer you to their
network at other (smaller) banks.
(15.5) Action Item 5 – Continue Preparing For Your Interview

For a detailed description of how to prepare for interviews, see Chapter 14.
Remember, you should continue studying up until the day of your interviews.
(15.6) Action Item 6 – Dominate Your Interviews

If all goes as planned, you have now made it to the next level: the interview. Below we provide an inside
look at the interview process itself. We cover general tips and strategies and dive into each of the
different types of interviews you will come across as you advance through the process. This section
provides a rare view of what investment bankers see and look for from the other side of the table.
General Interview Tips & Strategies

• When to Show Up: Do not be too early or late. Wait outside or in a parking lot if you get to an
interview more than 15 minutes early.
• What to bring: Bring at least five copies of your resume, a portfolio, a notepad, a pencil, and a
calculator.
• What to wear: Wear a full suit and tie, keep it conservative. Dark blue, dark grey, and black are
all fine suit colors. Wear a blue or red tie with a blue or white shirt.
• Last minute check: Check where the markets are on your cell phone.
• Get in the zone: Get into a “chatty” mindset by talking with people before the interview. Make
sure that you are wide awake and your mind is clear.
Quote
“ I would talk to people on the phone or would talk to people in the waiting room to get myself in a
talkative mood before any interview. This really helped calm my nerves and improved my interview
performance. ”
Phone Screen
Some banks will call candidates before filling their first round interview slots: this is a “phone screen”.
The bankers may email you to warn you of the call, while others will call out of the blue (often catching
students off guard).
Insider Insight Screening Calls During Recruiting

 There are different theories about answering calls from unknown numbers during recruiting
season. To gain the upper hand and be better prepared, let calls from unknown numbers go to
voicemail. When employing these tactics, listen to the message immediately and put yourself in
a position to call back as soon as possible. Note, by not answering the call you run the risk of the
bank passing you up, especially if you barely made their cut. Some bankers get frustrated when
students knowingly screen their calls.
Non-Target School
Non-target candidates and those applying out of their own region can expect a phone screen before
any in-person interviews. The banks want to screen and pre-qualify students before spending money
to fly them out to the office.
More formal phone screens can resemble first round interviews (described below) in terms of questions
asked and interview structure. During phone screens, you have the rare advantage of having materials in
front of you; have these handy but do not rely on them. Make sure the interviewer cannot hear you
flipping pages!
What To Expect
• A typical phone screen lasts for 15-30 minutes, with 1-2 bankers on the other line asking you
some brief, simple questions to test your competency.
• The screen will be mostly qualitative, with the bankers trying to gauge how you sound over
the phone before narrowing down the applicant pool for in-person interviews.
• As long as you can explain everything on your resume, tell your story well, and understand
some of the basic valuation questions, you will be fine.
First Round Interview (On-Campus)
For target schools, candidates will be notified online regarding first round interview selections. You will
be accepted, denied, or chosen as an alternate (usually 1-2 slots are reserved in case accepted students
drop out).
After being selected for a first round interview, you must pick your time slot. Depending on your
school, investment banks will have between 14 and 60 slots for first round interviews on each campus in
30 minute increments (most schools have ~15-20 first round interview slots per bank). The selection
date and time will be communicated in the original job posting; pick a time slot at the instant they become
available. When picking a time slot, we recommend second or third in the morning or first or second
after lunch. Interviewer attention is the strongest during these times.
Approximately 2-3 out of every 20 first round interview candidates will make it to second round
interviews.
Insider Insight Choosing Interview Time Slots
 Choosing an interview time slot is often very competitive. If your career center has a set time to
choose slots, consider waiting at your computer until that exact moment. Many candidates
employ this same tactic; therefore, even this does not guarantee that you will get your desired
interview time.
What To Expect
• The interview will last a total of 30 minutes.
• Arrive 15 minutes early to the career center lobby. Other candidates will be sitting there
waiting to be called to a back room for the same interview or other interviews (often times,
different banks recruit on the same day).
• A banker will walk out, call your name, and introduce themselves. The next 30 seconds will
most likely be awkward for both parties as you try to make small talk while walking back to
the interview room.
Insider Insight Making Interview Small Talk

 Ask interviewers how their day is going so far; then talk about interviews, the fact that
they are not in the office, how you missed class for this, etc.
 If your interview is right before lunch, try asking, “Do you need any
recommendations about where to eat?” If your interview is immediately after lunch,
a good icebreaker is, “Where did you guys go for lunch? Hopefully someone directed
you somewhere good.”
• When you enter the interview room, there will usually be two bankers on the other side of the
table. They will briefly introduce themselves and their backgrounds; then they turn it over to
you.
• The first round interview generally consists of four parts:
1. Your story with some minor follow-up questions about your resume
2. Qualitative questions
3. Technical questions
4. Questions for the interviewer
• Steps 2 & 3 vary by bank, both in breadth and order. Some banks like to spend the entire first
round interview grilling candidates on technical questions, but most take a more balanced
approach.
Insider Insight Sell-Mode After First Round Interviews

 Sometimes, you may notice at the end of an interview (especially when you are asking
questions) that bankers go into “sell mode” and promote their bank. This is a good
sign that your interview went well and that you will likely get past the first round.
Insider’s Perspective
Below, we briefly discuss the first round interview process as experienced by a banker on the other
side of the table (what the day is like for them, what is going through their mind, etc.):
• Bankers that are interviewing you are excited to be out of the office but at the same time have
the lingering stress of work piling up.
• For Analysts, this is finally their first time to sit on the other side of the table. Do not be
startled if they are a bit harsher than others; this might be their first time as an interviewer.
• This is often a reminiscent time for interviewers as they remember going through the process
and college days, in general.
• The mood is typically very serious during the interview. However, between interviews the
bankers often joke around (remember that these are normal people).
• The interview process becomes very monotonous for the bankers because they ask the same
questions and hear similar responses all day. Breaking this monotony is a way to stand out.
You can do so by having an energetic attitude (instead of nervousness) as well as telling
interesting stories regarding your experience.
• Different levels of bankers will be impressed by different things. For example, Analysts are
more likely impressed if you answer a particularly difficult technical question correctly; Vice
Presidents may be impressed if you demonstrate the capability to be a hard worker.
• A LOT less time is spent assessing you than you likely realize.
Quote
“ I interviewed four candidates with one other guy and we decided on a top two and
bottom two after a 20 minute discussion. ”
• A quick way to get dinged is by lacking confidence (shaky answers), being overly animated,
or speaking softly. Interviewers only see you for 30 minutes and have already pre-judged
you somewhat due to your resume: confident and crisp attitudes are always noticed.
Insider Insight Strategies Employed By Interviewers

 Interviewers have different strategies for trying to catch candidates off guard. Some
will take a “bad cop” approach by cutting you off and grilling you, while others will
try to continue asking more and more detailed follow-up questions until you do not
know how to answer. Do not be alarmed if you fail to answer some of their questions;
these bankers are most concerned with testing your logic under pressure. Other
bankers will take the opposite approach and act friendly and casual with candidates.
No matter how they come across, maintain professionalism.
After The Interview

• Review how you did.
• Immediately write down all the questions you can remember; there is a good chance you will
hear similar ones in other interviews.
• Note any major slip ups so that you can address them before your next interview.
• Send a follow-up email that night or the next morning (see Section (15.7) below).
Non-Target
You generally will not have formal first round interviews as a non-target student. First
round interviews will typically be held over the phone and will be just as thorough as those
held in-person. Prepare similarly and expect the same format for these first round phone
interviews as the in-person interviews detailed above.
Second Round Interview
Making it past the first round interview is an excellent accomplishment. At this point, you have made it
past a pool of hundreds of resumes and are among the ~10-15% who were asked to come back after first
round interviews.
Acceptance to the second round interview is typically communicated over the phone. Expect to hear back
within 24-72 hours of your first round interview, but note that some firms call that same night. Smaller
banks often take longer to get back to you and usually communicate this fact at the end of the first round
interview. If you do not get a second round interview, expect an email a few days to a week later.
Insider Insight Scheduling Second Round Interviews at Smaller Banks

 Boutique investment banks and smaller middle market firms often have slower hiring processes;
do not get discouraged if you do not hear back from them quickly. Sometimes 1-2 weeks can
pass before you schedule a final round interview.
After the first round interview, the process moves away from campus. Your career center will not be
involved and interviews will be conducted at the bank’s offices.
• Second round interviews are often final round interviews (often referred to as “super days”).
• Super days at larger New York-based banks most often fall on a Saturday and each consist of
approximately 20 candidates. This group of students is made up of individuals from a handful of
schools.
• Super days can last from 2-5 hours, and banks often have some form of mixer, dinner, or social
event the night before (or of) the super day with all of the interview candidates.
Insider Insight Interview Meals & Social Events

 Although the atmosphere will be more relaxed during a final round lunch or dinner, THIS IS
STILL PART OF YOUR INTERVIEW! Do not get too comfortable. Let your personality show
but maintain a level of professionalism.
• Investment banks (especially New York-based bulge bracket offices) hold multiple super days
spanning several weeks (or more).
• Because second round interviews are off campus and are time consuming, there is a high
likelihood that you will need to miss class. School conflicts often arise, so talk to professors
about missing classes or tests; final round interviews should ABSOLUTELY take priority
over classes. Sometimes the firms will work around your schedule, especially if you have a test
or final exam, but do not push this. Regardless, class needs to take a back seat to your interviews;
one of the main purposes of attending school is to land a job.
What To Expect
Second round interviews vary greatly by region and bank. Here we will walk you through a “typical”
set of second round interviews:
• Arrive at the office building 15 minutes early. You will likely clear security and be escorted
to the firm lobby.
• A representative from HR or a banker will greet you and take you to a conference room.
• The number of interviews varies; you should expect to have a minimum of three interviews of
30-45 minutes each. Sometimes super days can last up to five hours.
• Whereas first round interviews are usually conducted by junior bankers (Analysts and
Associates), during the second round interview you will meet with bankers of all levels. It is
not uncommon for a VP or MD to sit down with you, especially in smaller or regional offices.
• Technical questions vary from basic (similar to first round) to more advanced. Bankers want
to push your knowledge limit as this is the final test before they give you an internship offer.
The technical questions tend to be more case-study based in second round interviews (i.e.
questions that require pencil and paper), and sometimes an entire interview can be based on
one example.
• Each ~30 minute interview may vary in its mix of technical and qualitative questions: a single
interview may be half technical half qualitative, mostly technical, or mostly qualitative.
• At the end of each interview, be prepared to ask at least two detailed and insightful questions
of your interviewer(s). Since these are final round interviews, it is okay to ask questions that
make the bankers sell the bank to you. For a list of questions to ask your interviewer, refer to
Appendix A.
• At some banks, once the interviews are complete, candidates are walked around the office to
meet bankers at their desks. This can be rather awkward because you will have only ~30
seconds to talk with each individual. Be confident and discuss your background/where you
are from; it will be difficult to remember names but do your best.
Insider Insight Interviewing With Senior Bankers

 Interviews with senior bankers are usually qualitative and involve very few technical
questions. They are more concerned with your attitude, your fit with the office, and
your motives. These bankers are more disconnected from the technical aspects of the
job and leave technical questions to Vice Presidents and junior bankers. When being
interviewed by senior bankers, emphasize your personality and exhibit strong,
confident communication skills.
Insider’s Perspective
• Even though recruiting is an important process, deals take precedence for bankers. It is not
uncommon for some internal interview schedule shuffling to occur last minute with one
banker filling in for another.
• Some bankers like to play “good cop, bad cop”. One interviewer is very cordial with the
candidate while the next interviewer grills the interviewee (keeping them on their heels).
• A major focus of final round interviews is testing your level of knowledge. Bankers will push
your limits with questions that you probably do not know how to answer. It is okay to say “I
don’t know” at a certain point; bankers want to see that you can take what you have learned
previously and apply it to questions you do not know how to answer.
Insider Insight Thinking Aloud During Interviews

 If you do not know an answer to an interview question (and you have said so), do not
be afraid to try and “think aloud”. This shows the interviewer that, although you
might not know the actual answer, you are still able to use common sense to get you
close. If you show that you are willing to attempt an answer, interviewers will often
help you along the way.
• After conducting interviews, bankers discuss whether or not to secure a candidate

immediately (giving them an offer that day) or risk losing them to another bank.
• Recognize that most of the 2nd year Analysts that interview you will never even work with you.
By the time you start your internship, those Analysts will have completed their two-year
program. Keep this in mind when evaluating your potential future coworkers.
• Similarly to first round interviews, surprisingly little time is spent deliberating on candidates.
You are sized-up in a holistic manner, and therefore, how your carry yourself is important.
Non-Target
Second round interviews will be the same for target and non-target students. Non-target
candidates will either be lumped into super days with other non-target students or will be
weaved into the target-student final round process. After completing a set of final round
interviews, expect to speak with a few senior bankers. Since you come from a non-
traditional background, the team will require a final “okay” from more senior individuals
before extending you an offer.
Juggling Interviews
It is not frowned upon to discuss having other interviews: it makes you look more desirable. Do not be
afraid to tell banks that you need to work around other interviews if you have conflicting schedules. If
anything, it may make them want to give you an offer sooner (if they like you). When scheduling
conflicts arise, final round interviews should take precedence over first round interviews.
(15.7) Action Item 7 – Follow-up

After each round of interviews, send a follow-up email to every individual that interviewed you. Keep
these simple, and personalize the emails when possible. The email should be a simple thank you for
being considered for the job and for the interviewer to have taken time out of their busy schedule to meet
with you. Send follow-up emails within 24 hours, but no earlier than the evening of the interview. An
example follow-up email is below:
E-Mail Template
Steven,
It was a pleasure meeting you this morning. Thank you very much for considering me for a position
with your firm. Meeting you and hearing more about the firm only reinforces my belief that
[Goldman Sachs] would be a great fit. I look forward to staying in touch regarding next steps.
Best,
Mark
After second round interviews, mention firm culture in follow-up emails, and emphasize the fact that you
have now met enough people to be certain that you are a good fit at the bank.
Insider Insight Sending Thank You Emails

 When sending follow-up emails, do not sound desperate, and keep the email very short. This act
is more of a formality than anything.
 Bankers do not want to receive thank you emails while interviewing other candidates later in the
day. Do not be over-eager to send a thank you email.
(15.8) Action Item 8 – Choose An Offer
At this point, ideally all of your hard work has paid off and you will receive a summer internship offer (or
even better, multiple offers). Offers are normally communicated by HR or one of the bankers the night of
your final round or within a few days (but sometimes this can take up to a week). Some firms tell you on
the spot (at the end of your super day).
Exploding Offers
When communicating offers (due to high competition for the job), banks often give some form of an
“exploding offer” to candidates that they like. An exploding offer is an informal offer that “explodes”
(terminates) if not accepted immediately or within a very short time frame. Banks justify exploding
offers due to the highly competitive landscape: they do not want to risk losing other qualified students to
the competition while someone sits around on an offer. If you are not willing to commit, they will find
someone else who is, and they aim to do this before that person gets acquired by another firm.
Insider Insight Recruiting Competition Between Investment Banks

 Investment bankers are competitive and this is reflected in the recruiting process. Each bank is
recruiting from the same pool of students, so banks will usually try to pre-empt competitors and
secure the best candidates first. Some firms will be more aggressive than others and cultures are
often reflected in different recruiting tactics.
Exploding offers are somewhat faux pas. They are commonly “not allowed” (or at the least are frowned
upon) by universities and even bank HR departments. To get around this, firms use carefully worded
phrases and scenarios as to not give an offer that “officially” explodes.
Let us examine a few exploding offer scenarios:
Example
“Everyone you met today really liked you, and we feel you would be a great fit for the firm.
Unfortunately, things are very competitive this year and we only have a limited number of intern
spots. If we gave you on offer right now, what would you say?”
The answer is ALWAYS YES. Although you did not technically receive an offer in the above situation,
once you say yes you will likely hear “then consider this your offer”. If you say “no” or show
uncertainty, the bank might never give you the offer. GET THE OFFER FIRST, DEAL WITH SUBTLE
CONSEQUENCES LATER.
Example
“Congratulations, we have decided to extend you an offer for this summer. As you know, it is a very
competitive process this year. If you want to tell us your answer right now, that is great. Also feel
free to think it over this weekend if you need to speak with your family or anyone else. But, we
really need your final verbal answer by Monday morning (three days later). Now, if you don’t let us
know on Monday, it doesn’t mean that you are not still a candidate for this summer. However, in this
scenario we can no longer guarantee your spot in our group. We are interviewing [Wharton] kids on
Monday afternoon and need to fill our summer class. If you do not let us know Monday, we can
touch base after interviewing other schools, but we highly recommend you make up your mind before
then.”
This scenario is a nice way of saying “let us know by Monday or we will give your spot away”. Even if
this is an empty threat and the bank is just trying to incite a quick answer, DO NOT RISK IT. If you have
more than one offer, decide by Monday. If you do not have another offer yet and are still interviewing,
ACCEPT.
Worst case scenario (after accepting an offer), you can change your mind and accept an offer at another
bank. This may require you to burn bridges. Although you should try to avoid this, it is not uncommon.
Choosing an offer is a big decision, so it is okay to be a bit selfish.
Insider Insight Reneging On An Offer

 Note, some campuses career centers have policies that penalize students engaged in wrongful
recruiting practices (such as reneging on an offer). These repercussions are usually minor, but
know that they do exist.
Shopping Your Offer
After receiving an offer (or offers), some candidates will attempt to use them to their advantage and seek
out an internship offer at another bank. This process of reaching out to other firms is called “shopping”
the offer. Other investment banks will likely want (or at least want an opportunity) to meet and interview
you. Having one offer can open many doors: it acts as a stamp of approval and will now follow you
through the rest of your process. If you passed the test at one bank, others may find you more likely to
pass theirs as well.
Non-Target School
Receiving an offer as a non-target student is especially validating. Whether it is from a boutique,
middle market, or bulge bracket investment bank, leverage your offer to “shop up the ladder”. You
may now get looks at investment banks that would not have previously considered you.
Upon receiving an offer, IMMEDIATELY contact banks that you are more interested in and update them
with your current situation. Explain your desire to interview with and work at their firm, and ask how
you can be considered for a job. Even if they have not started recruiting or did not give you a second
round interview, you are now more desirable and may warrant special circumstances. If the bank likes
you enough, you may jump the recruiting process and get to interview with them before anyone else.
Choosing Your Offer
If you have multiple offers, weigh the following:

• What city you want to work in
• Bank and/or group reputation
• How well you get along with the bankers (you should have met dozens of people by this point)
• Work-life balance
• Summer-to-full-time conversion
• Compensation
Insider Insight Considerations When Choosing An Internship Offer
 When weighing offers, consider the probability of getting a full-time offer at the end of your
internship. Although rare, some banks are known for giving out more internships than planned
full-time offers. Candidates are forced into a “survival of the fittest” environment where fellow
interns are direct competitors.
 A few banks pay interns by the hour, allowing Summer Analysts to earn tens of thousands of
dollars in just one summer. Joining for this reason, though alluring, is very short-sighted.
Once you receive an offer and have signed the dotted line, go out with some friends. Congrats! You have
passed one of the most difficult hurdles in the process of becoming an investment banker!
(15.9) So You Didn’t Get An Investment Banking Internship

If you did not get an investment banking summer internship offer, there is no time to feel sorry for
yourself. Remember, the end goal is to land a full-time job in investment banking. Although a junior
internship increases your odds of breaking into the industry, there are other ways in. In this section, we
concentrate on what to do next if you did not get an internship: we detail what your options are and help
you formulate an action plan.
Assess Why
First and foremost (while the interview process is fresh on your mind) assess why you did not get an
investment banking summer internship. Pinpoint which shortcomings apply to your situation.
Common shortcomings include:

1. Poor resume – was not finance focused, poorly formatted, did not sell yourself or experience
well enough.
2. GPA and educational background – low GPA, non-relevant major (need to take recommended
classes in finance and accounting).
3. Lack of work experience – not enough finance or finance-related internships.
4. Poor networking – did not make the right connections, did not keep in touch or follow-up, did
not network well enough to get your foot in the door.
5. Interview performance – did not sell your story well, underprepared for technical and
qualitative questions, did not carry yourself well (nervous, unprofessional, etc.).
To help assess why, you should ask yourself the following two questions:
1. Did you get any first round interviews?

If your answer is “no” or “limited”, then your problem is likely one (or a mix) of shortcomings 1-4.
2. How often did you make it to second round interviews?

If your answer is “never” or “rarely”, then your problem likely lies in shortcoming 5.
Fix It
To better position yourself for future investment banking interviews, address the issues that prevented you
from securing an internship. After discovering what went wrong, fix the problem by employing the
following advice:
1. Poor Resume
Read Chapter 11 for a detailed description regarding how to create the perfect finance resume.
Concentrate on formatting, “financing it up”, and embellishing where applicable.
***For tailored resume review, please consider iBanking Insider’s resume review services at
www.ibankinginsider.com/resume. Our team of professional insiders will help you hand craft the
perfect investment banking resume.***
2. GPA And Educational Background
It is unlikely that you will be able to make any significant changes to your GPA or major by this
point, but consider adding a minor or taking outside finance courses to beef up your educational
background. If you are on the quarter system, you can sign up to take finance and accounting classes
during your spring quarter (before any summer internship would begin). Leverage this fact in
upcoming interviews for other summer internships.
3. Lack Of Work Experience
This will be tough to remedy, so your best bet is to adjust your story. Tailor it in a way that reflects a
change of heart that you had and how you somewhat recently decided to try to get into finance. Once
again, leverage the fact that you plan to take finance and accounting classes as evidence. Get an
unpaid or paid finance-related internship during the spring; you can point to this as additional
evidence of your dedication to the field.
4. Not Enough Networking
Refer to Chapter 12 and assess where you deviated from the networking plan we outline for you. Go
to every networking event and information session possible during the spring and try to reach back
out to people you may have lost contact with. Cold calling and emailing may be a more viable option
for you at this point as you will need to reach out to smaller banks and other finance firms to find an
internship.
5. Interview Performance
Review which parts of the interviews you struggled with. Did you mess up on technical questions?
Was your story fluid, relevant, and believable? Did you give specific answers to qualitative
questions? Discover where your faults lie and refer to the beginning of this Chapter and Chapter 14
to fix the problem and find additional helpful resources.
Your Options
If you are 100% set on breaking into bulge bracket investment banking, you should consider extending
graduation by another year. This gives you the option to apply again for junior internships during the
next recruiting cycle. However, you still need to gain worthwhile experience this summer. Consider the
following:
• Pursue internships at smaller local boutique investment banks. These firms often recruit long
after larger investment banks have finished recruiting. The best way to pursue these positions and
get your foot into the door is by hustling and utilizing any contacts you have made. Consider
cold emailing or calling individuals working at these firms, offer to work for free, or just try to
shadow senior bankers.
• Pursue an internship in another avenue of finance: corporate finance, sales and trading, equity
research, etc.
Insider Insight Breaking Into IBD Through Different Departments

 If you are extremely dedicated to breaking into IBD, a roundabout way to get into the job
is to work in a different division of the bank (i.e. Sales & Trading or Equity Research).
From there, you have the chance to network your way across the firm and request
transfers within the bank. This is a particularly good strategy for non-target candidates.
Note: this is possible but it is not easy.
• If you fail to obtain an internship in a directly related field of finance, try getting one in a less-
relevant finance field such as accounting, valuation, or others. These firms usually start
recruiting a few months after investment banks have finished. Many of the big four accounting
firms look good on a resume: not only do these firms have accounting departments, but many
have corporate finance or valuation-related groups.
• Pick something that you can embellish upon so that it sounds relevant to investment banking.
• The process for applying for these internships on-campus is very similar to that for IBD.
Formulate A Plan
Now that you have assessed why you did not get the internship and what your other options are, it is time
to take action.
Action Item 1 – Apply to small boutique investment banks that have less-formal recruiting processes.
Some of these firms might recruit through your school’s career center, otherwise hustle and reach out to
smaller banks to see if they plan to hire interns.
Action Item 2 – Determine how much time you have until recruiting begins for non-investment banking
internships.
Action Item 3 – Broaden your search to general finance opportunities and apply. Start with major
corporations that recruit on campus.
Action Item 4 – Further broaden your search by seeking out non-finance (but relevant) opportunities
such as accounting. Start with bigger-name firms and slowly move to middle-market and smaller firms.
Action Item 5 – If all else fails, obtain any corporate internship where your experience can be spun to
show relevance to investment banking.
To reiterate, if you do not obtain at least a boutique investment banking internship, the likelihood
of getting an offer during full-time recruiting in the fall is much slimmer (however, candidates still
break into full-time positions after a summer in corporate development or valuation, so do not give
up).
Chapter 16: Step 9 – Excel During Your Summer And
Secure The Full-Time Job
Landing a summer internship is great, but the end goal is a full-time investment banking job. Once you
have accepted a summer offer at a bank, focus your energy on succeeding during the internship and
obtaining a full-time job offer.
At the end of your junior year Summer Analyst internship, you need to get a full-time offer. It does not
matter if you change your mind and want to work at a different bank or if you are having second thoughts
about banking as a whole. If you do not receive an offer, other employers will question why and will
instantly doubt your capabilities.
In this chapter we focus on ways to get ahead before your summer internship and how to excel as a
summer intern.
(16.1) Getting Ahead

Now that you have secured an internship, there are several ways to get ahead. Investment banking
summer programs will usually include some form of training (approximately one week for bulge bracket
banks). This training, especially when coupled with your undergraduate education, is designed to be
sufficient. More serious candidates will often take measures to gain a leg-up on the competition before
the summer begins. Ways to get ahead include:
Take Workshops & Online Courses
There are a countless number of online and in-person investment banking-specific workshops that prepare
you for the job. The technical questions that you studied during interviews are relevant but do not fully
prepare you for what the job will actually entail. Workshops and online courses provide a hands-on
introduction to the actual technical tasks you will complete on the job (basic Excel, financial modeling,
public comps, etc.).
Many workshops are available year-round; ideally you should complete these in the spring, a few
months before your internship begins.
Notable workshops include:

• Training the Street
• Wall Street Prep
• Investment Banking Institute
• AMT
Notable online courses include:
• Training the Street
• Wall Street Prep
• AMT
These courses are expensive: online training can cost hundreds of dollars, and in-person workshops can
sometimes cost thousands of dollars. To reiterate, these are not necessary for you to succeed on the job,
but they certainly give you an edge over students that have no hands-on investment banking technical
training.
Read These Books
The books listed below provide insight ranging from details on what investment banks do to more
advanced technical methods and their applications.
• Vault Career Guide to Investment Banking (Lott)
• Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions (Rosenbaum
and Pearl)
• The Practitioner’s Guide to Investment Banking, Mergers & Acquisitions, Corporate Finance
(Castillo and McAniff)
• Applied Mergers & Acquisitions (Bruner)
Utilize These Forums And Websites
There are various websites that contain a plethora of knowledge as it relates to finance and investment
banking in particular. They are useful for learning finance jargon and understanding the culture of the
industry. Some of these sites are good sources for staying up to date on industry news:
• iBanking Insider: utilize the “Ask” section of our website
• Wall Street Oasis
• Investopedia.com
• iBankingFAQ
Practice With MS Office
As an Analyst, you will spend approximately 90% of your time using Excel, PowerPoint, Outlook, and
Word. Practice using these programs so that you understand how to use them more efficiently. There are
thousands of tutorials online: become savvy with these programs ahead of your internship as you will
spend less time playing catch-up and more time learning financial concepts and necessary job skills.
(16.2) Excelling On The Job

Below, we have compiled a list of the essentials for you to become a successful Summer Analyst. The
junior year Summer Analyst internship is one of the most grueling 8-10 weeks of your professional
career, but there is a lot to be gained from the experience. Treat this internship as your do or die moment
and give it your all. Ideally, you will sign a full time offer upon completion of the internship and have a
relaxing senior year.
Leave A Good Impression
In investment banking, first impressions are everything. Set precedents early: prove that you are
reliable in your first few weeks. If coworkers do not feel they can trust you early on, it will likely carry
with you for the rest of your internship.
Follow the tips below to ensure you leave a good impression:

• Pay attention to detail. The easiest way to blow a first impression is by making stupid mistakes.
This means that you should not have any formatting errors, spelling mistakes, missed comments,
or overall lazy errors. LITERALLY, double, triple, quadruple check your work, particularly in
the first few weeks of the internship. The extra few minutes will pay off.
• Never be late to work or to meetings.
Insider Insight Being Late To Work As An Intern
 Full-time Analysts get frustrated when interns constantly show up to the office after
them. It is an unspoken rule that interns should be the first ones in the office.
• Have a great attitude. Be positive when receiving new assignments. Attitude is particularly
important when judging interns and is a way to stand out early-on during your summer.
• Know your place in the office and be humble, nothing is beneath you (get coffee if you are asked
to, though this will hardly ever happen).
• Avoid complaining to full time bankers.
Quote
“ It is always unnerving to hear Summer Analysts complaining. Everyone is working hard
and you’re the only one who will be getting a nice long break when your program ends. ”
• Manage expectations by under promising and over delivering: give yourself a cushion when
accepting new projects. When asked how long a project will take for you to complete, build a
buffer by giving yourself more time than you anticipate the task needing.
• Avoid constant use of your personal cell phone. If coworkers walk by and always see you
texting, it will reflect poorly on their view of your work ethic.
• If you see a senior banker doing something menial, offer to help. Their time is much more
valuable than yours; if you see them doing an administrative task, offer to provide assistance.
Stay Organized
Investment bankers love Analysts that stay organized; it is a necessary component of the job, and it makes
everyone’s life easier.
• Keep a running to-do list at all times. Tasks will begin to pile up, and it is vital that everything
necessary is completed. Cross off items as you finish them, and review your to-do list for
completion every night before leaving the office.
• Version control: when working in any document, periodically and systematically save new
versions (i.e. v1, v2, v3…). After any big change or addition, save-up. If you mess up a live
version of a model and accidentally save over it, you will be in BIG trouble.
• Keep email and deal folders well organized. Learn the best way to categorize and sub-
categorize from fellow Analysts.
• Always ask for a deadline or timeline on assigned projects. This aids in managing expectations
and prioritization.
Practice Proper Email Etiquette
As an investment banking Summer Analyst, you send a countless number of emails throughout the day
(sometimes hundreds). Understanding the “ins and outs” of email etiquette is essential. Below, we detail
some important points:
• Understand the email hierarchy: put the highest ranking individual on the email chain first, and
then go in descending order (although this may sound ridiculous, some bankers care a lot).
• Be careful when replying to one individual versus replying all.
• Keep every email professional: no slang, nicknames or abbreviations. Save casual or personal
conversations for offline mediums.
• Double check email addresses before sending ANY emails to ensure you are sending it to the
intended recipient. Triple check the email and recipients when sending confidential information
or when a client is on the thread.
• Fill in the “To” addresses last: this prevents sending unfinished emails on accident or before
adding attachments.
• Double check to make sure that attachments are included and that they are the correct files
before sending. It does not look good to have to send a follow-up email after forgetting to attach
a document.
Quote
“ Whenever there is a name in the ‘To:’ field and I need to tweak an attachment or the body of an
email, I consider myself in the ‘danger zone’! Avoid this as much as possible. ”
Practice Proper Phone Etiquette
Summer Analysts do not receive a high volume of inbound business calls, but practice a simple greeting
(i.e., “Hello, this is [John]”), which sounds infinitely more professional than “Hello”. Be concise and
courteous. Try to end conversations by thanking the other party for their time and/or offering further
assistance, if applicable.
Always Be Learning
Along with getting a full-time offer, an end goal of your internship is to learn as much as possible (this is
a major perk of the job). Recognize that, at first, you will be more of a burden than a help to full-time
Analysts. Follow the below best practices as you learn on the job.
Before asking any questions, try to find answers online. Bankers hate being asked questions that can be
easily answered on your own:
• For basic questions that cannot be found online, ask fellow interns.
• For more meaningful or job-specific questions, always ask full-time Analysts first. They will
direct you to an Associate if they cannot answer it.
• Take notes so you do not have to ask the same question twice.
Quote
“ It surprises me how often interns will come and ask me questions directly. I like interacting with
them, but answering basic questions cuts into my time. ”
- Vice President, Middle Market Investment Bank
“ I don’t mind when Summer Analysts ask me questions, in fact I encourage it. However, it bugs me
when they ask the same question twice. I’m too busy to repeat myself. ”
- Associate, Elite Boutique Investment Bank
• Ask for feedback: do this after a specific project, after a few weeks on the job, etc; it shows a
desire to improve.
• Be a problem solver: “I don’t know” is an acceptable answer, but even better is “I don’t know,
but I’ll try to find out”.
• Leverage all possible resources: knowing where to find the answer is often more important than
knowing the answer itself.
Understand Office Politics
Understanding office politics is essential in knowing how to interact with coworkers, managing what is
expected of you, and finding out whose good side to be on.
As an intern, face time is one of the most important aspects of office politics: be the first person in the
office and the last to leave. Summer interns (in particular) are expected to always be around. The more
someone sees you in the office, the more they associate you with commitment to the firm. Pay your dues
during the summer to land a full-time offer.
Quote
“ As I always said as a Summer Analyst: face time to full-time, baby. ”
Insider Insight Summer Analyst Face Time

 Most bankers will tell you that face time does not matter, but during your internship it does.
Senior bankers love hard workers; convey this by being around the office all of the time.
Other things to consider when dealing with office politics are presented below:
• Form a good relationship with your staffer. If you have capacity, show initiative by asking to
be added to different types of projects and deals. The staffer is often one of the more powerful
and vocal members of your review process.
• Be likeable and social. Break the formal office setting when possible: get coffee or lunch with
coworkers, go out at night with Analysts, etc. These are great ways to have personal
conversations with peers and let your personality shine through. Forming good relationships with
coworkers is very helpful in getting a full-time offer.
Quote
“ Most bankers will refer to the ‘airport test’ when it comes to potential junior bankers. What this
means is ‘if I got stuck sitting in an airport with the intern during a flight delay and had to make small
talk, would I get annoyed with them?’ End up on the wrong end of this test and you could be out of
luck come offer time. ”
Insider Insight Importance Of Relationships In Intern Reviews
 Strong personal relationships with other Analysts, Associates, and VP’s can make up for a lack of
technical skills when being considered for a full-time offer. There are many instances where
well-liked Summer Analysts are given full-time offers even though they lack proficiency in some
of the technical skills required for the job.
• Interact with people senior to you (in the hallways, kitchen, elevator, etc.). Many interns act
shy around senior bankers, so stand out by approaching them. However, avoid barging into
offices or interrupting conversations; have something relevant to say or you will stand out for the
wrong reason.
• Utilize a mentor: form a good relationship with specific full-time bankers and put yourself in a
position where these individuals will go to bat for you during the review process.
Do The Little Things
Employ the below to make your life a little easier during the rigorous summer internship:
• Keep toiletries and snacks in your desk: you will most likely use them.
• Dress the part. You might not be able to afford Hermes ties or Ferragamo shoes, but have clean,
presentable clothes. If your office does not require ties, avoid wearing a crew neck undershirt.
For offices with casual Fridays, be smart about how you dress and err on the conservative side.
In both situations, take cues from the full-time Analysts.
• Take detailed and comprehensive notes. You are the deal-team’s note taker, so be prepared in
meetings and conference calls.
Insider Insight Note Taking Strategy

 A good way to go the extra mile and stand out is to email typed notes to your team after
important events or meetings.
• When in doubt, print it out. Every time you have a meeting or call in a senior banker’s office,
there are probably some materials you can print out and bring with you. It looks good when
someone asks a question and you can provide them with the backup data.
(16.3) Understanding The Summer Review Process

Summer interns should consider the entire program (8-10 weeks) as one big review process. Even if they
do not make it clear, the bankers are judging your every move. Knowing this, along with how the review
process works, is useful when trying to impress your reviewers. Aside from casual and informal feedback
that bankers may provide, there are specific reviews that occur during the summer.
Mid-Summer Review
• This review will occur halfway through your summer (~5 weeks).
• Usually, this will take the form of an informal 15 minute conversation with you, your staffer, and
HR.
• Most banks have a specific review form and rating system that the staffer and other bankers fill
out. This form rates candidates on a range of expectations including fit, technical aptitude,
attitude, attention to detail, and organization.
• The staffer communicates feedback from these forms. The overall take-away from the meeting is
your current status: are you below expectations, meeting expectations, or exceeding expectations?
The conversation may end with the banker communicating whether or not you are “on track to
receive an offer”.
Insider Insight Mid-Summer Analyst Reviews

 There is some element of criticism in every summer review. Digest what is said and avoid the
urge to blurt out counter arguments – it is not a debate. If you are asked to respond, avoid
blaming others and be positive about your ability to fix whatever has been discussed.
After the review, immediately act upon any negative feedback. If there is concern over your
organization, clean it up right away. If there is unease regarding your technical skills or lack of modeling
exposure, be proactive and emphasize to your staffer that you would like to work on this. You have
another five weeks to prove yourself worthy of a full-time offer.
Bankers want to know that you are trainable: prove that you are by correcting or improving on mid-
summer review feedback. Part of your final review will be focused on your ability to correct problems
that were brought up during your mid-summer review.
Last Chance Review (Semi-Final Review)

• A few weeks before the end of your summer, there will sometimes be a semi-final review: this is
a group discussion to assess the intern class as a whole (interns will not be present).
• In rare cases a “final test” will be given over the last week or two without the intern’s
knowledge. It is often something technical, such as a model. This is usually administered to
interns that are “on the cusp” of receiving an offer or those that have not sufficiently
demonstrated their technical skills.
• As a general rule, do not slack off towards the end of your internship. Regardless of whether or
not you are working on a test, finish your internship strong.
Final (“Round Table”) Review
At the end of your summer, your colleagues get together and provide verbal feedback in a live discussion
with each other. The end goal is to determine which interns get full-time offers.
• The review group consists of investment bankers from every level, from Analysts to Managing
Directors.
• A few days to a week prior to the meeting, bankers may once again fill out one of the previously
mentioned review forms, rating each Analyst a final time on various attributes.
• The group of investment bankers gathers in a conference room to discuss the Summer Analyst
class.
• The focus for each candidate is twofold:
1. Can this intern complete the technical aspects of the job?
2. Does this intern fit in with the office culture; does everyone like him/her?
• Specific deals you worked on are brought up and you are judged on your role and performance.
• Each individual who worked with you is asked to share their overall view of you and your work
performance.
• Specific shortcomings are brought to light for each candidate. A discussion ensues over whether
any of the shortcomings are deal breakers. If no deal breakers are found, the bankers discuss
how fixable the problems are.
• Number of full-time spaces is discussed and each summer intern is ranked.
• For candidates just on the border of being acceptable, discussions may occur around extending
them an offer versus going back to campus to hire someone full-time (a risky move since there is
no internship trial run for these candidates).
Insider Insight Round-Table Summer Analyst Reviews

 You need bankers to go to bat for you during summer round-table reviews. A few strong
opinions can make or break your chances of getting a full-time offer. These discussions can
often get heated, with investment bankers having opposing views of particular Summer Analysts.
(16.4) Receiving Your Offer

On the last day of your internship, your staffer and HR sit down with you for a final meeting,
communicate any final feedback from the team, and let you know whether or not you got an offer. Unlike
internship offers, full-time offer communication does NOT usually come as an exploding offer. You
have several weeks to provide a verbal response, but the bank prefers confirmation as soon as possible.
If you take a bit of time to decide, various levels of bankers will often call you to sell you and ask if you
have any questions about the firm, job, offer, etc. After confirming your acceptance of the job, a few
weeks to a month later you receive legal documents that you must sign. This makes it official!
Insider Insight Analyst Signing Bonuses

 Most bulge bracket investment bank offers come with a $10,000 signing bonus. This is paid well
ahead of starting full time and can make senior year very exciting.
Choosing A Group
Summer Analysts that interned as generalists often need to choose a group after receiving and accepting a
full-time offer. Analysts are asked to rank their group preference (usually top 3-5 groups) and this is
cross-referenced with a similar selection process by the different groups within the bank (ranking which
interns they liked best). Analysts are then matched with a group based mutual preferences and the
group’s needs. This process is often not fully completed until months after the internship has ended.
Chapter 17: Step 10 – Full-Time Recruiting
Investment banks engage in full-time recruiting to fill vacant Analyst positions. The openings are filled
after summer interns accept offers. Full-time recruiting is an important step for students that either A) did
not get an investment banking internship or B) had an internship but want or need (i.e. no offer) to look at
other banks.
In this chapter we provide an overview of the full-time recruiting process and outline strategies tailored
for students in different situations.
(17.1) Number Of Openings

In a given year, the amount of full time recruiting that a bank engages in depends on:
• How many interns did not accept full-time job offers after their summer
• How many interns did not receive offers at the end of their summer
• How well the market is doing (or is projected to do); a better market requires a larger Analyst
class
Because of this structure, full-time recruiting is highly variable year-to-year. Overall, it is not nearly
as robust as internship recruiting. As a very general approximation, bulge bracket firms will typically fill
15-40 full-time spots.
(17.2) Recruiting Cycle And Structure

Full-time investment banking recruiting does not have a set schedule. It can start as early as August and
can last for months after that. The structure is more informal than internship recruiting and initial full-
time recruiting depends mostly on word-of-mouth recommendations.
As stated earlier, banks aim to fill their full-time Analyst class with summer interns. Once the summer
process is over and the bank determines whether any spots are available, they may aggressively seek to
fill the spots. Banks first reach out to candidates with whom they have been in touch or obtain candidate
recommendations from interns that received full-time offers.
If a bank does not find desirable candidates during this initial rush, they will go back to campus in
September or October. This full-time on-campus recruiting process is very similar to that for summer
internships, usually with an on-campus first round interview and in-office super days.
Non-Target School
Starting in August, non-target candidates need to continuously reach out to bankers and HR to make
sure that they are not passed up in the full-time recruiting process. Most non-target candidates that
break into bulge bracket banks through full-time recruiting do so during the initial full-time
recruiting rush (keep in mind that these candidates almost always had some sort of investment
banking internship the summer leading into full-time recruiting).
(17.3) Assess Your Situation And Execute A Plan
At the end of your junior year summer, assess your situation to determine what course of action makes the
most sense for you. Here we detail three main situations you may find yourself in at the end of your
junior year summer:
A. Received a full-time offer from an investment banking summer internship
B. Had a junior year investment banking Summer Analyst internship but did not get an offer at the
end of your summer
C. Did not have an investment banking summer internship
Situation A – Received A Full-Time Offer From Banking Summer Internship
If you like your firm and want to stay, great: you are DONE! Accept the offer and enjoy your senior
year!
If you were unhappy with your summer experience or are unsure if you want to work at another bank, you
often have up to a month before getting official documents to sign. This gives you some time to shop
your offer.
Shopping Your Full-Time Offer
Students with full-time offers have the option of “shopping” around for another full-time offer at a
different bank. This is fairly common practice among students going through full-time recruiting.
Just like shopping your summer internship offer, shopping a full-time offer has many pros and cons:
Pros & Cons

 You may get a job at a “better” bank.
 This may be a good way to change geographic location.
 You are in a powerful position. Other banks will find you desirable and will want to meet
you. You can always fall-back on your offer if you do not find one you like better.
 You can make a more educated decision on long-term desired work environment after having
worked in investment banking.
 There is a good chance that your bank will find out you are recruiting. This is most likely not
a deal breaker, but it may change the way people think of you.
 There is a chance that you will have to rescind on an offer, which can burn bridges and hurt
your reputation with your school’s career center (and possibly other bankers).
 Full-time recruiting is stressful and time pressured; you need to study and go through the
grueling interview process once again.
How To Reach Out To Another Bank
After deciding whether or not you want to shop an offer, you need to learn how to reach out to other
banks appropriately:
• Reach out to contacts you made during (and prior to) summer internship recruiting. Utilize
your network of industry insiders, especially those that you previously interviewed with.
This is why it is important to stay on good terms with these bankers, even if you do not end
up interning at their bank.
• Send them an email with a general update of your situation. Keep the email brief and offer to
discuss your current status over the phone. If you are pressured for time to accept your
current offer, let them know.
E-Mail Template
Dan,
We spoke a few months ago about summer internship recruiting. Just to remind you, I am an
incoming senior at [UPenn]. I wanted to reach out and let you know that I received a full-time
offer after my summer with [Morgan Stanley]. I would love to catch up regarding your full-time
recruiting prospects and get on the phone as soon as possible. Please find my updated resume
attached which reflects this summer’s experience. I look forward to hearing from you.
Best,
Ron
Insider Insight Shopping Your Offer To Previous Contacts

 Many times, banks that you turned down (or banks with which you interviewed but did not
get an internship offer) will tell you to contact them after your summer. This is a particularly
good sign that they were interested in you previously.
Reach out to friends that interned at other banks:

• They will know what the full-time recruiting prospects are at their bank (ask them if their
firm has any open spots).
• Friends can tell you exactly who the right person is to contact (even better, you can send them
your resume and have the friend copy you on an email to that person).
The Full-Time Interview
The differences between full-time interviews and summer internship interviews are very minimal.
The structure is generally the same, with two separate days of interviews. The first round interview
can be conducted on-campus, over the phone, or in the office. The second round interview is
conducted in-office and consists of 2-4 interviews. Content of these full-time interviews generally
falls along the same lines as that of summer internship interviews, but will be mildly more difficult.
Full-time interviews focus on two main concepts:

1. Your recent summer internship experience
2. Why are you looking elsewhere, specifically this firm?
1. Your Recent Summer Internship Experience:
The majority of the interview focuses on experience from your summer internship, but you will
be asked technical and qualitative questions, as well. For this reason, keep a list of notes on major
deals or projects that you worked on during your summer. Make the notes as detailed as possible so
that you can study them and reference specifics in your interview:
• Focus on what specific technical experience you gained (LBO modeling, DCF, public
comparables analysis), and know some of the numbers and strategy behind what went into
your work. Technical questions tend to be more difficult because they are more specific and
are often asked in relation to deals you worked on.
• Be able to give background on the deals, companies, or industries that you worked with. You
should be able to describe the competitive landscape, risks associated with certain types of
companies you worked with, and unique aspects of different deals you worked on. A
walkthrough of how to describe deals/projects is located in Chapter 22.
Make sure to highlight that you received an offer after your summer internship, and tell
interviewers about any positive feedback.
2. “Why Are You Looking Elsewhere, Specifically This Firm?”
This is the most important qualitative question that someone in Situation A is asked during full-time
interviews: it tests your dedication and interest in the bank. You need to think of a story and stick to
it. Emphasize one or a combination of the below facts:
A. You wanted to work with this bank since internship recruiting, but timing did not work out
and you had to accept your internship offer before this bank finished recruiting.
B. You did not like the culture at your bank or morale was low.
C. You are interested in a specific group that is stronger at this bank.
D. You want to change cities.
E. You heard from the bank’s interns that their summer was extremely rewarding and that they
loved the firm.
The actual answer to this question is most likely that this bank has a stronger reputation.
Communicate that you want to be at the best firm and work for the best people; compliment your
interviewers. Avoid “trash talking” your summer experience, it can make you look undesirable.
Situation B – Banking Summer Analyst Internship With No Full-Time Offer
The bad news: you did not get an offer. The good news: you had a junior year investment banking
Summer Analyst internship and gained relevant experience.
It is not uncommon for students that failed to get an offer at one bulge bracket bank to end up at a
different bulge bracket bank full-time. As long as you do not have a major flaw, you are more valuable
than a student that did not have a banking internship (and in many cases, students that interned at
boutique or middle market firms).
Full-time recruiting is the same in this situation as it is for Situation A (described above). The major
difference for students in Situation B is overcoming the hurdle of explaining why they did not get an
offer.
Why Did You Not Receive An Offer?
This is the most important question every bank will ask you. They want to know if your lack of an
offer is performance-related and will try to determine whether or not you can succeed if placed in
their work environment. When talking to other banks, DO NOT LIE ABOUT GETTING AN
OFFER; THEY WILL FIND OUT.
Before approaching other banks, find out exactly why you did not receive an offer. You need to spin
the reason into a good story that does not make you look bad. Emphasize the fact that you were a
good employee during your summer, you had a good experience with the firm, but you think that the
firm you are interviewing with is a better fit. The key is to keep a positive spin on things.
Stick to one or a combination of the below facts:
1. Not enough spots

“The bank did not have enough full-time offers to give to interns, but my review was positive."
This emphasizes that you were liked by the office and places the blame on something out of your
control (i.e. the market, the firm, etc.). Be careful: this means that there were other candidates
that were better than you (i.e. you were not the best).
2. Wanted to work in a different group

“I realized partway through my summer that I was not interested in my group. I was a bit too
vocal about it, and I think the bank began to question my loyalty halfway through the summer.”
This emphasizes that the reason you did not get an offer was not performance-related. It is
especially helpful if you can justify your explanation with specific examples or interactions. Be
careful: this argument hints at an attitude problem. Investment bankers like to hire humble
individuals, eager to learn in any situation. Also, bankers know that other banks will go out of
their way to retain top talent, even if the intern wants to change groups after their summer.
3. Did not vibe with the culture

“I simply did not fit in with the firm’s overall culture.” Again, this emphasizes that the issue was
not performance related, and instead was driven by differences in personality. Tailor your story
to convey that you had a different personality and set of interests compared to everyone else.
Avoid discussing an inability to get along with other bankers. Be careful: likability is an
important factor to investment bankers. They will most likely assume that the problem is your
personality, and not that of other bankers. Note, use this excuse with caution; the only time a
firm would choose not to give you an offer based on “fit” is when you were on the border to
begin with.
Situation C – No Investment Banking Internship
It is difficult to obtain a full-time investment banking offer without a junior year Summer Analyst
internship. If you did not have a valuation or finance-related internship, the chance that you get an
investment banking offer during full-time recruiting is low.
If you fall into Situation C, your best chance of securing an investment banking job is to aim for middle-
market and boutique investment banks; be realistic about your expectations. You can always try to
lateral after a year if your heart is set on the bulge bracket.
Utilize your network of contacts at different banks and try cold emailing and calling as many contacts as
possible. You need to truly hustle your way into a job at this point. Keep in mind that these smaller
banks often do not have set recruiting cycles, so you can spend most of your senior year reaching out to as
many banks as possible. Refer to the Chapter 12 for a detailed description of how to utilize your network
to obtain a job.
To be more seriously considered for any full-time investment banking position, we recommend taking a
rigorous modeling and/or investment banking workshop. A list is provided in Section (16.1).
Otherwise, postponing graduation by one year is a viable option. This allows you to go through
internship recruiting again next year.
For candidates without any banking internship experience, the full-time interview is much more
technical: banks will look for proof that you:
A. Have a thorough understanding of technical concepts required for the job
B. Are passionate about investment banking, have done your homework, and fully understand
the role of an Analyst
There is no internship trial run, so bankers will vet candidates much more thoroughly during full-time
recruiting. Interviews may be lengthier as the firm dives deeper into making sure you are a good fit
and worth the large investment they are about to make.
As a general rule, position and tailor your non-finance experience in the best way possible. Make
your experience sound relevant (even if it is a stretch). The more you can convince the interviewer of
your passion for finance, the better.
Chapter 18: Step 11 – I Did Not Get A Full-Time Job, Now What?
Not everyone will land a full-time investment banking job; however, there is still hope. If you are serious
about investment banking, there are roundabout ways of getting into the industry. Otherwise, going into a
related field is also an option.
(18.1) You Still Want To Get Into Banking

If your heart is set on getting into investment banking, there are options for increasing your chances of
breaking into the industry in the future.
Delay Graduation
As stated before, delaying graduation by one year gives you a chance to go through the recruiting process
again. Along with this second chance, you also have more time to acquire other internships during the
school year and can better position yourself when internship recruiting starts again.
Insider Insight Deferring Graduation To Recruit

 In most cases, when deferring graduation for recruiting purposes, banks will not notice (so do not
bring it up). If they do notice, banks generally do not care that you are extending graduation.
 To camouflage your extension, consider only putting your expected graduation date in the
education section of your resume.
Masters Program
Enroll in a 1-year masters program in something finance-related. Try to attend a program at a target
school, allowing you access to on-campus recruiting. This extra year also gives you more time to expand
your network.
Non-Target School
This is a good strategy for non-target students: you earn a Masters degree and have the opportunity to
become a target student in the bank’s eyes.
Enter As An Associate
A long-term approach to getting into banking is to attend business school and enter as an Associate. Plan
to work 2-4 years before business school as investment banks want Associates with corporate experience.
Preferably, gain experience that is finance-related.
Insider Insight Entering Banking As An Associate

 Do not try to get an MBA immediately after undergraduate schooling with the hopes of skipping
the Analyst career – banks will not hire you.
Get Lucky
Settle for a related non-banking finance job and stay in contact with your network of investment bankers.
Investment banking is a high turnover industry, and it is not uncommon for 1st year Analysts to leave
early (sometimes after only a few weeks or months on the job). There is a small chance you could be
called in as a substitute. Your chances for success become higher if you work in a related field that
requires skills similar to that of investment banking (i.e. become a credit or equity Analyst).
Back Office: A Common Misconception
Some candidates wrongfully believe that settling for a “back-office” role in an investment bank is a
viable way to break into a firm (by trying to lateral at a later time). Back office roles include non-revenue
generating positions within the firm (accounting, IT, HR) and do not provide any relevant experience for
investment banking. Transferring from these departments to a position in IBD is extremely rare: the
options above provide a much better chance to land a job in IBD.
(18.2) You Want To Do Something Else Finance Related

Despite not landing an offer, your time spent going through the investment banking interview process was
still well spent. This preparation and interview experience is directly transferrable to recruiting for other
finance-related jobs.
Consider pursuing positions in the following finance-related fields:

• Accounting
• Valuation
• Internal corporate finance
• Wealth management
Aside from rare cases, interviews for the above fields are not as technical or as intense as investment
banking interviews. The rigorous preparation you have undergone is uncommon for these interviews; you
will likely be well ahead of other candidates applying to these positions.
Leverage everything you have developed so far, it has not gone to waste:
• Your finance resume
• How to tell your story
• Qualitative questions and answers (strengths and weaknesses, biggest accomplishment, etc.)
• Interview skills
• Networking strategy
Part IV
How To Succeed On The Job And
Next Steps
Chapter 19: How To Be A Successful Full-Time Analyst
In this chapter, we provide insight on how to succeed on the job: ways to best position yourself
beforehand, strategies for your first six months, and things that seasoned Analysts wish they had known
before starting their Analyst programs.
(19.1) Preparing For The Job

Although not required, students may find it beneficial to do the following things before their full-time job
begins:
Keep Up With Financial News
Read online and physical news publications on a regular basis to stay up to date on the happenings of the
financial world. This is useful for conversations you have in the workplace, understanding the state of the
market, and maintaining your interest in the field. The more well-versed you are on the market, the
smarter you appear to your colleagues. Popular online news sources include:
• Bloomberg News
• Dealbook
• Dealbreaker
• Google Finance
• Morningstar
• Reuters
• WSJ
• Yahoo! Finance
Brush Up On Summer Training Materials
Just before the full-time job begins, consider giving yourself a refresher course by going through old
training materials from your internship (if applicable). You do not need to spend much time going
through difficult technical concepts as full-time training is designed to be comprehensive.
Continue Your Finance And Accounting Education
Take relevant classes during your senior year that help prepare you for the job. Continue taking any
accounting, finance, or economics-related courses (when possible). Pay close attention in these classes
and learn relevant financial concepts.
Get “Fitted”
You will be wearing business casual (or business professional) most of the time after you begin working:
put your signing bonus to use and buy business clothes. Stick with conservative colors for shirts, pants,
and suits, and remember no cufflinks and no suspenders. Invest in something comfortable; you are going
to spend a lot of time in your new shirts and pants.
(19.2) Full-Time Training

Bulge bracket and larger middle-market banks provide robust full-time training programs for incoming
Analysts and Associates. These are primarily located in New York (with some in London) and usually
include incoming employees from around the world. The training programs are 4-8 weeks long (bulge
bracket programs are closer to eight weeks) and include the following:
• Overview of the bank and its culture: the bank will sell you on their firm to build loyalty and
teach you about its structure and offerings.
• Talks from bank executives.
• On-the-job resource training: you will be instructed on how to use corporate resources such as
the Presentations department, Information Services, and the Copy Room, as well as third-party
subscriptions such as Bloomberg, Capital IQ, Factset, Thomson Research, and others.
• Technical training: this will be conducted by a third-party training company such as Training
the Street or AMT and covers Excel, accounting, valuation, and modeling. This part of training
lasts for several weeks and is the most valuable part of the program.
• Series certification training: usually towards the end, you will undergo an intensive week-long
training course to help prepare you for your mandatory licensing examination(s). Individuals
working in IBD must pass the Series 79 exam.
Insider Insight Full-Time Analyst Training Considerations

 The professional technical training that full-time Analysts receive is a significant perk of the job.
These multi-week courses normally cost individuals thousands of dollars.
 An important aspect of full-time training is networking with people from other groups and
offices. Building a strong base of contacts will make your life easier on the job when it comes to
needing favors or searching for previously completed work.
 During training, you work fewer hours; take advantage of this more relaxed schedule before your
real job begins.
Quote
“ As a Leveraged Finance Analyst, I constantly have to do debt comps. After my Associate gives me
relevant companies to compare, the first thing I do is contact friends from training who now work in
the relevant industry group. I ask if they have seen debt comps for these names in pitches or previous
deals they have worked on to make my life a little bit easier. The few minutes it takes to call or email
them sometimes save me hours. ”
Smaller middle market and boutique banks also provide training programs. However, these programs are
usually conducted in regional or local offices and are often shorter and less structured. Larger middle
market and elite boutique banks both tend to offer bulge bracket-esque training programs.
(19.3) First Impressions (Again)

Your first few months on the job are the most important of your Analyst career. Although you may have
interned at your bank the previous summer, this is a fresh slate to make new impressions. You have much
more responsibility as a full-time Analyst (compared to your summer internship); you are given more
meaningful work and coworkers have higher expectations of you.
The trust you build and impressions you make during these first few months carry with you for the full two
year program. If you violate this trust early on, you may never fully regain it. Work harder during this
time and make sure that you leave lasting impressions. Concentrate on the following:
• Attention to detail: Since you are no longer an intern, you are given less leeway for simple
mistakes. Gain coworkers’ trust by checking over your work several times before giving it to
them. If you establish an early reputation for not double checking your work, it will likely haunt
you for the next few years.
• Be proactive: Ask for additional projects or how you can be more helpful to senior employees.
Seek out staffings instead of avoiding them.
• Go above and beyond expectations: When completing a project, do more than the bare
minimum required of you. Provide additional analysis, dig up helpful details, or make a more
senior employee’s life easier in some way (i.e. thoroughly sourcing backup to make reviewing
your work easier).
• Get on good terms with your staffer: They are influential in not only how much you work, but
also in what you work on. Being on good terms with your staffer can win you better deals and
projects and help you avoid unpleasant situations (such as “Friday night specials”). Prove
yourself to them early on, and be likable. Make both of your lives easier by being transparent
when communicating what you are working on.
Insider Insight Conveying Your Staffing Preferences

 Take an active role in your staffing process; communicate preferences to your staffer (what type
of deals you want to work on, industry exposure you hope to gain, etc.). Many Analysts never
take advantage of this opportunity and instead take a passive role.
Quote
“ During my first few months, I was put on a deal with my staffer. It was a difficult few months, but
working late nights together really sparked a friendship. After completing the deal, he was very
impressed with my work ethic, and we have become good friends. Now, I tend to find myself
working on better projects and am able to avoid a lot of bad staffings. ”
- Analyst, Elite Boutique Investment Bank
(19.4) Settling In
After Analysts get settled into their roles, one witnesses a broad spectrum of approaches to the rest of the
two year program. Some Analysts aim to be superstars; these individuals overachieve and push to be the
best Analyst in their class (top bucket). Others try to skirt by; these people slack off and complete the
minimum amount of work possible while still fulfilling their role (the quality of their work is still high
and meets expectations, but they do not go above and beyond). Most Analysts will fall in-between these
two extremes.
How To Be A Superstar
If you dream of being the top ranked Analyst in your class, these are some things you can do to stand out:
• Actively seek out more work and staffings.
• Make an Associate’s life easier by assuming some of their responsibilities. Examples include
running conference calls, creating presentation pages without a markup, etc.
• Always source the backup to your work; know where each number came from and why.
• Contribute insight (rather than just executing orders). Go above and beyond the Analyst role by
taking a higher-level view of a deal and providing worthwhile opinions throughout the process.
• Recheck your work when you have time, but always be responsive on deliverables.
• Be a master of resource utilization: know what resources exist, and when and how to use them.
• Be one step ahead at all times: begin next tasks before being asked.
• Make efficient use of spare time by sharpening your Analyst skills when you have down time.
• Minimize the number of questions you ask, but when you do, ask the right questions and at the
right time.
• Make your bosses look good.
• Create user-friendly models. Any coworker should be able to open your model for the first
time, quickly see how it works, and be able to take it over seamlessly.
• Help fellow Analysts.
• Be impeccably reliable: coworkers should never need to worry about whether or not something
will get done.
• Always be available.
• Over-communicate with coworkers. The more transparent you are about what you are doing,
the more comfortable your colleagues will be.
Insider Insight Analyst Rank vs. Exit Opportunities

 Being the top ranked Analyst does not mean that you get the best exit opportunities. Sometimes
it is better to focus more on recruiting and take a hit on your bonus to get a superior offer.
How To Be A Sufficient Slacker
This section describes ways to cut corners and avoid additional work. Although these are ways to slack
off, recognize that when someone is relying on you to complete something, it needs to be done well and
in a timely manner. No matter your method and effort, deliverables need to be up to par.
Insider Insight Getting Away With Slacking Off

 Proving yourself during your first few months will make it exponentially easier to get away with
being a sufficient slacker. Work as hard as possible for a few months to establish a great
reputation before applying any of the strategies below.
In general, this conduct is more common once Analysts have obtained buy-side or other exit offers (do
not forget, your bosses will often be called as references). Below, we list some common strategies:
Concentrate On Material Work
When checking work, concentrate on material aspects of your work and areas more prone to errors.
You will get better at this with experience.
Look Busy At All Times
Analysts go to great lengths to avoid being assigned additional work. Try to look busier by:
• Setting a delay on emails so they send later at night, long after you have gone home
• Utilizing Alt + Tab (see Section (3.4))
• Putting up a small computer mirror at your desk so you can see who is coming
Quote
“ I carry a notepad, even to lunch or the bathroom. Then I get back to my desk, drop the notepad,
and give a big sigh as if I was just given a lot of work to do. ”
Push Back On Projects
Push back on new staffings by appearing to have limited capacity for new work. Exaggerate
deadlines and estimates of how long current projects will take. Use this strategy wisely, though:
Analysts that push back on new work too often are quickly viewed negatively by superiors.
Outsource Work
Outsource as much work as possible to firm resources. Have Presentations put together the bulk of
graphic-heavy materials you need. If you are asked to conduct research, have the Information
Services team do the work for you. Over-utilize these services, but do not abuse them.
Feign Face Time
Make it appear as though you are always in the office. Some strategies include:
• Ensure that you are at your desk at opportune times (i.e. when senior employees are leaving
for lunch or going home for the evening)
• Run windows media player so your screen does not go blank
• Forward incoming calls from your desk to your cell phone
Push Responsibility
When possible, try to push responsibility of completing projects to other groups on the deal team.
For example, attempt to get the product group Analyst that you are working with to take on more of
the work when creating a pitchbook.
Utilize More Junior Employees
After being on the job for one year, ask to have more interns (during the summer) or junior bankers
put onto your deals. Lobby by emphasizing that it will be a good experience for them.
Leave the Office When Possible
If you have nothing to do, leave the office right after the last member of your deal teams leaves.
There is no reason to stick around if you have nothing to do. Establish a daily “gym” regimen at a
certain time. People will assume this is where you are when not in the office.
Politic
Become friends with employees at every level. These “slacker” strategies will work better for
Analysts that are well-liked, especially by senior bankers.
(19.5) “Things I Wish I Would Have Known”
In this section, we break down the top items that Analysts wish they had known before heading into the
job. Similar points are located in Section (16.2). Most of the same traits that help you succeed as a
Summer Analyst help you succeed as a full-time Analyst, as well. Some of the below insights may sound
familiar; most are so important that they warrant being mentioned more than once.
The Analyst/Associate Dynamic
Some Associates attempt to be more of a friend than a superior, while others want to maintain a strictly
professional relationship. Befriend Associates whenever possible because the good ones can make your
life exponentially better. Not only can they help you avoid unnecessary work (pushing back on Vice
Presidents), but they can also help influence your staffing. You interact with Associates more than any
other level of employee. They have the most direct impact on your investment banking experience.
2nd year Analysts often know more than newly hired Associates, even though these Associates are
technically above them. This can sometimes frustrate Analysts and lead to conflicts (do your best to
swallow your pride and help them integrate). Being on bad terms with an Associate can only hurt you in
the long run.
Importance Of Finding A Mentor
Form a good relationship with a Vice President as early as possible. Sit down with this person and
explain that you want to develop a big picture view for each deal and project you work on. They can
provide great overviews and insight regarding the deals on which you are staffed. This not only helps you
understand the job more, but also helps when going through exit opportunity interviews (you will be able
to talk about your deals more effectively and have good employer references).
Bonus Payment And Reviews
People underestimate how large of a role qualitative factors (such as likability) play in reviews. The
reviews themselves are conducted behind closed doors, and coworkers’ general perceptions of you matter
significantly.
Factors that go into the ranking include: how well colleagues like you, how smart people think you are,
and how efficient you are at completing tasks.
Insider Insight Banker Influence In Bonus Decisions

 Understand who has influence in bonus decisions, and ensure that you are on their good side.
Usually, your staffer and more well-respected individuals in your group provide the most
powerful and respected opinions during Analyst reviews. If everyone else in your group loves
you, but one of these powerful individuals has a negative opinion of you, your review and bonus
will likely be lower.
It is very difficult to obtain a top ranking at any bank. The amount of additional effort required may not
be worth the minimal increase in bonus pay. Usually the difference between top, middle, and bottom
bucket is no more than $5,000-$10,000. It may require an extra 20-30 hours per week to jump from
middle to top bucket; you do the math.
DISCLAIMER: On average, top bucket Analysts put in the most hours, but this is not always the case.
On the flip side, you could work more than any other Analyst and still only receive a middle bucket
ranking.
As stated earlier, bonuses are determined more by market, bank, and group than anything else (including
performance).
Long Hours & Weekends
You constantly hear stories about the long and exhaustive hours that investment banking Analysts must
work. Although you are most likely aware of this drawback, most individuals grossly underestimate the
difficulty of working such long hours. Before pursuing a career in this industry, fully consider the
implications of working upwards of 16 hours daily and most weekend days.
To get an idea of what an Analyst’s life is like during a live transaction (as well as an Associate’s), look
to your most difficult finals week. You can expect a similar (if not worse) work and sleep schedule.
Unlike a week of finals, this lasts for several weeks (or months) at a time. At one point or another in their
careers, most Analysts question their sanity.
Quote
“ My roughest stretch was during my first year as an Analyst. I was staffed on two live deals on
accelerated time frames. For around six weeks, I stayed in the office until 3:00am each night, with
only one day off. I remember having over a dozen cups of coffee on certain days, as I struggled to
stay awake. My record was 14. ”
Organization
Staying organized is extremely important in investment banking because you have so much going on at
any given time. It becomes easy to lose things or forget that you need to complete certain projects. Make
your life easier by organizing email efficiently: create deal folders, auto-file, delete old or irrelevant
emails, etc. Make everyone’s life easier (including yours) by keeping file folders organized: archive old
documents, categorize folders appropriately, save relevant backup in a central location, etc.
Practice wise saving and version control: save up frequently, create new versions after making major
changes, etc. Keep physical deal folders well organized at your desk: be able to reference old files when
in meetings. Keep running notes of deals that you work on: you will want them down the road.
Managing Expectations
As stated earlier: “under-promise and over-deliver”. Immediately ask for timing and deadlines on new
staffings so that you can plan accordingly. Give yourself a timing cushion when possible; projects
ALWAYS take longer than expected. Do not be afraid to tell someone that you are staffed on too many
deals if you are getting crushed.
Forming Relationships Across The Bank
You interact with lots of different groups within the bank on a daily basis. Having a person you can rely
on in each group makes your life easier when you need to reach out for a favor or something deal-related;
investment bankers tend to give preference to people they know. Full-time training is a great place to
meet these individuals.
Remember that finance is a small world: you will likely run into colleagues down the road. Forming
worthwhile relationships with your coworkers may come in handy sometime in the future.
Leveraging Existing Work
Time is a commodity for Analysts and you want to avoid wasting it whenever possible. Know what work
has been completed and leverage it. If you do not know whether a particular project has been previously
completed, spend the extra few minutes to find out if it has been done by someone else in the bank (this is
where forming relationships proves helpful).
Investment bankers tend to do the same type of work for different clients, which is why it is so common
to leverage existing presentations, models, and comparables.
This is what bankers are referring to when they say “do not recreate the wheel”.
Importance Of Attitude
Having a good attitude around colleagues is an important aspect of being an Analyst. All investment
bankers feel the urge to complain at many points during their career. The wise do not act on it (or if they
do, it is only among bankers of their same level).
Even when the job gets tough, maintain a good attitude around senior bankers. They want people that
can keep their composure during tough situations. Your VP’s and Associates will do enough complaining
for the both of you (trust us on this one).
Importance Of Judgment
Many areas of an Analyst’s job require sound judgment; this includes formulating model assumptions,
interpreting comments, interacting with clients, managing workloads, etc. Judgment cannot be learned by
merely reading a guide, but it gets better with experience and knowledge of the industry. Good judgment
is often a distinguishing factor between good and great Analysts.
Taking Vacation/Missing Work
There is a stigma on Wall Street that junior bankers should always be at their desks, not take lunches,
order-in dinner, and take limited vacations despite the amount of time off you are allocated. A lot of this
pressure is self-inflicted by Analysts: senior employees are usually too busy to worry about your
whereabouts (unless you are working on a live deal together).
Once settled in, planning short weekend vacations in advance is completely acceptable. You always risk
having to cancel a vacation or having to work while traveling, but that is the nature of the business.
Ways To Stay In Shape
In general, staying in shape is a very difficult task. We have listed out a few tips below:
• Eat healthy; when you get stressed out, avoid snacking as a reward.
• Once you get settled in, establish a “gym culture” where you go to the gym at a set time every
evening with other Analysts and Associates and come back afterwards to complete work.
• Utilize the weekends to work out.
What To Keep At Your Desk
You will be spending a lot of time at your desk, so it is necessary to keep it properly stocked with some of
the essentials:
 Extra dress clothes  Gum  Toothbrush and toothpaste

 Eye drops  Snacks: energy bars, cereal  Umbrella
 Face wash  Sweatshirt/jacket  Vitamins
Work-Life Balance
Many individuals go into investment banking thinking that it will be extremely difficult to maintain
personal relationships while on the job: it IS. Living close to the office can help by freeing up time
normally spent commuting. Avoid complaining about this aspect of the job to more senior colleagues –
many of them are juggling the same issues and have wives/husbands and kids at home. They are not
going to be sympathetic if your boyfriend or girlfriend is mad that you cancelled dinner plans.
Importance Of Having Good Relationships With Back-Office Services
Befriend auxiliary staff at the firm; sometimes they become your lifeline. This includes Copy Services,
Presentations Services, Research Services, couriers, and IT.
In investment banking, time is money: any hour that you can save is an extra hour that you can spend at
home. Auxiliary staff can save you lots of time if utilized correctly. Analysts that play their cards right
can often use their relationships with these people to get favors. Examples of favors include:
• Printing presentations at the last minute or skipping to the front of the print queue.
• Getting graphics created for a presentation ASAP.
• Conducting in-depth market research on obscure subjects (Information Services might be willing
to spend more time digging for information if you have a good relationship with them).
Insider Insight Getting On Good Terms With Auxiliary Staff

 Do not underestimate the power of a simple “thank you”. When emailing or interacting with
back-office support teams, show them how grateful you are and be overly thankful for their help.
This is a quick and easy way to get on their good side.
How Early Exit Opportunity Recruiting Begins
Private equity recruiting keeps getting pushed up every year. You can expect to start hearing from
headhunters regarding private equity and other exit opportunities as early as three months into your first
year as an Analyst. Be proactive and ask for legitimate staffings, especially at the beginning of your first
year. Completing your first deal quickly can put you well ahead of the competition.
Insider Insight Firm Help In Exit Opportunity Recruiting

 Try to gauge your bank and/or group’s stance on exit opportunity recruiting. If they are known
for being open to recruiting and helpful, make your intentions to recruit clear. As soon as
headhunters begin reaching out to you, let your superiors know that you are looking into different
exit opportunities. You will find that colleagues often go out of their way to help you.
Chapter 20: Banking And Beyond
One of the major benefits of being an investment banking Analyst is the lucrative exit opportunities.
These include jobs in the buy-side, corporate finance, or continuing a career in investment banking (and
working up to a client-facing role).
(20.1) Making It A Career

Particularly in the U.S., the investment banking Analyst program has traditionally been “two-and-out”:
most Analysts only stay at their firm for two years before pursuing other opportunities. That being said,
staying in banking is still an option, and it is becoming more common as banks move away from set two
year programs. Lifestyle improves after the junior levels along with pay.
There are three major paths to take to work your way up the investment banking ladder:
1. Work as Analyst for two years and get directly promoted to Associate. This is somewhat
uncommon, but banks will provide this option to retain their more promising Analysts.
2. Extend your Analyst term for a third year and then get promoted to Associate. The third year as
an Analyst is often a trial Analyst/Associate hybrid year used to screen candidates trying to move
up within the firm.
3. Obtain an MBA, recruit for a job in banking, and enter as an Associate.
Unlike Analysts, Associate hires are assumed to be long-term, career-aspiring employees. Associate
programs normally last three years, followed by a promotion to Vice President.
Once a banker reaches the Vice President level, they begin forming client relationships and start to pursue
deals independently. Promotion after the VP level is based largely on performance (client relationships
and bringing in deals), making this level much less structured in terms of tenure. There is no guarantee of
eventual promotion to Managing Director: Vice Presidents must prove that they can generate new
business or they are let go.
Insider Insight Working Your Way Up In An Investment Bank

 Many Analysts and Associates presume that being good as a junior banker translates into success
at the senior level. This is not necessarily true as the Vice President level and above requires a
much different skill set. Technical aptitude and analytical skills can carry a banker through the
Associate level; beyond this, relationship and sales skills become essential.
 In rare cases, high level executives in other industries (i.e. consulting, law) can become bankers
at the Senior VP or MD level. They are utilized for their relationships and industry expertise.
(20.2) Exit Opportunities

Many undergraduates enter investment banking with the intent of exiting after two years. Due to the
specific skills acquired on the job, there are six highly popular exits:
1. Private equity
2. Hedge funds
3. Venture capital
4. Internal corporate finance
5. Business school
6. Entrepreneurship
Insider Insight Setting Yourself Up For Exit Opportunities
 Keep a file with notes from major deals and projects that you work on. This will be vital when
updating your resume and studying for exit opportunity interviews.
 As an intern and full-time Analyst, the majority of the junior bankers your work with will move
on to other relevant opportunities. Form relationships with your junior coworkers and keep in
touch: they can serve as useful entry points into buy-side and other exit opportunities. Even
contacts that you make as an intern can be helpful three years later.
 The “Analyst” title equivalent on the buy-side is an “Associate” (not to be confused with the
Associate position in investment banking).
Below we break down the different exit opportunities in more detail.
Private Equity & Hedge Funds
This is the most coveted exit strategy for investment banking Analysts, especially at well-known and
respected banks. Private equity and hedge fund jobs pay extremely well, are difficult to get, and usually
have a better work-life balance. Many Analysts pursue buy-side opportunities because they think that the
work will be more interesting: they are lured by the experience of looking at things from an investor’s
perspective and having “skin in the game” (money on the line).
Insider Insight Work In Private Equity vs. Investment Banking

 Note that the work for junior employees in private equity is very similar to that in investment
banking. If you do not like modeling, this is likely not the right exit strategy for you.
Compensation
Private equity and hedge fund positions are known for being some of the highest paying jobs in
finance. Analysts that pursue these roles can expect a significant increase in pay depending on the
size of the fund they join. Similar to investment banking, pay for these jobs is usually characterized
by a high base salary and annual bonus. Base salaries at larger funds are in the $125-$140k area
with bonuses expected to be at least 100% of base salary, depending largely on fund performance.
Another component of compensation is “carry”: investment returns that employees can earn in-line
with fund performance. Note, not all funds offer carry, especially to junior employees.
Lifestyle
Unlike investment banks, buy-side firms are not at the whim of demanding clients and instead serve
the needs of their investors. This allows buy-side Associates to have more stable schedules that are
less subject to last-minute surprises (though surprises can occur when potential investments have
short windows).
Insider Insight Hours In Private Equity vs. Investment Banking

 Lifestyle for junior employees at mega funds is generally similar to that of bulge bracket
investment banking (and sometimes worse). These firms have demanding investment
requirements and large amounts of capital to invest, both translating into extensive analysis
for buy-side Associates.
Recruiting
Within a few months on the job, bulge bracket investment banking Analysts begin receiving emails
from major headhunting firms. Shortly thereafter, Analysts have informational interviews with these
recruiters to discuss what sorts of exit opportunities interest them the most. Conversations focus on
types of funds, sizes of funds, locations, investment strategies, etc. If you do not hear from
headhunters before December of your first year, start reaching out by finding contacts on LinkedIn or
asking friends.
Each headhunting firm has its own set of clients. Private equity funds and hedge funds almost always
work exclusively with one headhunting firm; do not blow off any recruiters. In most cases,
headhunters are the sole point of entry to the buy-side; funds often outsource their entire recruiting
process to these companies.
Insider Insight Buy-side Recruiter Considerations

 Headhunters are the gatekeepers: get on good terms with them. Sometimes they ask you
specific technical questions or specific deal-related questions; they often pre-screen
candidates in this manner before introducing them to their best clients.
Recruiting can begin as early as March of your first year and can last for several years (depending
on how quickly you get a job).
Insider Insight Timing For Buy-side Recruiting

 Over the last few years, buy-side recruiting has started earlier and earlier as firms aim to stay
competitive and snag the best talent first. Traditionally, the largest funds in the world go on a
multi-week recruiting blitz to begin every recruiting season. After these hectic first few
weeks, the process dies down significantly and firms recruit sporadically throughout the year.
Non-Target School
Unfortunately, your undergraduate non-target school status comes into play again during buy-side
recruiting and can make it difficult to break into more well-known firms. Working at a
prestigious investment bank can help, but it does not guarantee equal footing.
Venture Capital
Venture capital is arguably the least common buy-side exit opportunity for investment banking Analysts.
There are fewer junior openings at these firms, and individuals with engineering and startup-related
backgrounds are often preferred. Positions with venture capital firms are favored by individuals with a
passion for helping young corporations. Junior employees gain valuable insight into investing in early-
stage companies.
Compensation
Venture capital firms are not known for paying employees as well as other buy-side jobs. Typical
entry-level Associates should expect all-in pay of $150k-$200k. Compensation consists of a base
salary, year-end bonus, and (more rarely) carry.
Lifestyle
Venture capital firms are known for having the best junior lifestyle of all buy-side opportunities.
Firm culture is often less formal and firms are known for having better hours (especially early-stage
venture capital funds). Associates spend a lot of time meeting with entrepreneurs and networking
with industry professionals. The job is less modeling-intensive and more focused on sourcing deals.
Recruiting
When considering investment banking candidates, venture capital firms often prefer individuals in a
bank’s technology coverage group. It is not uncommon for some firms to require an MBA.
Recruiting is somewhat independent with no set cycle, so Analysts must be proactive to come across
employment opportunities. Most headhunters that reach out to Analysts do not recruit for these types
of firms.
Internal Corporate Finance
Internal corporate finance is the broadest exit category with the most available positions. Every major
company has a corporate finance department, and they often prefer to hire former investment bankers.
The technical skills you gain as an Analyst are very valuable and are directly transferrable to positions in
these departments. Individuals interested in breaking into a specific industry (i.e. retail, entertainment,
media, technology, etc.) should consider these positions.
Compensation
Corporate finance compensation is usually significantly lower than other exit opportunities (even
investment banking). These companies do not realize buy-side investor profits and cannot pay
employees as well, especially at the junior level. Compensation at these firms varies widely, but ex-
investment banking Analysts can expect to make around $80k-$120k at more well-known companies.
Insider Insight Corporate Finance Compensation

 Internal corporate finance roles offer very little room for increases in compensation. This is a
major difference between these positions and buy-side opportunities; year-over-year increases
in pay are minimal in comparison.
Lifestyle
Internal corporate finance positions offer the best work-life balance among the exit opportunities
listed here. The average employee at these companies works nine-to-five, so employees in the
corporate finance department will not be working 100-hour weeks. Corporate finance employees can
expect to work 50-70 hours per week, on average. However, during big deals, corporate finance
employees are known to work hours that are similar to those in banking (but this occurs infrequently).
Company culture varies by industry, but employees are generally treated very well and exhibit
stronger loyalty towards their employer.
Recruiting
Some of the same headhunters that recruit candidates for buy-side positions also recruit for these jobs.
However, since so many positions exist, a significant amount of the search needs to be conducted
independently. To find open positions, browse company websites and well-known online job boards
(Monster, CareerBuilder, etc.).
Business School
After 2-3 years in investment banking, business school is a viable option. This route is worth
consideration for candidates interested in switching industries or those uncertain of what they want to do
next. For those that plan to stay in banking, business school is a way to take a “vacation” (although
expensive) and better position oneself to lateral to another firm.
The process of entering a top MBA program is more competitive when coming from a finance
background. Candidates will need a high GMAT score and undergraduate GPA to stand out. In general,
it is more difficult to get into a top business school with only investment banking Analyst experience.
Entrepreneurship
For those with an entrepreneurial spirit, working as an investment banking Analyst provides many
advantages. Individuals learn relevant skills related to company valuation and accounting, as well as how
to find investors, how to create marketing materials, and overall deal processes. On top of this, the job
provides a rare inside look at very successful companies (and unsuccessful ones, too).
Working in investment banking also provides a worthwhile capital base, making dreams of
entrepreneurship realizable more quickly.
Part V
Technical Concepts & Interview
Questions
Chapter 21: Technical Guide – Accounting, Valuation & More
Any junior level employee at an investment bank, private equity firm, venture capital firm, hedge fund, or
even corporate finance department of a company needs to understand the fundamentals of how to conduct
technical analysis. Rather than provide you with a textbook-sized instruction manual, we have condensed
the most important technical concepts that you need to know into the following pages. Review these
concepts and understand their usage, as this knowledge will be tested extensively during almost every
interview.
(21.1) Accounting Overview

Accounting is an essential component of any job that requires an individual to conduct financial analysis.
It is known as the “language of business” for a reason: without a basic knowledge of the financial
statements, how they are structured, and how they interact with one another, it is impossible to perform
even the most basic financial analysis.
In this section, we provide a basic introduction to the most relevant and important accounting concepts as
they pertain to finance interviews and the job. In conjunction with these basics, we recommend serious
candidates take one or more university-level courses in managerial and/or financial accounting.
Accounting is a driving force behind the financial statements reported by every company. Below we
outline the three major financial statements: Income Statement, Statement of Cash Flows, and Balance
Sheet. As an investment banker or other finance professional, you can expect to work with these
statements every day.
Income Statement
The Income Statement presents the results of a company’s operations for a given period of time. It lists
the major sources of income (revenues), costs of doing business (expenses), taxes, and ultimately ends
with profits or losses (Net Income). Net Income can be defined as a company’s earnings to which owners
of the company have a claim. The Income Statement provides the necessary line items to conduct
analyses regarding expenses, revenue growth, and margins.
The major items listed within the Income Statement include:

• Revenue: money received from normal business activities.
• Gross Profit: revenue less direct cost of selling the goods or providing the service that resulted in
the revenue.
• Operating Income (“EBIT”): profit earned from the normal course of business after deducting
operating expenses (or Earnings before Interest and Taxes).
• Pre-Tax Income (“EBT”): profit earned after taking into account all income and expenses (from
the normal course of business and from ancillary activities), before factoring in income taxes.
• Net Income: profits or losses that owners of a company have a right to.
In the world of finance you will hear investment bankers and other professionals refer to Earnings before
Interest, Taxes, Depreciation & Amortization, or “EBITDA”. This is a very popular metric to use when
analyzing a company’s operating performance over time as it not only serves as a rough proxy for a
company’s cash flows, but it also eliminates ancillary business activities and is relatively immune to
accounting manipulation. Everything “below the line” (Interest, Taxes, D&A) has little to do with the
company’s performance, so eliminating those line items from the metric allow for a purer analysis of how
efficiently a company is being operated.
Insider Insight Above & Below “The Line”
 People often refer to an item on the Income Statement being “above or below the line”. The
“line” is usually drawn at EBIT (operating income), which means that expenses incurred
“above” EBIT are “above the line”, and expenses that occur “below” EBIT are “below the line”.
 “Above the line” expenses are operating expenses and include items such as D&A, SG&A,
marketing expense, payroll expense, and COGS. “Below the line” expenses are non-operating
expenses and include items such as interest expense, other gains or losses, lawsuits, etc.
To get to EBITDA, you simply add back any Depreciation & Amortization expense to EBIT. The figure
below is a sample Income Statement:
Income Statement
For the 12 Months Ended December 31, 2013
Fiscal Year End
12/31/13 12/31/12
Sales $120 $110
COGS (35) (30)
Gross Profit $85 $80
Operating Expenses:
General & Administrative (25) (22)
Payroll Expense (10) (8)
Depreciation & Amortization (8) (8)
Marketing Expense (10) (14)
Total Operating Expenses ($53) ($52)
Operating Profit (EBIT) $32 $28
Other Income / (Expenses) (1) (2)

Interest Expense (8) (8)
Pre-Tax Income (EBT) $23 $18
Tax Expense (9) (7)

Net Income $14 $11
EBITDA $40 $36
Statement Of Cash Flows
The Statement of Cash Flows (or “Cash Flow Statement”) presents a company’s inflow and outflow of
cash over a period of time. More specifically, the statement shows how changes in the Balance Sheet and
Income Statement affect the company’s cash balance.
Finance professionals often note the Statement of Cash Flows as their “favorite statement” due to its high
degree of transparency; it cannot be easily manipulated by accounting tricks and therefore paints the
clearest picture of a business’s overall health. For example, a company might boast high Net Income
on the Income Statement but at the same time be hemorrhaging cash from various investments or
financing activities. The Statement of Cash Flows accurately portrays the amount of cash going in and
out of the business and helps address questions related to maintaining current growth, capital structure
decisions, and solvency.
The major items listed within the Statement of Cash Flows include:
Operating Activities Investing Activities Financing Activities
 Calculates cash inflows and  Calculates cash inflows and  Calculates cash inflows and
outflows from operations outflows from acquisition or outflows from finance-related
 Begins with Net Income divestiture of long-term assets activities
 Add back non-cash expenses  Purchase or sale of land,  Issuance or buyback of new
(D&A, stock-based comp) buildings, or factory equipment or existing debt
 Add or subtract changes in  Acquisition or sale of small  Stock issuances or buybacks
Working Capital companies or properties  Cash dividends to
 Purchase or sale of available- shareholders
for-sale securities
NOTE: Above, we mention Working Capital. For a detailed description of how to calculate Working
Capital, see the Balance Sheet section on the following page.
After each section of the Statement of Cash Flows is calculated, they are added together to get the overall
Net Change in Cash for the period. An example Statement of Cash Flows is provided below:
Statement of Cash Flows

For the 12 Months Ended December 31, 2013
FYE
12/31/13
Cash Flows from Operating Activities:
Net Income $14
Depreciation & Amortization 8
Change in Working Capital (7)
Cash from Operating Activities $15
Cash Flows from Investing Activities:

Purchase of Equipment (20)
Sale of Building 17
Cash from Investing Activities ($3)
Cash Flows from Financing Activities:

Dividend to Shareholders (7)
Paydown of Debt (9)
($16)
Change in Cash ($4)
Beginning Cash Balance 22

Ending Cash Balance $18
Although not directly listed on the financial statements, an important metric in corporate finance is Free
Cash Flow. Its exact meaning and calculation can differ, but generally this term refers to cash available
to the company before any sort of financing activities are taken into consideration. Below we outline a
short-form method of calculating Free Cash Flow:
FCF = Cash from Operating Activities – Cash from Investing Activities
In the formula above, Cash from Investing Activities can be replaced by capital expenditures, but the two
should generally be interchangeable. A more detailed calculation for Free Cash Flow (particularly,
unlevered Free Cash Flow) is located in Section (A.6).
Insider Insight Free Cash Flow

 Free Cash Flow is an important metric for determining the sustainability of a company’s
operations: several quarters or years of consistently negative FCF implies a need for external
financing sources (such as a loan or issuing new equity). A company can only survive for a
finite period of time if it cannot produce positive FCF.
Balance Sheet
In simple terms, the Balance Sheet presents a company’s current financial state in the form of assets,
liabilities, and ownership. The Balance Sheet reflects a company’s assets measured against the claims of
its creditors and shareholders at a set point in time. A key aspect of the Balance Sheet is that it
ALWAYS properly balances based on the below formula:
Assets = Liabilities + Owners’ Equity
Examples of each account include:
Assets Liabilities Owners’ Equity
 Cash & Equivalents  Accounts Payable  Retained Earnings

 Accounts Receivable  Salaries Payable  Non-Controlling Interests
 Inventory  Income Taxes Payable  Additional Paid-in Capital
 Prepaid Expenses  Accrued Expenses  Accumulated Other
 Property, Plant & Equipment  Long-Term Debt Comprehensive Income
 Goodwill
 Intangible Assets
Below is an example of a Balance Sheet with relevant line items bolded:
Balance Sheet
As of December 31, 2013
Assets Liabilities & Equity
Cash & Equivalents $18 Accounts Payable $14
Accounts Receivable 12 Salaries Payable 9
Prepaid Expenses 8 Accrued Expenses 10
Income Tax Receivable 4 Current Portion of Debt 7
Current Assets $42 Current Liabilities $40
Property, Plant & Equipment $100 Long Term Debt 55

(Less: Depr. & Amort.) (25) Other Long Term Liabilities 4
Net PP&E $75 Total Liabilities $99
Other Long Term Assets 17 Stockholder's Equity $35
Total Assets $134 Total Liabilities & Equity $134
Assets and Liabilities can be divided between current and long-term accounts. Current Assets and
Current Liabilities are needed to calculate Working Capital, an important accounting concept that
measures the short-term financial health of a company. A specific form of Working Capital called
“Operating Working Capital” is frequently used when creating a financial model.
Working Capital = Current Assets – Current Liabilities
Operating Working Capital = (Current Assets – Cash) – (Current Liabilities – Current Portion of
Long-Term Debt)
Current Assets Current Liabilities
 Cash  Accounts Payable

 Accounts Receivable  Accrued Expenses
 Inventory  Income Taxes Payable
 Prepaid Expenses  Current Portion of Long-Term Debt
 Other Current Assets
Beyond Working Capital, the Balance Sheet provides other useful metrics such as the Book Value of
Equity and the Book Value of Debt. Though the Book Value of Equity is often very different from the
Market Value of Equity, it becomes a useful metric when valuing insolvent companies.
The Balance Sheet provides the link between the three financial statements. It is vital to understand how
the statements flow together, so refer to Section (23.1), Question 1 which covers in more detail how the
financial statements are interconnected.
(21.2) Financial Ratios

Financial ratios are important metrics used to evaluate a company’s performance over time. They are
useful in determining company trends and improvements/digressions by analyzing how they change over
time. Financial ratios are also useful in comparing the operating and financial performance of one
company to another (to see how they stack up against one another). The major types of ratios include
Solvency/Liquidity Ratios and Profitability/Efficiency Ratios.
Solvency & Liquidity Ratios
Solvency and Liquidity Ratios are used to determine a company’s ability to remain financially stable and
pay back its short-term (“liquidity”) and long-term (“solvency”) debt obligations. Investors pay close
attention to these ratios that show a company’s financial risk and seek companies that display a high
probability of being able to pay them back over time.
Below we outline some of the most common and important Solvency & Liquidity Ratios:
Solvency & Liquidity Ratios
Name Ratio Description Prefer Higher / Lower Type of Ratio
Debt Equity available to "pay back"
Debt to Equity Lower Solvency
Equity debt obligations
Cash Cash available to cover short-

Liquidity Ratio Higher Liquidity
Total Current Liabilities term liabilities
Cash + A/R Assets that could be quickly

Quick Ratio liquidated to cover short-term Higher Liquidity
Total Current Liabilities liabilities
Total Current Assets Current assets that could be

Current Ratio used to cover current Higher Liquidity
Total Current Liabilities liabilities
Profitability & Efficiency Ratios
Profitability and Efficiency Ratios are used to examine how well a company manages its assets and
liabilities and its ability to earn a high return on those assets. On a single-company basis, these ratios are
important because changes in efficiency will often eventually hit the bottom line and directly affect
profitability. When comparing multiple companies, these ratios can be used to help compare the
effectiveness of management teams and determine which companies are being run well versus those that
have room for improvement.
Below we outline some of the most common and important Profitability & Efficiency Ratios:
Profitability & Efficiency Ratios

Name Ratio Description Prefer Higher / Lower Type of Ratio
Sales How quickly inventory is sold
Inventory Turnover Higher Efficiency
Inventory to customers
COGS How quickly Accounts

A/P Turnover Higher Efficiency
Average A/P Payable is paid
Accounts Receivable How long on average does it

Days Sales Outstanding Lower Efficiency
Sales x 365 take to collect A/R
Gross Profit How much profit is earned

Gross Profit Margin Higher Profitability
Sales from sales
Net Income Profits relative to the amount

Return on Equity Higher Profitability
Shareholder's Equity of company equity
(21.3) Introduction To Valuation
Valuation is the bread and butter of the buy-side and sell-side world. Understanding how to properly
value a company or investment is an important talent that distinguishes the skill sets of finance
professionals. In this section we highlight the three most commonly used methods of valuation and dive
into each:
• Public Comparables (or “Comparable Companies” or “Equity Comparables”)
• Transaction Comparables (or “M&A Comparables”)
• Discounted Cash Flow Analysis
Before digging into each valuation method, it is important to have a clear understanding of Equity Value
and Enterprise Value.
Enterprise Value vs. Equity Value
“Enterprise Value” (or “Firm Value”) measures the value of the company as a whole (the value
attributable to all parties). It includes the value attributable to equity holders PLUS any debt holders,
preferred equity holders, and other parties not captured in the common equity account. Equity Value, on
the other hand, measures only the value available to equity holders in the company.
Enterprise Value = Market Value of Equity + Market Value of Debt – Cash & Equivalents +
Preferred Stock + Non-Controlling Interests – Investments in Associated Companies
In the above formula, there is sometimes confusion as to what is meant by non-controlling interests and
investments in associated companies. Below are some simple ways to think about each concept:
• Non-Controlling Interests: reflect the claims on another company’s assets that have been
consolidated into the operations of the firm being valued. This amount represents the un-owned
portion of majority-owned subsidiary companies (i.e. the firm in question owns more than 50%,
but less than 100% of a subsidiary; the difference is known as “non-controlling interest”).
• Investments in Associated Companies: reflect the claims on assets that have been consolidated
into other firms. This amount represents the portion of other companies that a firm owns a
significant percentage of (i.e. 20-50%), but whose earnings have not been consolidated into the
firm in question’s. Therefore, these large investments in other companies are excluded from the
Enterprise Value formula of the firm being valued.
Equity Value can be derived by reaching Enterprise Value and then back-solving for Equity Value, or it
can be calculated for public companies using a more traditional method:
Equity Value = Diluted Shares Outstanding x Share Price
Note: The following valuation methods are most often used to derive a company’s Enterprise Value (the
value of the entire company).
(21.4) Public Comparables Analysis

Public Comparables Analysis (or “Comparable Companies Analysis”) is a form of valuation which
infers that similar companies will exhibit similar valuation multiples. To perform this type of
valuation, an Analyst first finds a peer group of companies similar to the company they wish to value.
When determining a peer group, it is common to choose “comparables” based on the following criteria:
• Industry: are the companies in the same industry/sub-industry group? In most cases, the peer
group will start with companies in the same industry and then hone in on more of the criteria
below.
• Size: do the companies have a similar number of employees? Are they similar in their overall
market share? Are revenue figures in the same ballpark?
• Geography: are the companies located in the same region? Are they serving the same customers?
• Product/service mix: do the companies offer similar products and/or services to their potential
customers? Do they face similar risks and growth opportunities?
• Maturity: are the companies in the same stage of their corporate life cycle? Is a startup company
being compared to Coca Cola?
• Financial Metrics: do the companies have similar debt levels, financial ratios, etc.?
After finding a good set of similar companies, one then analyzes the financial metrics and valuation
multiples of this peer group to determine what types of multiples should be applied to the target company.
Common valuation multiples include:
• EV/Sales
• EV/EBITDA
• EV/ FCF
• Price/Earnings Per Share
• Price/Earnings/Growth (“PEG Ratio”)
Taking the average or median of the comparable company valuation multiples can be useful, but a more
thorough analysis of the target company’s financial performance and capital structure compared to each
company yields more accurate results. For example, are certain EV/EBITDA multiples higher or lower
for certain companies in the comparable set? If so, why? Do certain companies have higher EBITDA
margins or more sales growth, and is that driving higher or lower valuation multiples? Let us look at the
following example:
Public Comparables Analysis

($ in millions, except per share data)
Firm Equity Total Net Revenue EBITDA Debt /

Company Name Value Value Debt Rev. EBITDA FCF Income Growth Margin EBITDA
Company A $2,200 $1,600 $700 $2,000 $300 $180 $200 3.2% 15% 2.3x
Company B $1,025 $375 $700 $1,100 $198 $105 $55 1.5% 18% 3.5x
Company C $3,450 $2,600 $1,000 $2,500 $425 $270 $225 8.9% 17% 2.4x
Average $1,867 $308 $185 $160 4.5% 17% 2.7x
Firm Value / Price /

Company Name Revenue EBITDA FCF EPS
Company A 1.1x 7.3x 12.2x 8.0x
Company B 0.9x 5.2x 9.8x 6.8x
Company C 1.4x 8.1x 12.8x 11.6x
Average 1.1x 6.9x 11.6x 8.8x
Implied Firm Value Using Total Net Revenue EBITDA Debt /

Revenue EBITDA P/E Debt Revenue EBITDA FCF Income Growth Margin EBITDA
Private Company D $853 $1,031 $839 $200 $750 $150 $90 $75 3.0% 20% 1.3x
Let us assume that Companies A-C are comparable companies, and we are trying to extract a valuation
for Private Company D (also similar to Companies A-C). We can determine an Enterprise Value for
Private Company D based on any or all of the three multiples calculated. Applying each, we get:
Enterprise Value/Revenue
1.1x EV/Revenue * $750 = ~$853 million
Enterprise Value/EBITDA
6.9x EV/EBITDA * $150 EBITDA = ~$1,031 million
Price/Earnings
8.8x P/E * $75 Net Income = $659 equity
+ $200 debt – $20 cash = ~$839 million
Notice in the P/E ratio we must add debt and subtract cash to reach Firm Value (Enterprise Value) as the
P/E ratio only gives you Private Company D’s Equity Value.
Applying simple averages of the valuation multiples from Companies A-C might not be the most accurate
method of valuing Private Company D, though. One must take into consideration Private Company D’s
overall size, revenue growth, EBITDA margin, Debt/EBITDA ratio, and other factors and compare these
items to the set of peer companies to determine which valuation multiples are most applicable to Private
Company D.
(21.5) Transaction Comparables Analysis

Transaction Comparables Analysis (or “M&A Comparables”) uses past transactions of comparable
companies to infer a valuation for a target company. It is very similar to Public Comparables Analysis,
however rather than comparing companies themselves, an Analyst compares transactions (such as
acquisitions, mergers, IPOs, etc.) and the valuation levels achieved.
When looking for a peer group of transactions, Analysts look for those involving companies with similar
businesses, as well as other selected criteria (discussed below). At the most basic level, if an investment
banker was working with a client that is a potential acquisition target, he would start by finding similar
acquisitions from the past few years with companies in the same industry as their client, of the same size,
etc. Below we outline common company traits used to build a transaction comp group:
• Industry: are the companies involved in the transaction from the same industry/sub-industry
group as the company being valued?
• Geography: is the transaction executed by companies in the same region as the company being
valued? International transactions (and/or cross-border transactions) may differ in their
comparability to domestic transactions.
• Date: has the transaction occurred recently? Was the economic environment similar to the
current economic environment? Transaction multiples can vary widely from year-to-year; it is
important to compare transactions during similar economic cycles. Comparing acquisitions from
Fall 2006 (economic boom) to those in Spring 2009 (deep recession) will yield very different
valuation multiples.
• Transaction Size: is the size of the transaction similar to the one being contemplated?
Comparing a $1 billion acquisition with a $50 million acquisition is not ideal. Each one has
different implications, including the importance/change in market share that could come about
from a much larger transaction.
• Consideration: how was the acquisition paid for? Was it an all-stock deal? Was it 50/50
cash/stock? This is a less important comparison, but sometimes companies will inflate their
valuation (and are willing to pay more for a company) in an all-stock deal.
• Hostile vs. Friendly: was the comparable acquisition a hostile or friendly takeover? Hostile
takeovers almost always result in higher valuation multiples (given the fact that the target
company does not want to be acquired).
After coming up with a list of relevant transaction comps, financial Analysts then look to see if any
trends exist in the valuation multiples of these transactions. The goal is to determine which financial
metrics were used to value the transactions. Are companies being valued according to Earnings, Revenue,
EBITDA, or something else? Sometimes industries carry specific metrics that are used in valuation
(such as EBITDAR or Price per Key).
Next, Analysts break down the transactions by the details of each company to find averages, medians,
highs, and lows among the data. Metrics typically included are:
• Enterprise Value or Transaction Value or Equity Value: depending on the transactions being
compared, this metric will differ. For example, if IPO transactions are being compared for a
company that plans to go public, then an Analyst would care most about Equity Value (as this is
the value attributable to an IPO). However, if comparing acquisitions for a company that seeks to
get bought out, then one would want to compare Enterprise/Transaction Value (as this is the
relevant metric for an acquisition).
• Revenue: dollar amount, % growth, etc.
• EBITDA: dollar amount, % growth, % margin, etc.
• EBIT: dollar amount, % margin
• Earnings (Net Income): dollar amount, % growth, EPS, % margin, etc.
• Free Cash Flow: dollar amount, % margin, % growth
Once the key valuation and operating metrics have been discovered, Analysts will compile relevant
transaction multiples such as EV/EBITDA, EV/Revenue, Equity Value/Net Income (or P/E), etc.
Multiples are then averaged across the peer group and a range will be determined. Finally, valuation is
inferred by applying the target company’s financial metrics (EBITDA, Net Income, Revenue, etc.) to this
range of average multiples. Below is an example of a set of comparable transactions that have been
spread:
Transaction Comparables Analysis

($ in millions)
Date Purchase Enterprise Enterprise Value / LTM

Announced Acquirer Target Consideration Value Revenue EBITDA
8/1/13 Toy Story Co. Finding Nemo Inc. Cash $530 1.2x 7.4x
7/12/13 Muppets Co. Wall E Inc. Cash $780 0.9x 6.9x
4/3/13 Cars Co. Planes Inc. Cash / Stock $950 1.4x 7.5x
9/20/12 Lion King Co. Air Bud Inc. Cash $1,700 0.7x 6.5x
2/8/12 Dalmatians Co. Fantasia Inc. Cash $650 1.4x 7.6x
10/20/11 Hercules Co. Jungle Book Inc. Cash $800 1.5x 7.7x
Mean 1.2x 7.3x

Median 1.3x 7.5x
High 1.5x 7.7x
Low 0.7x 6.5x
In this example, the appropriate mean or median Enterprise Value multiples would be applied to the
Revenue and/or EBITDA figures of the company being valued to arrive at an implied Transaction Value.
(21.6) Discounted Cash Flow Analysis
Arguably one of the most common types of valuation, Discounted Cash Flow (or “DCF”) Analysis is a
useful method to break down the value of a business’s operations. In simple terms, a DCF is a short-
form model that projects out future FCF of a business and then discounts that cash flow back to the
present using a set discount rate.
A DCF can be broken down into three important components:

1. Discount rate (WACC)
2. Free Cash Flow
3. Terminal Value
Before diving into each, it is important to understand the concepts of present value and discount rates.
Present Value & Discount Rates
The fundamental premise behind present value calculations is simple: individuals prefer to have money
today rather than money tomorrow because they can invest the money today and earn a return going
forward. When calculating the present value of an amount to be received in the future, one must always
assume a required rate of return that an investor would demand. This assumed rate of return is known as
the discount rate, Weighted Average Cost of Capital (“WACC”), or the hurdle rate (all
interchangeable). A discount rate can also be thought of as the amount of interest someone assumes they
could earn on an investment.
It is important to recognize that the discount rate and present value are inversely related: the higher the
discount rate, the lower the present value (and vice versa).
To see how this works in practice, let us look at an example.
Example
Assume an individual receives a gift of $100 today. If that person has an annual discount rate of 10%
(in other words, he believes he can earn an interest rate of 10% per year on his money), then investing
that $100 today at an interest rate of 10% would result in $110 in his bank account at the end of one
year. Therefore, this individual should be indifferent between receiving $110 one year from now and
receiving $100 today. Below is the formula for a present value calculation:
payment
PV =
(1 + r) ^ t
Where:
payment = amount of money to be received (also known as future value)
r = discount rate
t = length of time until you receive the payment***
In this case, payment = $110, r = 10%, and t = 1, getting us to a present value of $100.
***Typically, this will be in years, though it is important to match the discount rate period with the
time period of the payments. For example, if there is an annual discount rate of 10% but payments
are monthly, then the discount rate must be converted to a monthly rate. To do this, utilize the
following formula:
Effective rate for period = (1 + annual rate) (1 / # of periods) – 1
Per the formula, an annual discount rate of 10% translates into a monthly discount rate of 0.797%.
Discount Rate (Weighted Average Cost of Capital)
With a basic introduction to present value, it is now possible to move on to a vital component of the
DCF process: the discount rate or Weighted Average Cost of Capital (“WACC”). WACC is the
formula used to calculate a discount rate, and it consists of several parts: cost of equity, cost of debt,
and cost of preferred equity (if applicable):
Cost of Debt Cost of Equity Cost of Pref.

D E P
WACC = [rd * (1 - t)] * + re * + rp *
(D + E + P) (D + E + P) (D + E + P)
Where:
re = cost of equity
rd = cost of debt
rp = cost of preferred equity
t = tax rate
D = market value of debt
E = market value of equity
P = market value of preferred equity
Notice above that each respective discount rate is multiplied by its proportion of the total capital
structure of a company. We demonstrate this formula in the example below:
Example
Company A has a market value of equity of $500 million and $200 million of debt. Assuming a
cost of equity of 15%, a cost of debt of 10%, and a tax rate of 40%, calculate Company A’s WACC.
WACC = (.1 * .6) * ($200 / $700) + .15 * ($500 / $700)

WACC = 12.4%
We multiply the cost of debt by (1 – t) because interest expense paid to creditors is tax
deductible. If you were to pay equity investors a return (i.e. as a cash dividend), this would not be
tax deductible and would not be listed on the Income Statement (whereas interest expense is).
Finding a figure for the cost of debt is relatively straight-forward: the cost of debt should be the
weighted average yield on all outstanding debt within the company. If no market prices of debt
are publicly available, then taking a weighted average of the company’s interest expense to its book
value of debt is usually accurate enough.
To find the cost of equity, we use a formula known as the Capital Asset Pricing Model (or CAPM).
CAPM = rf + β * (rm - rf )
Where:
rf = risk free rate (equal to U.S. Treasury Bill with maturity equal to length of DCF, usually 10 years)
β = levered beta of the company’s equity
rm = expected return of the stock market
In the CAPM formula (rm – rf) is known as the market risk premium: this is the excess return that
the market demands given the risk of equity. Historically, the expected return of the market has
hovered around 7%, which results in a market risk premium in the 3-5% area. Levered Beta is a
measure of the individual stock’s volatility compared to the stock market (i.e. the S&P 500). If a
company has a Beta of 1.5, then for every 1% increase in the overall market, there should be 1.5%
increase in that company’s stock price (and vice versa). The riskier a stock is, the higher its Beta.
To find an applicable levered Beta for your stock you must:

1. Find the levered Betas for comparable companies (located online or via paid subscription)
2. Unlever the Betas of those companies
3. Find the average and/or median of the unlevered Betas
4. Re-lever the Beta using your specific company’s capital structure (using its mix of debt, equity,
and preferred equity)
The formulas for unlevering and levering Beta are below:
βL
Unlevered β =
1 + [(1 - t) * (D / E)]
Levered β = βU * [1 + [(D / E) * (1 - t)]]
Where:
βL = levered Beta
βU = unlevered Beta
t = corporate tax rate
Once levered Beta is obtained for the company being analyzing, plug in the other parts of the CAPM
formula to find the cost of equity. The risk free rate is the rate that investors demand with no real
default risk on their investment; the typical proxy used is the interest rate on a U.S. Treasury Note or
U.S. Treasury Bond.
Free Cash Flow
After finding a proper discount rate to be applied to a DCF, the next step is calculating unlevered free
cash flow and projecting it into the future. Unlevered FCF represents a company’s cash flows before the
effects of interest payments on debt. For this reason, unlevered FCF represents the purely operational
cash flows of the business, independent of its capital structure. This means that the exact same company
with $100 million of debt vs. $800 million of debt would have the same unlevered FCF (since interest
expense on the different debt levels is not deducted from cash flow figures). Note that this difference in
capital structure (debt) WOULD affect the discount rate and equity value calculations, though. Unlevered
FCF is calculated as follows:
(EBITDA - D&A) * (1 - t) = Tax-effected EBIT

Unlevered FCF = then
Tax-effected EBIT + D&A - Capital Expenditures - Working Capital Increase
As described above, we use unlevered FCF because it represents the cash flows available to the business
as a whole and provides the fundamental value of the business’s cash flows, regardless of capital structure
and debt levels. The value obtained in a DFC using unlevered FCF is the company’s Enterprise Value.
On the other hand, conducting a DCF using levered FCF will produce the company’s Equity Value; you
would discount levered FCF by the cost of equity, excluding the cost of debt or preferred equity.
To project unlevered FCF into the future, one does not simply add a growth rate to a company’s historical
unlevered FCF. Instead, projections involve specific revenue growth, balance sheet, and margin
assumptions. Typically, an Analyst will assume certain growth rates for revenues while increasing or
decreasing margins (decreasing or increasing expenses as a % of revenue) to arrive at projected EBITDA.
Future capital expenditures and working capital can be calculated as a % of revenue or other line items, or
can be built out with detailed capital expenditures schedules and full three-statement models. In these full
models, line items of the Balance Sheet are calculated year-to-year to arrive at the change in Working
Capital. The tax rate should remain constant.
When building a DCF, cash flows and other operating figures are typically projected out 5-10 years into
the future to ensure that a company’s cash flows are stabilized by the time a terminal value is calculated.
As we will discuss shortly, DCF valuation is highly dependent on the terminal value, a figure that
represents a company’s cash flows to infinity (in other words, over an infinite period of time). It is very
important to project out enough operating years so that this “infinite” terminal figure is stable and not
inflated. Note that DCF projections can go out further (15-20 years) if dealing with a very early stage
company, though this is not very common (nor are extended projections very accurate).
Terminal Value
The final piece in a DCF valuation is the terminal value calculation. Terminal value represents the
present value of the company’s unlevered FCF’s beyond the DCF’s projection period (into infinity). At
this point, the company’s cash flows are assumed to be stabilized.
Insider Insight Present Value of the Terminal Value

 The terminal value is not the present value TODAY; it represents the present value at the
end of the DCF projection (5-10 years away). For this reason, one must discount the
terminal value back to the present day (today), as well. This “double present value”
calculation is often forgotten when walking through a DCF during interviews.
The terminal value usually represents a majority of the value calculated in a DCF, making it a very
important part of the analysis. Small changes in discount rate, growth assumptions, exit multiples, or
other factors can cause major swings in overall valuation from the DCF.
There are two major methods of calculating the terminal value: the perpetuity growth (or Gordon
Growth) and exit multiple methods.
Perpetuity Growth Method
The perpetuity growth method utilizes the present value formula for a series of cash flows that are
received forever (i.e. “into perpetuity”). The present value formula for a payment or cash flow
received into perpetuity is below:
FCFn * (1 + g)
PV =
r-g
Where:
FCFn = terminal year unlevered FCF
g = growth rate
r = discount rate
Notice in the formula above that one must multiply the final year’s free cash flow by (1 + g) to get the
following year’s unlevered FCF under the assumed growth rate. How is a proper growth rate
determined? A growth rate in the 2-5% range is the most common, as going any higher would
infer that the company would drastically outgrow the U.S. economy (given historical GDP growth
rates), and would eventually be larger than the economy as a whole. Thus, FCF projections are
usually carried out until assumed growth rates reach this range in the DCF model.
Exit Multiple Method
The exit multiple method assumes the company will be sold at the end of the projection period
and uses Enterprise Value multiples to estimate the value at this time. Depending on whether or not
the company will “exit” via a sale, M&A Comparables can be used to find the appropriate Enterprise
Value multiples. The most common valuation multiple used is EV/EBITDA, with EV/EBIT,
EV/FCF, and EV/Revenue also occasionally being used.
To find the terminal value, simply multiply the proper valuation multiple by the final year’s EBITDA,
Revenue, unlevered FCF, or other statistic. Do not forget, this terminal value must still be discounted
back to the present.
Insider Insight Exit Multiple Method

 The exit multiple method is more commonly used than the perpetuity growth method due
to its more accurate and measurable nature.
 The exit multiple method uses actual public and transaction comps to find exit multiples
while the perpetuity growth method relies on a growth assumption over an infinite time
period (the proper growth rate to assume is always open to debate).
Step-By-Step
Below we recap the steps of completing a Discounted Cash Flow Analysis:

1. Obtain the discount rate using WACC (and finding the cost of equity using CAPM).
2. Project unlevered FCF 5-10 years into the future.
3. Calculate the terminal value using the Exit Multiples Method or Gordon Growth Method.
4. Discount future unlevered FCF’s and the terminal value back to the present.
5. Sum all of the present values to reach your company’s Enterprise Value.
6. If looking for Equity Value, simply back-solve by subtracting the company’s current debt balance
and add its cash balance (from the Enterprise Value formula); adjust for non-controlling interest,
preferred equity, or investments in associate companies, if applicable.
To see all of these components in action, study the following example of a short-form DCF analysis:
Discounted Cash Flow Analysis
WACC 12% 1 2 3 4 5
Terminal
Year 1 Year 2 Year 3 Year 4 Year 5 Value
Revenue $100 $105 $110 $116 $122 $128
Less: Operating Expenses (48) (50) (52) (54) (55)
EBITDA $52 $55 $58 $62 $67
Less: Depreciation & Amortization (12) (12) (12) (12) (12)
EBIT $40 $43 $46 $50 $55
Less: (1 - T) (16) (17) (19) (20) (22)
Tax-Effected EBIT $24 $26 $28 $30 $33
Plus: Depr. & Amort. 12 12 12 12 12

Less: Capital Expenditures (15) (14) (13) (12) (11)
Less: Increase in Working Capital (3) (2) (4) (2) (3)
Unlevered Free Cash Flow $18 $22 $23 $28 $31
Terminal Value (Avg. of Exit Mult. Method & Gordon Growth) $467
Present Value of FCF $16 $17 $16 $18 $17 $265
Enterprise Value $350
Terminal Value: Exit Multiples Method

Year 5 EBITDA $67
Formula = EBITDA * EV / EBITDA
Comparable EV/EBITDA 8.0x
Terminal Value $534
Terminal Value: Gordon Growth Method

Year 5 FCF $31 EBITDA * (1 + g)
Formula =
Assumed Perpetual Growth Rate 4.0% (g - r)
Terminal Value $401
(21.7) Capital Structure

A company’s capital structure, the way in which it is financed (or “capitalized”), is an important
financial concept and is relevant for any individual engaged in financial analysis. A company’s capital
structure will typically include some combination of debt and equity, as well as some other form of
financing such as preferred equity. A breakdown of the different components of a company’s capital
structure is located below:
Senior Secured Debt Most
(Bank Debt and often High Yield Debt) Secured
Senior Unsecured Debt

(High Yield Debt and sometimes Bank Debt)
Debt
Senior Subordinated Debt
(High Yield Debt and sometimes Mezzanine Debt)
Subordinated Debt
(Mezzanine Debt and PIK Debt)
Preferred Equity
Equity
Least
Common Equity
Secured
Debt
Debt is money borrowed by a company that it is required to pay back at a future date. The amount of debt
a company takes on varies widely, with some companies having no debt in their capital structure
(including many early-stage companies, technology companies, or other companies that have very few
tangible assets to serve as collateral). There are various types of debt, with the major categories listed
below:
Type of Debt Interest Ranking Amortization Covenants Collateral
Bank Loans Senior Secured or Interim Company

Floating Rate Maintenance
(Term Loans) Senior Unsecured payments assets
Senior Secured, Senior Sometimes

Bonds
Fixed Rate Unsecured, Senior Sub, None Incurrence company
(High Yield Debt)
or Subordinated assets
Senior Unsecured, Varies
Mezzanine Debt Varies Senior Sub, or None (usually Usually none
Subordinated incurrence)
Senior Secured, Senior
Convertible Debt Fixed Rate Unsecured, Senior Sub, None None None
or Subordinated
PIK Debt Fixed Rate Deeply Subordinated None Incurrence None
Similar to valuation multiples, there are different debt-related ratios used to measure the overall “health”
of a company’s capital structure: it is important to recognize signs that a company is taking on too much
debt or may face financial troubles in the future. Below are some examples of common debt ratios used
to analyze a company’s capital structure:
Leverage Ratios Coverage Ratios
 Total Debt/EBITDA  EBITDA or EBIT / Interest Expense

 Net Debt/EBITDA (Interest Coverage Ratio)
 Senior Debt/EBITDA  Fixed Charge Coverage Ratio
 Total Debt/Shareholder’s Equity
Generally, lower leverage ratios are better (especially from a creditor’s perspective). The lower a
leverage ratio is, the less debt the company has relative to its ability to earn money (in this case,
EBITDA). When a company’s leverage ratio gets too high, investors become concerned with the
company’s ability to pay back existing debt as well as its ability to incur additional debt in the future.
Generally, higher coverage ratios are better. Coverage ratios reflect a company’s ability to pay back
interest and other fixed charges relative to its financing (such as leases or mandatory debt amortization)
vs. its cash flow, EBITDA, or EBIT.
Example
A company has an interest coverage ratio of 1.0x. This is a bad sign as it implies that they can barely
pay back interest expense; it has no flexibility for other uses of cash (such as expansion of the
business through capital expenditures). A company in this position would be in very poor overall
financial health, likely on the brink of bankruptcy.
Equity
Subordinated to debt, equity represents ownership interest in a company and makes up the other
portion of the capital structure. Equity holders are the owners of the business; they control business
decisions and have a right to the business’s profits. Unlike debt holders, equity holders usually have no
secured interest in their investment; equity is not guaranteed by any of the business’s assets, has no
obligation to be paid back at a future date, and is the most subordinated level of capital in the overall
capital structure. This makes equity more risky than debt, but it can also yield higher returns over time.
Most people think of equity in its classic form, common stock, but there are other forms of equity as well.
Below we break down the different types of equity:
• Common Equity: Common equity is the fundamental equity within a company. Owners of
common equity shares are the owners of the business and retain a right to the company’s future
profits. When a company goes public via an IPO, this is the form of equity they are offering to the
public. Oftentimes there can be multiple classes of common stock, but at least one class carries
the voting rights of the business (and therefore controls decisions that steer the company’s
future).
• Preferred Equity: Preferred equity usually acts like a hybrid debt and equity instrument. Senior
to common equity, preferred stock usually carries no voting rights in the business and sometimes
carries a dividend payment to be received quarterly or semiannually (usually senior to any
common equity dividends to be paid). Unlike debt, preferred equity has no maturity date and it
often has the ability to convert into common equity at a set strike price.
• Contingent Equity Interests: Contingent equity interests consist of rights to future equity stakes
within a company. Common examples include convertible debt, restricted stock grants, equity
warrants, and stock options. Holders of these contingent interests do not have any current control
or claim over the business, but they could in the future. It is important to understand what sort of
contingent equity interests exist within a company as it can greatly affect share dilution.
(21.8) Options
An option is a financial contract that gives the buyer the right (not the obligation) to buy or sell a
specified financial instrument or asset at a specified price (“strike price”) before a specific date. The
seller of the option (usually a financial institution) is paid a fee for the contract and must fulfill the
transaction if it is exercised by the buyer: thus, they have the obligation (not the right) to fulfill the
transaction if exercised by the buyer.
Options play many roles in financial markets, but this section will focus on their application to financial
analysis. Our goal is to focus on aspects most relevant to finance interviews and on-the-job as an
investment banker. Therefore, we will not discuss option pricing, Black-Scholes, or other technical
valuation information. Instead, the focus of this section will be on how options affect share dilution
and why this is relevant when analyzing a company’s financial performance.
Going forward, any mention of “options” will be referring to the type issued by corporations (to
their employees). These are different than the options mentioned above in that they are not standard
option contracts that are bought and sold in a secondary market over price speculation. Company-issued
options are granted as incentive compensation to executives and other employees at no expense to the
employees themselves. This method of compensation aims at aligning corporate goals with individual
incentives, and serves as a form of non-cash compensation (desirable for a company that wants to retain
more cash). Beyond options, “restricted stock awards” are another form of non-cash, stock based
compensation in which company shares are granted directly to employees with no strike price, but cannot
be transferred until a set period of time has passed. Both employee stock options and restricted stock
become exercisable after a set period time (known as “vesting”).
When analyzing a company’s earnings, one must take into account any potential share dilution from the
exercise of these employee options and restricted stock awards. The main method of calculating share
dilution is via the Treasury Stock Method. The Treasury Stock Method is a way of incorporating
unexercised “in-the-money” options (when the exercise price of the option is lower than the current price
of the stock) into a company’s fully diluted share count. This method assumes that the proceeds a
company receives from the exercising of options are used to repurchase common shares. Refer to the
following example for an illustration of this concept:
Example
Company stock price = $20

Common shares outstanding = 1,000
Employee options outstanding = 100
Average strike price per option = $10
Notice that in this scenario, the options are in-the-money (stock price of $20 > option exercise price
of $10). Before incorporating the buyback of any shares, the company’s fully diluted share count is
1,100 (1,000 common shares + 100 options in the money). Assuming that all 100 options are
exercised, the company receives $1,000 in proceeds ($10 strike price x 100 options). Using the
option proceeds, the company is able to buy back 50 shares ($1,000 / $20 per share). Thus, the net
increase in shares is 50 (100 new shares from options, less 50 shares bought back), resulting in a fully
diluted share count of 1,050.
Note: if the company’s stock price is below the strike price of the options, then they would not be
exercised (and common shares outstanding = fully diluted share count).
Restricted stock awards are typically just added to the amount of diluted shares outstanding since they
have no strike price and they are expected to vest.
(21.9) Mergers & Acquisitions

Analyzing past and future M&A activity is commonplace in investment banking. This section provides
an overview of the different types of acquisitions, and then dives into the different ways to analyze the
success or failure of each.
There are two major types of buyers in an acquisition: strategic buyers and financial buyers.
Strategic Buyers Financial Buyers
Acquire a company operating in the same (or Group(s) of investors that purchase companies
similar) industry to integrate or expand business with the purpose of earning a return on their
or eliminate competition. investment. Unlike strategic buyers, financial
buyers are not operating companies. These
buyers are behind most LBO (Leveraged Buyout)
transactions.
Examples Examples
 Facebook acquisition of Instagram  Berkshire Hathaway acquisition of Heinz
 Google acquisition of Waze  Dell management buyout with Michael
Dell and Silver Lake
As a generalization, strategic buyers will usually value a company higher than financial buyers due
to the potential realization of synergies (these will be discussed shortly). At the same time, financial
buyers are constantly focusing on maximizing return on investment and therefore try to bid as low as
possible to gain ownership of a company. The less a buyer pays for a company, the lower the investment,
and (potentially) the higher the returns will be in the future.
Why would a company want to merge with another company? The reasons are abundant, but in general it
can be broken down into two major categories: horizontal integration and vertical integration.
• Horizontal integration: Acquisition of competitors and companies engaged in similar lines of
business to eliminate competition and increase economies of scale. For example, a restaurant
company acquiring a different group of restaurants.
• Vertical integration: Acquisition of companies in different stages of the supply chain in an effort
to control all aspects of production. This type of acquisition aids in reducing costs of production,
eliminates uncertainty in production, synchronizes the overall supply chain, and allows for
internal streamlining of the entire process. For example, a baking company acquiring farmland to
grow wheat or acquiring a distribution company to deliver its products.
In each of these types of acquisitions, an acquirer expects to realize certain benefits from the transaction,
known as “synergies”. There are two types of synergies: revenue synergies and cost synergies.
• Revenue Synergies: Synergies that increase the “top line” items of an Income Statement (i.e.
Revenues) via increased sales, prices, etc. Examples include cross-selling products, increased
product reach, and co-branding.
• Cost Synergies: Synergies that reduce expenses and increase profit margins via cost cutting,
economies of scale, etc. Examples include consolidation or elimination of facilities, reduced head
count, consolidation of supply chain and distribution channels, and increased purchasing power.
It is important to note that although synergies are almost always baked into M&A valuations, they are by
no means guaranteed. The realization of synergies can take several years, or they may never be realized,
which is a major risk in any M&A transaction.
Insider Insight Synergies

 Typically, cost synergies are given more merit by Analysts than revenue synergies. This is
due to the fact that cost cutting is more “provable” than a merged company’s ability to drive
increased sales.
Consideration
“Consideration” refers to the form of payment made in an acquisition or merger. The different types of
consideration include:
• Cash: though less common, corporations sometimes use balance sheet cash for an acquisition.
• Debt: raising new debt (either bonds or loans) to finance the transaction and pay the target
company owners with cash.
• Equity: issuing new common stock of the acquiring company’s shares to distribute to owners of
the target company. Oftentimes this is expressed as a ratio of the acquiring company’s shares to
target company’s shares (i.e. 1.75 acquirer shares for every 1 target company share).
• Assumption of liabilities: more common in distressed acquisitions, sometimes a company will
agree to acquire another by assuming their debt obligations (and assuming the liability of paying
back creditors).
Insider Insight “All-Cash Deals”

 A common phrase in M&A terminology is an “all-cash deal”, but this statement almost
always refers to acquisitions financed completely with debt (most companies do not have
enough cash on their balance sheet to acquire another company and therefore must borrow).
In this section, we refer to using debt as consideration for a transaction as paying “cash”.
Most acquisitions will involve some combination of different forms of consideration: 50% cash/50%
equity, 30% cash/70% equity, 100% cash, 100% equity, etc. There are pros and cons of each type of
consideration:
Pros & Cons

Equity/Stock Debt
 Avoid taking on more debt (less interest)  No dilution of existing share holders
 Can serve as strong currency in good market  Often associated with lower cost of capital
environments (stock is valued higher at time) (thus higher return on investment over time)
 Delay tax payments until stock is sold in the  Incur additional interest expense
secondary market  May increase difficulty of raising more debt
 Dilutes existing equity holders in the future for other purposes
Determining the right combination of cash and stock varies by transaction, industry, company, and market
environment.
Accretion & Dilution
Mergers can be generally classified as either accretive or dilutive:

• Accretion: refers to an increase in the acquiring company’s earnings per share (EPS) after the
merger is complete (compared to EPS if they were to continue operating as an independent
company).
• Dilution: refers to a decrease in the acquiring company’s EPS after the merger.
Determining the accretion or dilution caused by an M&A transaction is dependent on the projected
financial performance of the combined company, realization of any synergies, and the type of
consideration paid. In terms of consideration paid, raising debt will lower EPS due to increased
interest expense from new debt issued to finance the transaction (thus lowering “earnings”); issuing
stock will lower EPS due to share dilution (thus increasing shares and lowering per-share earnings). As
well, the higher the purchase price, the less likely a deal will be accretive as the acquiring company will
need to raise more debt or issue more stock (thus causing higher interest expense or more per-share
dilution). Writing-up assets after the acquisition increases future depreciation and amortization expense,
also lowering future earnings per share.
It is difficult to determine the true accretive or dilutive effects of a transaction without completing a full
merger model. However, a quick “back-of-the-envelope” rule to determine if an all-stock acquisition
will be accretive or dilutive can be determined by looking at each company’s Price-to-Earnings ratio.
Insider Insight Accretion & Dilution

 In an all-stock acquisition, if the acquiring company’s P/E ratio is higher than the target
company’s P/E ratio, the deal will be accretive. If the acquiring company’s P/E ratio is
lower than the target company’s P/E ratio, the deal will be dilutive.
An explanation of the reasoning follows: with a higher P/E ratio, the acquiring company’s stock is “more
expensive” or “more valuable” per share than the target company’s stock. In other words, the target
company’s earnings are cheaper to buy than the acquirer’s own earnings, so the acquiring company’s EPS
will increase because it does not need to issue as much stock to obtain the target company’s earnings.
(21.10) Leveraged Buyouts
A leveraged buyout (or “LBO”) is an acquisition of a target company by a group of investors, usually
led by a financial sponsor (i.e. a private equity fund). LBO’s are characterized by the heavy use of
leverage, meaning the acquisition is primarily financed with debt and a minimal amount of equity.
Investors will usually guarantee the debt with the target company’s own assets and use the target
company’s free cash flows to pay off the debt placed on the company. Financial sponsors use LBO
analysis to find a maximum purchase price they are willing to pay based on achievable debt levels and
return requirements.
Although the amount of equity invested varies, it is common to see equity comprise ~20%-40% of the
transaction purchase price (with the remaining balance financed with debt). Many factors determine
the amount of equity a buyer is willing to contribute to the purchase price, including:
• Target company’s capacity to borrow money
• Equity requirements imposed by the bank (lender)
• Transaction size
• Return requirement of the financial sponsor
As can be expected, the less equity that investors put in, the higher the potential returns of the transaction;
a lower initial equity investment means that future equity earned will be a higher multiple of the
initial investment. Though the use of financial leverage boosts returns to equity holders, it comes at the
cost of increased risk. Companies that are purchased via an LBO transaction go from being in a (usually)
stable financial situation to being in a highly leveraged one; the risk of bankruptcy significantly increases
post-transaction.
Key Participants
Below we outline the key parties involved in an LBO transaction:

• Financial Sponsors: act as the buyer/investor in an LBO and can include private equity funds,
hedge funds, venture capital funds, merchant banks, etc.
• Investment Banks: act as an M&A advisor to target companies (sell-side advisor) and financial
sponsors (buy-side advisor); also provide debt financing to execute the transaction.
• Commercial Banks: provide debt financing in the form of bank debt.
• Target Company Management: work with investment bankers to market the company to buyers
and lenders, and interact with the financial sponsor to address questions and discuss the future of
the business.
What Makes For An Attractive LBO Candidate?
Not all companies are good LBO candidates. Investors look for companies that exhibit a combination of
the below characteristics:
• Healthy and predictable cash flows to meet future debt obligations and interest payments that
come from high use of leverage in an LBO
• Many hard assets that can be used as collateral when taking on more secured debt (which offers
the cheapest interest rates)
• Limited ongoing research & development and maintenance capital expenditures as to not
use up too much of the company’s cash flows
• Minimal working capital requirements
• Strong management team to run the company after the LBO
• Solid market niche with dependable and steady sale cycle
• Future growth prospects to enhance returns
• Untapped resources or potential to develop the business in different ways
• Current undervaluation compared to the rest of the market (helps minimize entry investment)
• Clear and practical exit strategy
LBO Valuation
When looking at potential LBO targets, financial sponsors analyze each potential investment’s ability
achieve a required rate of return, known as the “hurdle rate”. To do this, investors analyze expected
internal rates of return (or “IRR”): the discount rate that makes the net present value of all future cash
flows equal to zero. Investors have traditionally demanded LBO returns around 20%-30% and are
able to demand these high returns because LBOs are inherently risky investments: investors lever the
company up with debt, hold the investment for multiple years (at a minimum), and have no guaranteed
exit strategy.
An LBO analysis consists of projecting out a company’s operating performance (using detailed drivers
and different operating scenarios), modeling in different assumptions about the ability to raise debt (dollar
amount, interest rate, maturities, etc.), and calculating returns based on given exit scenarios.
Insider Insight LBO Valuation

 Instead of purely valuing a company with an LBO analysis, investors instead look for the
maximum price they could pay for the company in order to attain their required hurdle rate
of return. This type of analysis is typically coupled with other forms of valuation to
determine how high of a bid the financial sponsor is willing to make to acquire the target
company.
Value in an LBO is dependent on a few key drivers:

• Purchase multiple: the lower the purchase price, the higher the potential rate of return.
• Leverage: more debt and less equity allows for amplified returns.
• Free Cash Flow: more free cash flow allows a company to take on more leverage and pay down
debt quickly.
• Exit Multiple: the higher the sale price/exit valuation, the higher the potential rate of return.
Returns in an LBO are achieved by three potential means:

• De-leveraging: as debt is paid down using the target company’s free cash flow, the investor’s
equity stake increases.
• Operational Improvements: growing revenue, increasing EBITDA and free cash flow, and
expanding margins will increase total valuation (exit multiples will be multiplied by larger
EBITDA numbers).
• Multiple Expansion: growth in the company or industry beyond expectations can lead to higher
exit multiples upon sale than entry multiples when purchased.
To better understand the importance of leverage’s effect on returns, look at the following high-level
example:
Example
A private equity firm wants to buy a company with an Enterprise Value of $50 million.
They are able to get a bank to loan them $30 million to finance the transaction, requiring the fund to
put in $20 million of their own money; note that this debt is the obligation of the company being
purchased, not of the private equity firm.
Over the next 7 years the company creates steady cash flows and the private equity fund (now owners
of the company) uses these cash flows to pay down the $30 million in debt. Assume that after 7 years
of operating the company, all of the debt has been paid down and the Enterprise Value expands
slightly to $60 million.
When the sponsor sells the company at the end of year 7, it will receive $60 million, a 300% gain on
the original $20 million they put in.
Now, imagine that the private equity firm had put in the entire original $50 million on its own (and
had taken on no debt). At the end of year 7, the sponsor would receive $60 million for their initial
$50 million equity investment, a much smaller equity return of 20%.
LBO Analysis – The Process
In this section we aim to shed some light on the actual process of conducting an LBO analysis (beyond
just the theory), and what Analysts can expect to do on-the-job when modeling out an LBO. Though this
is not a thorough step-by-step guide, the following points provide a high-level overview of how to create
an LBO model:
1. Evaluate the target and LBO feasibility: analyze if the target company is a good LBO
candidate by looking at factors such as debt levels, margins, growth prospects, projections, etc.
Weigh the specific risks associated with an LBO of this target company in the current economic
environment.
2. Create operating assumptions: these will be used to project the financials of the potentially
acquired company into the future (often create multiple operating scenarios and compare the
effects on future returns). This includes items like revenue growth and margin assumptions.
3. Adjust EBITDA: a highly influential metric in the LBO model, EBITDA must be adjusted
carefully for non-recurring line items and common add-backs (such as non-cash compensation,
impairments, etc.).
4. Determine appropriate capital structure: types of debt raised to finance the transaction (senior
debt vs. subordinated debt), dollar amounts and leverage levels, interest rates, maturities, etc.
Models will often incorporate and compare various debt scenarios. In the model itself, capital
structure will play an important role in the “sources and uses” as well as the “debt tables”.
5. Figure out investment horizon and exit multiple: generally, the exit multiple and entry
multiple should be the same; with a timeframe (how long the sponsor plans to hold the
investment) and exit multiple in mind, it becomes possible to calculate an internal rate of return.
6. Calculate equity returns and “sensitize”: IRRs are calculated and sensitized to see difference in
returns based on hypothetical changes in factors such as exit multiple, operational assumptions,
exit year, key drivers, etc.
7. Back-solve to determine valuation (or maximum price): review the model and sensitivity
tables, and tweak assumptions to arrive at a potential maximum price the financial sponsor would
be willing to pay based on a desired hurdle rate.
8. Revisit LBO feasibility and valuation: take a look at the model and outputs to determine if debt
levels make sense, coverage ratios stand, downside case is bearable, etc. Compare LBO value to
other common valuation methodologies.
Exit Strategies
Buyers will usually hold an investment in a company for 3-7 years before monetizing it. The main
methods of realizing a return on investment in an LBO include:
• Dividend Recapitalization: the company refinances its debt (and often issues more debt than
necessary to finance the dividend), and the financial sponsor pays themselves a significant one-
time dividend.
• Initial Public Offering (IPO): the company lists its shares on a public exchange, allowing the
financial sponsor to either (i) sell part or all of its equity ownership to public investors during the
IPO, or (ii) sell its equity ownership to public investors at a later point in time.
• Sale (to strategic or financial buyer): the company owned by the financial sponsor is sold to a
separate company, resulting in the financial sponsor’s equity ownership being purchased in full.
This is one of the most common exit strategies for an LBO investor.
Chapter 22: Qualitative Interview Questions & Answers
(22.1) “Why…?”
1. Why do you want to do investment banking, private equity, etc.?
Expect to hear this question first in almost every interview (after walking through your resume). It
tests your understanding of the job as well as intentions for entering the industry. Do you fully
comprehend what you will be doing every day and are you excited for these experiences? Are you
here to learn or are you simply doing the job for the money and exit opportunities? Candidates that
truly understand the day-to-day work of an investment banker (or private equity associate, or hedge
fund analyst, etc.) and convey passion for the industry will shine. Show the interviewer that your
decision to work in the field is well thought out. Good answers include:
• Passion for learning about new companies/industries and analyzing their operations
• Interest in the concept of valuation and the different methods to reach a value
• Strong analytical background and interest in math leads to a desire to work a job where one
can utilize these skills
• Desire to gain hands-on experience in the capital markets and execute transactions
• Large level of responsibility, meaningful work done at the junior level
• Steep learning curve/fast paced environment (NOTE: this is one of the most overused
answers to this question)
2. What is it about [firm name] that makes you want to work here?
This question is designed to see if you have done your homework and are familiar with the firm with
which you are interviewing. Did you just apply to every investment bank hoping that you will get a
hit from one, or did you apply to this firm for a reason? Bankers understand that most of the major
investment banks are very similar (especially in the eyes of an outsider), but this question gives you
an opportunity to stand out if you can convey knowledge of the firm’s strengths or your passion for
their environment and/or office.
The most common answer to this question focuses on generalizations such as a company or office’s
prestige, deals they have completed, office culture, etc. Although these answers are acceptable, stand
out by being as anecdotal with your answer as possible:
• Instead of just saying you like the culture or people at the firm, bring up specific
conversations or meetings you had with individuals in the office.
• Instead of saying that you appreciate the firm’s completion of headline deals, show that you
are familiar with their accomplishments by discussing a recently completed deal.
• Demonstrate that you have done your homework by communicating your desire to work with
a specific group in their office and be armed with reasons why.
3. Why are you interested in our group vs. a different product or industry group (or our division
vs. another division in the bank)?
Answer with a combination of the following:

• Firm or group reputation
• Deal flow
• Enjoyed the individuals you have met at different recruiting events or via networking
• The types of skills you will learn while working in banking and/or for that specific group (i.e.
certain types of modeling, etc.)
• Desire to learn about the industry they work in (if interviewing for a coverage group). For
example, say that you are passionate about clean technology if interviewing with the
Technology group
4. Why are you interested in this office location, in particular?
If a regional office:
• If you have roots in that city or region (i.e. family or network lives there), emphasize this fact.
• You are interested in industries and/or products covered in that region.
• Emphasize that you want to live in this particular region long-term (i.e. you want to work in
Los Angeles because of the weather and lifestyle).
• You prefer an intimate, small office feel and work best in this type of setting.
If the New York office:

• If you have roots in that city or region, emphasize this fact.
• You want to work in the bank’s largest office.
• “There is no other city like New York, when it comes to finance.”
• You want to take advantage of the networking opportunities.
5. If you could work in any group at any bank, which would it be and why?
Your answer here will be highly dependent on where you are interviewing. In the end, you want your
answer to be “your group and bank”, but you need to be strategic in getting to this conclusion. Your
dialogue should describe characteristics that steer the answer towards the bank you are interviewing
with specifically. If you truly are interviewing for your dream job, make this clear. If not, still show
that you have done your homework and that this firm meets all of your criteria:
• You know about the bank’s group offerings and history.
• You have spoken with employees and get along with them.
• You fit in with the group and bank culture.
• You are excited for a specific type of transaction they are known to work on.
• The office location (city) is where you plan on settling down.
If you are interviewing with a large bank, bring up the benefits of their size (large training programs,
larger network, bigger deals, exposure to a larger pool of transaction types, proven track records, best
and brightest co-workers, etc.). Conversely, if interviewing at a smaller firm emphasize what led you
there (more intimate setting, more senior exposure, higher level of responsibility, more hands on
experience, specialization in deal types, etc.).
6. Where else are you interviewing? Are you looking at other industries?
In summary, say that you are interviewing at different firms and are only interested in investment
banking; do not be shy. Interviewing at different firms makes you more desirable, but do not lie. If
you only have a few other first round interviews, keep it vague.
Do not make the interviewer question your commitment to the industry. Banking should not be an
option or backup; it should be your plan.
7. Suppose you did not get an investment banking internship/job. What would you do instead?
Caveat your answer with the fact that you hope to avoid this situation. Interviewers are looking for a
few different things when asking this question: they want to see that you have a well-thought-out plan
and that your passion lies (ultimately) in finance/investment banking.
If you respond to this question with something random or unrelated to finance, they might question
your motivations for pursuing the job. However, if you answer thoughtfully and (even better)
describe a backup plan where you still end up in investment banking, then your passion for the job
will be noticed. A good answer would involve pursuing an internship/job in a directly-related
industry with the hopes of landing a full-time Analyst position at a later date.
8. Do you plan on jumping to the buy-side after 2 years at our firm?
Though you may be pursuing an investment banking job solely for the exit opportunities, you do not
want to communicate this plan. A good way to frame your answer is to say that you are not sure
because for now you are only worrying about the job at hand. You are currently very interested in
investment banking and are very excited to gain firsthand experience in the industry. Exit
opportunities in similar areas of finance are not out of the question, but it is too early for someone in
your situation to know whether or not investment banking is more of a career choice or if you would
want to use it as a stepping stone to do something else.
Note: interviewers know that many candidates pursue investment banking for exit opportunities, and
this is only fueled by the fact that most Analyst positions are only guaranteed with a 2 year
commitment. Recently, however, more and more firms are looking for career oriented employees.
9. Where do you see yourself in five years?
The likelihood that you actually know where you want to be in five years is low. The point of this
question is to gauge your commitment and interest in finance. It can also be used to catch you off
guard: an interviewer does not want to hear that you plan on doing something unrelated to finance.
The simple answer is that you are not 100% positive, but you have done enough diligence to know
that you want to do something in finance long-term. Throw in examples such as staying in banking,
eventually moving to private equity, potentially going to business school, etc.
10. What is your #1 priority for this summer if you landed an internship with us?
Use this question to prove that you know what to expect on the job and have thought out what you
plan to gain from the experience. This question opens the door for unique answers that may let your
specific personality shine. Some good general answers include:
• Succeeding and getting a full-time offer (always a good answer)
• Sharpening your technical skills (i.e. modeling, valuation, financial statement analysis)
• Gaining a better (and firsthand) understanding of how the deal process works
• Learning more about a specific industry and/or type of deal (depending on what group or
office with which you are interviewing)
• Becoming more effective at time management and learning how to prioritize important tasks
while maintaining a high level of responsibility
• Solidifying your belief that you want to make this job a career (be careful with this one)
11. What skills do you plan to take away from your internship?
This question is similar to the one above, but focuses on the specific skill sets that junior bankers can
expect to cultivate. Show that you understand the day-to-day experience of being an investment
banker and what you will learn and develop. Good answers include:
• Technical skills (modeling, valuation, financial statement analysis)
• Qualitative skills (creating presentations, memos, and marketing materials)
• Time management and prioritization
• Effective organization
• Ability to work under pressure and meet tight deadlines
• Leadership, responsibility, and multi-tasking
• How to interact with senior employees
(22.2) Understanding The Job

1. On a scale of 1 to 10, how would you rate your knowledge of investment banking?
Be careful when answering this question: answer too low and your interviewer will be unimpressed
by your lack of understanding of the job, answer too high and you might get difficult follow-up
questions. Preface your answer by assuming that a 10 is someone who knows EVERYTHING
possible about investment banking. In that case, you are usually safe answering in the 4-6 range
(when interviewing for internships; 6-8 is a better answer for full-time Analyst interviews).
Give reasoning why you came to your answer. Convey that you understand broader concepts related
to investment banking and investment banking transactions, but mention that some of the details are
still unknown to you. Show that you are excited to learn and point to it as one of the main reasons
you want the job.
2. Why do clients hire investment banks (in other words, “What is banking?”)?
This is another question that is designed to test your knowledge about investment banking as a whole.
Broadly speaking, clients hire investment banks when they need to raise capital or require advisory
expertise. An investment bank acts as a middle man, connecting those looking for money and those
with money to invest. A client hires an investment bank for a variety of reasons:
• Looking to purchase another company or wants to be sold (M&A)
• Wants to spin-off a division of the company (divestiture)
• There is an impending bankruptcy (restructuring)
• Wants to raise money for various reasons or go public: IPO, private equity placement, bond
transaction, loan transaction, etc. (debt or equity underwriting)
• Needs a fairness opinion
For a robust explanation of the services offered by investment banks, refer to Chapter 1.
3. What factors make an investment bank successful?
This question tests your understanding of how investment banking works and requires a relatively in-
depth understanding of the investment bank itself. Since different departments of the bank make
money in different ways, it is appropriate to differentiate and ask if you should concentrate on IBD
specifically. Factors include:
• Completing a high volume of transactions/closing deals: largely dependent on how well
the market is doing as a whole.
• Lower cost of capital: allows banks to win deals with lower fees.
• Strong senior banker and client relationships: increases the likelihood that a client
chooses your bank to help execute a transaction.
• Bank reputation: overall as a firm, with certain types of transactions, in certain industries.
• Strong internal risk management team: protects the bank’s capital from being lost in
higher-risk deals that earn more fees.
• Experienced and innovative team members: more experienced bankers have a better
understanding of how to address a client’s needs.
• Breadth of offerings and capabilities: a full suite of products and services allows a bank to
win clients that need help with a variety of strategic decisions.
4. What do you think is the biggest misconception about investment banking?
This question tests your understanding of the investment banking industry and culture. Again,
interviewers may use this question to see which candidates have done their homework and really
know what they are getting themselves into. Some common misconceptions include:
• Investment bankers live lavish, flashy lifestyles.
• Investment banks act purely as middlemen and do not provide much “real” value (when, in
fact, they provide countless analyses to aid in important company strategic and capital-related
decisions).
• The significant influence of the macro economy’s performance on individual investment
banks (it is arguably the biggest factor determining how well an investment bank does).
• Investment banking is all about M&A and working on LBO’s.
• Bankers work 100 hours every week (this happens in waves, but is not always the case).
• Investment bankers themselves buy and sell companies, or that investment bankers are
investors (it is called the “sell-side” for a reason).
• Good junior bankers make good senior bankers (the two demand entirely different skill sets).
5. In your opinion, what has prepared you more for this position, past internships or university
classes?
Ideally, your answer should be past internships (though not all interview candidates are lucky enough
to have applicable job experience). Interviewers value on-the-job experience more highly than
financial classes, especially because most candidates will have completed very similar course loads.
Make your answer even more ideal by describing that your classroom education has complemented
what you learned on-the-job and has proven helpful throughout your past internships. For candidates
with less applicable internship experience, argue that classes have provided a strong financial and
analytical background and that case studies have prepared you above and beyond theory. If you were
involved with highly relevant clubs or paid for third-party education, reference that experience when
describing why you are qualified (from a non-job experience perspective).
6. Tell me what you think you will be doing on a day-to-day basis.
This question is designed to test your knowledge of what the job entails. Interviewers like asking this
question when a candidate’s answers sound scripted. If you say that you are passionate about
working in investment banking, you should be able to prove that you know what you are passionate
about. This can sometimes be an instant “ding” for a candidate.
In a nutshell, an Analyst’s day-to-day responsibilities include administrative work (setting up

meetings, organizing files), research, qualitative work (creating pitchbooks and profiles), and
technical work (modeling, valuation, etc.). For a more robust explanation to this question, refer to
Chapter 3.
7. Would you go against your Associate or Vice President’s directions if the deal required it?
This behavioral scenario is designed to test your understanding of the Analyst/Associate/VP role and
workplace politics. You should generally assume that the answer to “defying authority” is no (unless
a team member senior to them gave you alternate instructions). As a junior banker, convey that you
understand your role is to aid in deal execution and not to make high-level decisions. If you are stuck
in this situation, explain that you would bring up the concern with your Associate or VP directly and
ask them to give their opinion on the matter. The next course of action would be to discuss the
situation with someone senior to the Associate or Vice President if they ignore your dilemma. The
bottom line is that you would defer the decision to someone more senior. You do not have enough
experience and it is not your place to determine what the deal requires.
8. Your Associate and VP are giving you conflicting instructions/requests, what do you do?
Like the question above, this scenario tests understanding of the Analyst role and office chain of
command. The best answer would be to defer responsibility. Explain to the Associate that he or she
is giving you conflicting information from what your Vice President instructed. Under normal
circumstances, the Associate will reach out to the VP and discuss their conflicting ideas directly and
will then advise you on the agreed-upon proper course of action.
Note: this situation happens a lot more than you would think as Associates are often “closer to the
ground” and more involved in the technical aspects of a deal than Vice Presidents.
9. What would you do if you had two projects that were “fire drills” for two different MDs?
There is no real “correct” answer to this question. Not only does it test your understanding of the
role of an Analyst, but it questions your problem solving methods.
Be transparent and aim to get both jobs done as soon as possible. Preface your answer by saying that
you would try to avoid the situation, if possible. You would prioritize if it was possible to complete
both projects, but if it is impossible to get both jobs done on time, you would be transparent and
vocalize the issue with your staffer and deal teams.
It is important to punt responsibility and not be the “decision maker” regarding which job is more
important. That is not an Analyst’s job. Show that you recognize that both jobs need to be
completed, that both need to be quality work, and that you understand your personal limits.
(22.3) Character Attributes

1. What are your strengths and weaknesses?
Expect to see this question in both finance and non-finance interviews alike. The trick is to highlight
relevant strengths and to present weaknesses that are actually just strengths in disguise. Arm yourself
with at least 3 strengths and 3 weaknesses when heading into any interview.
Strengths:
• Motivated
• Hardworking
• Proactive – you don’t need to be micromanaged
• Persistent – you never give up and accomplish anything you put your mind to
• Always own your work and take responsibility for it
• Ambitious
• Perfectionist – you pay close attention to detail
• Team player
Weaknesses:
• Spread yourself too thin because you are ambitious
• Get caught up in the details (a cliché answer in investment banking interviews)
• Sometimes procrastinate because you are more motivated by pressure situations
• Sometimes over prepare rather than just jumping right into a task (delaying its completion)
• Tend to be overbearing/micromanaging with individuals you work with
• Tend to complete all the tasks on your own when working with a team
See the theme with the weaknesses? The key is to relate the weaknesses to strengths wherever
possible, but do not be blatant about it: being too disingenuous when describing weaknesses can
sometimes turn off an interviewer.
2. If your friends could describe you in three words, what would they say?
Plan ahead with at least three key words that effectively describe your positive characteristics. Be
prepared to describe the reasoning behind each word (for example, if you say “funny”, you should
have a joke prepared). Examples of good key words include:
 Passionate  Wise  Diligent  Trustworthy
 Hard-working  Prudent  Detail-oriented  Determined
 Funny  Attentive  Hungry  Smart
3. I see here that you worked at [previous job] last summer. What would your boss say about you
if I asked him?
This question is simply a different version of the “what are your strengths and weaknesses” question.
Explain the things you excelled at on the job while trying to make them relevant for an investment
banking position. These include: paying close attention to detail, having a good work ethic, being on
time, being eager to learn, maintaining professionalism, getting along well with colleagues, etc. If
you are proud of a specific project/deal/accomplishment from your previous job, weave it into your
answer and use it to exemplify your strengths.
Avoid mentioning negatives unless specifically asked. If you are asked to present negative
characteristics that your boss would describe, be realistic about your weaknesses. Saying “I get too
caught up in the details” is not a good answer (and is arguably the most over-used answer to this
question). List out actual weak attributes, but make sure they are not material for the job at hand.
For example, do not say that you lack a strong work ethic, often make stupid mistakes, etc. (critical
skills needed to be an Analyst). Instead, list off less relevant weaknesses such as asking too many
questions, overextending yourself, lack of experience with MS Office, etc.
4. If I had two minutes to defend you in front of a selection committee, what would I say?
This question is asking for your “strengths”, but it is directly applied to the role of the
Analyst/Associate. Good answers include:
• Can always be relied on to complete work on time and at a high caliber
• Proactive – goes above and beyond expectations without being asked, and seeks out work and
learning experiences
• Willing to put in the demanding hours when required
• High quality work – few/minimal errors
• Strong technical and modeling skills
• Personable with fellow coworkers, makes the lives of superiors easier
• Meets and exceeds deadlines
• Punctual – first one in the office and last one out
• Genuinely passionate about the work/industry
5. What is a recent problem you encountered at school or work? How did you resolve it?
This question is used to discuss a real life pressure situation a candidate has dealt with and how they
acted. Have one or two well thought out past experiences (from internships, leadership positions,
etc.) in your back pocket. If necessary, it is okay to tweak small details or bend the truth a bit to make
the story more applicable. Here is a good example:
“When I was the president of the business club, a situation came up where, due to a clerical error, a
scheduling conflict occurred with a room we had reserved for our yearly executive board elections.
We had 100 members show up to a room at the same time as another student group. I called the
relevant individual in the office of student affairs, but it turned out that every room was taken. I was
forced to act quickly and find an alternative location without the help of the university. I called in a
favor with my friend who was an RA in the dorms and was able to get him to clear the study lounge
for an hour so our group could meet…”
Note: though the example above serves as a good template, demonstrating your ability to overcome a
work-related conflict will often be more appreciated by your interviewer.
6. Tell me about a time that you failed.
Think of an error that does not make you look very bad and use this as an opportunity to show how
you recovered. The key here is flipping the question to showcase a positive attribute. Mention an
experience with an organization or job listed on your resume and keep it simple.
Walk through the failure (perhaps an event did not go as planned; you forgot to complete a work
product; you missed a final; etc.), and then describe how you remedied the situation. It is important
to acknowledge your mistake and prove that you were able to act upon it: investment bankers make
mistakes too, and this question is designed to test your ability to recover.
7. Suppose you were fired after working at this company for 3 months. What happened?
In essence, this question is asking for your weaknesses, but it is more difficult as it requires that the
interviewee have a good understanding of the job itself. It also does not allow for the interviewee to
“sugar coat” a weakness; in this situation, the weakness gets you fired. It will be very difficult to put
a positive spin on this situation, but attempt to do so. One approach is to be lighthearted and make a
joke of the question (for example, answer with “the firm must be downsizing” or something similar),
but success with this attitude depends on your particular interviewer.
More serious answers should be prefaced with something that dulls the weakness you describe, such
as: “I cannot foresee anything that could cause this to happen; external factors would likely be
responsible. But if I had to guess… “
• You were overstaffed with work so not all work could be completed in time or to a level you
thought was acceptable.
• You spend too much time on individual tasks because you are a perfectionist.
• For whatever reason you did not fit in with the office culture and did not share similar views
as the employees working right above you.
• The job and its requirements were much different than what you had been expecting/prepared
for despite speaking with countless insiders beforehand (NOTE: be careful when using an
excuse like this as it might inspire the interviewer to question your dedication to the job).
8. Why should I hire you over everyone else?
Think of this as your 30 second “elevator pitch”. Concentrate on promoting yourself instead of
degrading others. Convey the following:
• Unique and relevant background – Your past experience has given you the tools and
technical skills needed to succeed as an Analyst. If possible, position your experience as
unique and emphasize that you are grateful for it.
• Knowledge of what the job entails – You have an in-depth knowledge of the role of the
Analyst and have realistic expectations of what you will actually be doing. You do not mind
the long hours, administrative tasks, and sometimes difficult work: in fact, you are
enthusiastic about it.
• Enthusiasm for finance – You want to make it sound like you have been interested in
finance, specifically investment banking, for a long time. You did not discover banking last
week and decide to apply.
• Interest in the firm – This is the firm you want to work for, hands down. You have hit it off
with enough people and have done enough diligence to make this decision.
9. Are you a leader or a follower and why?
The answer to this is simple: “it depends”. Most students will immediately say that they are leaders,
but the question is designed to trap you in that answer. Investment banking Analysts are the most
junior members of deal teams; therefore, their role entails following the orders of more experienced
bankers. Your interviewer wants to know that you will be able to listen to directions and “be a
follower” when needed. At the same time, when working on specific tasks for deals, Analysts should
be able to take initiative and act as leaders in the right situations.
Your answer should fall along these lines: if you have the most experience (or no one else will step up
to complete something), then you are more than ready to take control and be the leader. If not (and it
makes more sense for someone else to be the leader), then you have no issues being a good follower.
Get the point across that you know your role.
(22.4) Work & Personal History

1. Why did you choose to attend [your university]?
Your answer to this question will depend on many factors such as what type of school you attend
(target vs. non-target), location, major, etc. This question opens the door for you to sell yourself as a
candidate in many ways. In general, show that your decision was well thought out by bringing up key
attributes in the decision making process, such as:
• Region/location
• Future employment opportunities
• Strong business/finance program
• Strong academics
• Well-rounded (good answer if you attend a semi-target school)
• Strong alumni network
• Intimate setting (good answer for smaller schools)
Overall, gear your answer based on your situation and make it fit in with attaining the job at hand. If
you attend a target school, mention you have been interested in finance and knew that the school had
a great department with a reputation for good recruiting prospects. If you attend a semi-target or non-
target school, mention that you were unsure of what to major in so you picked a more well-rounded
institution before deciding on finance. This question also opens up the door to convey a strong
association with the city in which the bank’s office is located. Bankers (especially those in regional
offices) look for employees who have some grounding in that city and are not a flight risk. If
applying for banks in your hometown or where you college is, incorporate something along these
lines in your response: “I chose to go to University of Chicago because this is where I’m originally
from and would prefer to establish my career”.
2. What is your most important extracurricular activity? Why?
With this question interviewers are trying to get to know you better as a candidate. In general, try to
bring up a unique experience and something that truly takes up a good and meaningful amount of
your time. Good answers include anything finance/business related (especially if you have a
leadership role in the organization), and/or anything that you are genuinely passionate about and is a
big part of who you are (community service, charity, athletics, etc.). You must balance a mix of
relevance and personal importance when deciding what to share, as this will be reflected in your
answer. Unique positions or experiences related to finance or activities where you have shown
particularly impressive accomplishments will go over well.
3. Why did you choose the extracurricular activities you did (as listed on resume)?
This is an opportunity to provide more information on the experiences you list on your resume. Your
answer here should connect to your “investment banking story” likely shared at the beginning of the
interview. Start with a high level comment along the lines of “wanting to fully take advantage of the
different learning experiences and opportunities presented in your college setting”. Next, go into
each activity you outline and briefly explain why you chose to become involved (networking, interest
in the field, learn more about the different avenues of business, give back, etc.). Take this
opportunity to demonstrate your personality, as interviewers want to see you are a well-rounded
person.
4. What is the last book you read for pleasure?
Interviewers will use this question to get to know you better as an individual and to see where your
interests lie. Try to come across as multi-dimensional and avoid giving a coined response by saying
you recently read a finance or investing book. However, if you truly are in the middle of a finance-
related book, sharing this may spark up a conversation; have a recently read non-finance book in your
back pocket in case that answer does not go over well. Use discretion and try to pick a book that is
appropriate and will not evoke negative judgment by the interviewer (sorry, no 50 Shades of Grey).
5. What should we know about you that is not on your resume?
Use this question to sell yourself, but at the same time provide a unique detail about your life that will
stick out in an interviewer’s mind (so they do not have trouble remembering you later). There are two
primary ways to answer this question:
• Give a 30-second elevator speech about yourself: emphasize your work ethic, passion for the
job, etc.
• Tell them an interesting fact about yourself: competitions you have competed in, significant
accomplishments (perhaps unrelated to finance), unique facts about your family or
connections, odd interests not included on your resume (make sure they are not weird), non-
tangible traits (i.e. how important family/friends are to you), etc. If you take this route,
convey your personality and well-roundedness in your answer.
6. Do you prefer to work with a team or alone? Give me an example of when you worked with a
team.
The best answer here is “working with a team” – investment banking is highly team oriented so your
ability to collaborate and work with others is imperative. Every deal you work on will have a diverse
team, often spanning various offices and sometimes even countries. Not only should you prefer
working in a team, team settings are where you flourish.
In terms of giving an example, the best team experiences are usually anecdotes from participation in
student groups, leadership roles, class projects, and past internships. Be prepared for this type of
question and have a “teamwork” story planned ahead of time. Address the following:
• Background situation
• What the team accomplished
• How you contributed
7. What has been your hardest internship to-date and why?
This question is a good opportunity to showcase your strengths, prove you have handled a demanding
job, and provide more clarity on an experience listed on your resume. If no single internship stands
out as hardest, pick your most recent or most relevant experience. Try to convey the experience as
demanding and as similar to a banking job as possible. Bring up some of the following factors as
they apply to your previous internship:
• Demanding hours and schedule
• Unpredictability
• Large amounts responsibility
• Learning how to complete work you did not initially understand
• Working with senior management
• Tough technical projects
• Strict deadlines
• Steep learning curve
• High expectations
Instead of just listing these off, gear them specifically to the job you are describing (as part of your
answer to why it was your hardest internship). End your answer on a high note with the caveat that
although it was the hardest to date, it also holds as your most valuable experience and provided the
highest level of learning.
8. Can you walk me through a deal or project that you worked on last summer?
Walking someone through a deal and/or project is usually saved for individuals that have previous
investment banking experience. When walking someone through a deal, follow the below structure:
• Describe the background of the industry and company
• Walk through the specific type of project/deal for that company and why (i.e. if the company
was looking to sell itself, say why they were pursuing that avenue)
• Dive into the details of the transaction – list off relevant financial metrics and ratios, issues
you encountered, considerations made, etc.
• Tell them the status of the deal – did you complete the deal while you were at the firm? Is it
still in progress?
If you are unsure as to whether or not the information is confidential, refrain from using specific
names or giving too much detail related to the company of interest. However, confidentiality is NOT
an excuse to avoid describing your past experience.
(22.5) Macroeconomics & Microeconomics

1. What are the three primary ways the Federal Reserve can influence the economy?
The Federal Reserve is responsible for using monetary policy to influence the level of money and
credit in the United States. To do so, the Fed primarily uses the following three methods:
• Open Market Operations: the buying and selling of financial instruments on the open
market. If the Fed wants to increase the money supply, they purchase securities thus
pumping money into the system and stimulating the economy. If the Fed wants to decrease
the money supply, they sell securities thus taking money out of the system and slowing the
economy.
• Changes in Discount Rate: by manipulating the discount rate (the interest rate that the Fed
charges banks on short-term loans), the Fed is able to influence credit and the money supply.
For example, if the Fed lowers the discount rate, this in turn allows banks to lower the
Federal Funds Rate (the rate the banks charge each other on short-term loans), which leads to
a lower Prime Rate (the rate that banks charge customers). This action will stimulate lending
by the banks and borrowing by customers, thus increasing the money supply.
• Reserve Requirements: this requirement is the minimum portion of received deposits that a
bank must keep in its own vault or with the Fed. As an example, if the Fed lowers the reserve
requirement, banks can keep less money in reserves and therefore have more money to lend.
This action will be expansionary and increases the money supply.
2. If the Federal Reserve increased the federal funds target rate 50 basis points, how would this
affect the economy?
Interviewers will ask this question to gauge your understanding of macroeconomics and the Federal
Reserve’s influence on the economy. Though less important in investment banking (and more
important for buy-side roles), it is important to know how to connect the dots with macroeconomic
events.
In “layman’s terms”, an increase in the federal funds rate causes short term interest rates to rise and
subsequently leads to increased borrowing costs, thus constricting the money supply. A decrease in
the money supply and rise in the cost of borrowing curbs economic growth; individuals are less likely
to purchase goods and services, and businesses are less likely to invest and/or borrow money to
expand operations. Therefore, overall consumer demand decreases, which causes a rippling effect
throughout the economy. Less demand for goods and lower investment by businesses leads to lower
overall wealth in society, and this leads to less demand for goods and less willingness to invest (a
continuing downward spiral). From an inflationary perspective, a decrease in the money supply
coupled with lower demand for goods and services slows down inflation as wages are less likely to
rise and the cost of input/materials for operations drops (as demand for these goods drops). The Fed
would implement this sort of monetary policy if it seeks to curb economic expansion or reduce
inflation.
3. What is LIBOR? What does it signify?
LIBOR stands for the London Interbank Offered Rate, and it represents the interest rate that banks in
London would be charged if borrowing from another bank. It serves as a benchmark for lending
rates, and many banks use it as a base rate for floating rate debt. For example, a term loan may be
priced at an interest rate of L+450, signifying that the interest rate is 4.5% plus the LIBOR rate (banks
often set a minimum “LIBOR floor”, though). As LIBOR increases, this often sends bad signals to
the economy by inferring that banks are less willing to lend to one another. In other words, they
perceive that there is more risk lending to another bank in the current market environment; this causes
them to demand a higher interest rate to account for the increased risk (though this can be caused by
other market expectations, as well). A good demonstration of this effect is the brief spike in LIBOR
during the middle stages of the 2008-2009 Financial Crisis. As LIBOR decreases, the opposite is
true.
4. What is the TED spread and what does it signify?
The TED spread is the spread (difference) between LIBOR and rates on short-term U.S. Treasury
Bills. Particularly, it is the difference between 3-month LIBOR and the interest rate on 3-month T-
Bills. The spread between the two has usually hovered around 50bps or less during stable economic
times, with T-Bills carrying slightly lower interest rates than LIBOR (given the fact that U.S.
government debt is essentially “risk free” from a default perspective while short-term lending rates
from bank-to-bank carry some, minimal amounts of default risk).
As the TED spread increases (i.e. interest rates on T-Bills go down and/or LIBOR interest rates go
up), this usually indicates an economic downturn or decrease in the stock market. As individuals turn
to safer investments (such as government debt), the price of T-Bills is driven up and their respective
yields/interest rates are driven down. As well, LIBOR rates increase as banks are less willing to lend
to one another as they perceive higher credit risk, which is also an indicator of an economic
downturn. In summary, an increase in the TED spread reflects a market belief in increased credit risk
and a potential downturn in the economy.
5. What stocks would you buy right now and why (or pitch me a stock)?
Interviewers will often gauge a prospective candidate’s interest in financial markets (and finance in
general) by asking this question. Individuals that simply memorize prices of market indices will
struggle answering. Pick a stock or two ahead of your interview and study them. Choose a less well-
known publicly traded company: the less the interviewer knows about the company, the less likely it
is that they can scrutinize your answers. Focus on the below when answering this question:
• Describe the company and its operations
• Tell them why you think it is a good investment: describe the competitive positioning,
specific multiples that make it attractive (P/E, EV/EBITDA, Debt/EBITDA, etc.), growth
prospects, and risks of the business
• Be prepared to answer follow-up questions related to your stock – interviewers will try to find
holes in your investment thesis.
If you are unprepared for this question, do not attempt to pitch a stock that you know nothing about.
You are better off describing that you follow the markets as a whole but have not focused on
particular stocks. Try to steer the conversation to recent events or news stories regarding the industry.
6. What are the Dow, S&P 500, and NASDAQ currently trading at?
It is not uncommon for interviewers to ask for current market index prices (or even current Treasury
Bill rates). With this question, they are looking to see how in-tune with the market a candidate really
is. It is an expectation that every individual applying for a job in investment banking (or other high
finance position) is aware of the happenings within general financial markets and current economic
setting. Come prepared to each interview by knowing rough estimates of the current trading prices of
the indexes. To avoid sounding scripted, present your answer as a general range or approximate
figure. For example: “The S&P is trading around 1,500, the Dow around 14,700, and the NASDAQ
around 3,500.”
Chapter 23: Technical Interview Questions & Answers
(23.1) Accounting – Basic

1. Walk me through the three financial statements and how they are interconnected.
First describe the three financial statements and what each represents:
• Balance Sheet: a snapshot of a company’s assets, liabilities, and equity at a single point in
time.
• Income Statement: shows a company’s income and expenses from operations for a specified
period.
• Cash Flow Statement: shows a company’s cash inflows and outflows from operations,
investing activities, and financing activities over a specified period.
Next, describe how they are related (i.e. how the statements flow into one another):
• On the Income Statement, the bottom line, “Net Income”, represents the after-tax profit
earned by the company.
• This flows into the Balance Sheet under Shareholder’s Equity, increasing the balance of that
account. Net Income also flows into the Cash Flow Statement and serves as the starting point
for calculating Cash Flow from Operations.
• Changes to Current Assets and Current Liabilities on the Balance Sheet manifest themselves
as changes in Working Capital on the Cash Flow Statement.
• Investing and Financing activities on the Cash Flow Statement will adjust non-current asset,
liability, and equity accounts on the Balance Sheet (such as PP&E, long-term debt,
shareholder’s equity, etc.).
• The final item on the Cash Flow Statement, change in cash, serves as a plug and should
“balance out” the Balance Sheet (Assets = Liabilities + Equity).
2. If you could only have one financial statement to assess how well a company is doing, which
would you choose and why?
If you only get one financial statement, always choose the Cash Flow Statement. In the world of
banking, “cash is king”. It is the only statement that shows the true financial well-being of a
company. Many items can be buried in an Income Statement and it can be difficult to see the actual
financial performance of a company by just looking at it. The Balance Sheet is a static view of a
company’s financial position and does not tell you how well the business is operating.
3. If you could have two financial statements, which would you choose and why?
If you could have two financial statements, always choose the Income Statement and Balance Sheet.
With these two statements (over the proper periods), you can create a Cash Flow Statement, thus
having all three financial statements.
4. What are the different parts of the Cash Flow Statement? Which part contains interest
expense?
Understanding the Statement of Cash Flows is essential. The three main parts and their components
include:
• Operating Activities: Direct cash inflows and outflows related to the operations of a
business. This section begins with Net Income and then makes adjustments for non-cash
expenses as well as changes in Working Capital.
• Investing Activities: Changes in cash related to investment or divestitures in long-term
assets. This section contains purchases (or sales) of Property, Plant & Equipment (PP&E),
investments (or sales) in intangible assets (patents, licenses, etc.), purchases (or sales) of land,
and purchases (or sales) of marketable securities, among others.
• Financing Activities: Changes in cash related to financing activities of the business (such as
raising new capital). This section contains proceeds from debt or equity issuances, dividend
payments, share repurchases, and debt pay down, among others.
Some interviewers like to trick candidates by asking them the second half of this question (or
something equivalent). Interest expense is captured in the Income Statement and is therefore not part
of the Cash Flow Statement: only non-cash interest expense adjustments are included in a Cash Flow
Statement.
5. Can you give me some examples of non-cash expenses?
These are relevant for purposes of any cash flow calculations. The most common non-cash expenses
include:
• Depreciation
• Amortization
• Stock Based Compensation
• Bad Debt Expense
6. How do you define working capital? Can you describe to me a situation when a company
would have an increase in working capital?
Working Capital is an important accounting concept that measures the short-term financial health of a
company.
Working Capital = Current Assets – Current Liabilities.

Operating Working Capital = (Current Assets – Cash) – (Current Liabilities – Current Portion of
Long-Term Debt)
• Current Assets: Cash, Accounts Receivable, Inventory, Other Current Assets, etc.
• Current Liabilities: Accounts Payable, Construction Payable, Accrued Expenses, Current
Portion of LT Debt, etc.
If a company has negative Working Capital, then it may have short-term liquidity issues: it will have
difficulties paying off short-term liabilities with its short-term assets.
An example of an increase in Working Capital would be an increase in a Current Asset account or a

decrease in a Current Liability account. When Working Capital increases, cash goes down.
7. Is an increase in the Accounts Payable account a source or use of cash? Is Accounts Receivable
(or Inventory) going up a source or use of cash?
Increases in short-term assets are decreases in cash (also known as a “use of cash”). Decreases in
short-term assets are increases in cash (known as a “source of cash”). The opposite is true for short-
term liabilities accounts. As an example, if a company’s Accounts Payable account increases from
one quarter to another, this means that the company did not use as much cash to pay short-term
expenses during that time, resulting in more cash on hand at the end of the period. Thus, an increase
in the A/P account is viewed as a source of cash.
In other words, if a company was billed for $100, this is reflected on the Income Statement as a $100
expense. However, if they only paid $60 in cash up-front and agreed to pay the other $40 of the
expense later, then this would be reflected in a $40 increase in the Accounts Payable account (also
serving as a $40 source of cash to reflect the amount of the expense NOT paid in cash and thus still
on the company’s Balance Sheet).
The opposite is true for an increase in the Accounts Receivable account. If a company’s Accounts
Receivables increase over a period, then the company did not collect as much cash from customers
that bought on credit, so there should be less cash on hand at the end of the period. Thus, an increase
in the A/R account is viewed as a use of cash.
8. If Depreciation increases by $20, what happens to the three financial statements?
This is a common question to evaluate a candidate’s understanding of the different financial

statements and how they interact. Know how to answer variations of this question as it is likely that
you will see it in one form or another. Most interviewers will not mind if you write down your
answer on a piece of paper as you work through the question.
Start with the Income Statement: expenses will increase by $20. Ask the interviewer if there is an
implied tax rate (40% is probably a safe guess) and tax-effect the expenses. Pre-tax income decreases
by $20 due to the increase in expenses, so post-tax Net Income will decrease by $12, net of 40%
taxes.
Next, move to the Cash Flow Statement: in Cash Flows from Operations, the top line (Net Income)
will decrease by $12 as reflected in the Income Statement. Since Depreciation is a non-cash expense,
you must add it back to Net Income as your cash balance did not actually decrease. The net effect of
a $12 decrease in Net Income and a $20 increase in Depreciation is an $8 increase in your cash
balance.
Next, move to the Balance Sheet: starting on the Assets side, your contra-asset Depreciation account
increases by $20, thus decreasing Assets by $20. Also on the Assets side, cash increases by $8, for a
net decrease in Assets of $12. Moving to the Liabilities and Equity side of the Balance Sheet, Net
Income decreases by $12: this results in a decrease in Retained Earnings (under Owner’s Equity) of
$12. Notice that the Balance Sheet balances with a drop of $12 on both sides of the equation.
(23.2) Accounting – Advanced

1. Why is free cash flow an important metric?
Free cash flow (FCF) is defined as cash flow available to all security holders in a company (debt
holders, equity holders, etc.). In a nutshell, FCF is excess (or deficit) money generated by a company
after paying all cash operating expenses and investing activities. The formula for unlevered FCF is
below:
Unlevered FCF = EBIT * (1 – tax rate) + D&A – Change in WC – Capex
Free cash flow is very important because it is cash that a company can spend to perpetuate earnings
generation and boost overall value. In a sense, it provides flexibility and more freedom in making
strategic decisions. Companies with strong free cash flow can pay down debt, use internal financing
instead of banks, pay dividends, buy back stock, develop new products, expand operations, etc.
Since FCF does not include Cash Flows from Financing Activities, it can be used to measure the
financial health of a company; in other words, it reflects the company’s cash flow irrespective of its
capital structure. If a company continuously has negative FCF, it will run into financial trouble in the
following ways:
• Maintaining a healthy minimum operating cash balance
• Funding future capital expenditures/growth
• Paying current debt obligations (including interest, amortization, and maturities)
• Seeking out future financing from investors (both debt and equity investors will be hesitant to
lend or invest in a company that struggles to earn positive FCF)
• Returning capital to investors (in the form of a dividend)
Ultimately, a company will need a lifeline in the form additional funding if it continues to have
negative Free Cash Flow, which is a bad sign for investors. If a company continues to be unable to
fund its operations/growth, then the business will likely hit a cash shortfall and is a major cause of
bankruptcy.
2. What is the AOCI account? What goes in there, typically?
AOCI stands for Accumulated Other Comprehensive Income and it is an Equity account on the
Balance Sheet. It is maintained separately from Retained Earnings and is an accumulation of the
following examples of gains or losses that are not included on the Income Statement:
• Unrealized gains/(losses) on Available-for-Sale securities
• Gains/(losses) on derivatives
• Gains/(losses) on foreign currency translation
3. Say you buy PP&E with $50 million of debt and $50 million of equity, what happens in years 1
and 2?
This is another commonly-used accounting question. A summary of the major line item changes is
below:
Year 1
• PP&E goes up $100 million
• Debt goes up $50 million
• Equity goes up $50 million
• Cash stays flat
• There are no adjustments to the Income Statement
Year 2
• Incur depreciation expense on your PP&E. In this case, we assume 10 year straight-line
deprecation, resulting in depreciation expense of $10 million.
• Assuming a 10% interest rate on your new debt, you incur interest expense of $5 million.
• Assuming a 40% tax rate, Net Income will decrease by $6 million ($15 million x 40%)
• Since depreciation is a non-cash expense, you must add back D&A of $10 million to the Cash
Flow Statement (do not add back interest). With Net Income down $6 million and the D&A
add-back of $10 million, there is a net increase in cash of $4 million.
• At the end of the year, the Balance Sheet balances because Assets drop by $6 million ($4
million increase in cash net of $10 million drop in PP&E) and Equity drops by $6 million
from the drop in Net Income.
4. If a company issues 100 new shares at $10/share, what happens to all of the financial
statements?
In this example, a company is issuing $1,000 of new equity.

• Income Statement: this transaction has nothing to do with income, so it does not affect the
Income Statement.
• Cash Flow Statement: by issuing new shares the company is taking in cash, therefore this
would be listed as a $1,000 source of cash under Financing Activities on the Cash Flow
Statement.
• Balance Sheet: It would also be reflected on the Balance Sheet through the following
accounting journal entry:
o DEBIT: $1,000 Cash & Equivalents, CREDIT: $1,000 Owners Equity. Both Assets
and Equity increase by $1,000, balancing the Balance Sheet.
5. Continuing from the previous question, what happens in Year 2 if they applied all of those
funds to pay down a debt instrument with 10% interest (ceteris paribus)?
If the company used the $1,000 at the beginning of Year 2 to pay down debt with a 10% interest rate,
then the following would occur:
• Income Statement: $100 less of interest expense would be incurred ($1,000 x 10%), and
assuming a 40% tax rate, Net Income increases by $60.
• Cash Flow Statement: Operating Cash Flow increases by $60 (from increased Net Income),
but Cash Flow from Financing Activities has an outflow of $1,000 (having paid down $1,000
of debt) for a net decrease in Cash & Equivalents of ($940).
• Balance Sheet: Cash & Equivalents decreases by $940, Liabilities decrease by $1,000, and
Equity increases by $60, resulting in a net decrease of $940 on each side of the A = L + E
equation.
6. When discussing share dilution, what is the Treasury Stock Method? Can you walk me
through the formula?
The Treasury Stock Method is a way of incorporating unexercised “in-the-money” options (when the
exercise price of the option is lower than the current price of the stock) into a company’s fully diluted
share count. This method assumes that the proceeds a company receives from the exercising of the
options are used to repurchase common shares. To calculate fully diluted shares this way, follow
these steps:
1. Options proceeds = (exercise price of options) x (# options outstanding)
2. Shares repurchased = (options proceeds) / (current stock price)
3. Diluted shares outstanding = (basic shares) + (in-the-money options) – (shares repurchased)
Note: if the company’s stock price is below the strike price of the options, then they would not be
exercised (and common shares outstanding = fully diluted share count).
7. What is the difference between FIFO and LIFO accounting?
Both FIFO and LIFO are inventory valuation methods for companies that sell physical inventory:
they are two separate ways to calculate a company’s Inventory and directly affect the Cost of Goods
Sold (COGS). FIFO accounting refers to “First in First Out” and LIFO refers to “Last in First Out”.
Using FIFO, a company expenses inventory based on the oldest inventory on-hand (the “first”
inventory that was purchased). Using LIFO, a company expenses inventory based on the most recent
inventory on hand (the “last” inventory that was purchased). If Company A and Company B are
identical in all aspects, in a normal business environment, and Company A uses FIFO while
Company B uses LIFO, the COGS for Company A should be lower than Company B (due to
inflation). Note: IFRS accounting standards ban the use of LIFO accounting, but GAAP standards do
not.
As an example of FIFO and LIFO accounting, let’s assume we own a bicycle manufacturing company
and create 20 bikes on Saturday at a COGS of $100 per bike and 100 bikes on Sunday at a COGS of
$120 per bike (due to an increase in tire costs). Thus, our inventory is as follows:
Inventory Date # of Bikes Cost per Bike Total Value

Saturday 20 $100 $2,000
Sunday 100 $120 $12,000
Total Inventory 120 $14,000
FIFO:
If we open for business on Monday and sell 30 bikes, under FIFO our reported COGS is $100 for the
first 20 bikes and $120 for the other 10 bikes (for a total COGS of $3,200).
# of Bikes Cost per Bike Total Value

Sell 20 Saturday Bikes 20 $100 $2,000
Sell 10 Sunday Bikes 10 $120 $1,200
Total COGS $3,200
LIFO:
If we open for business on Monday and sell 30 bikes, under LIFO our reported COGS is $120 for all
30 bikes (for a total COGS of $3,600).
# of Bikes Cost per Bike Total Value

Sell 30 Sunday Bikes 30 $120 $3,600
Total COGS $3,600
8. You are a CFO and your only goal is for the company to pay as little income tax as possible.
You are given the choice of using FIFO or LIFO accounting. Which do you choose and why?
Assume an inflationary environment.
To pay as little income tax as possible, the company should use LIFO accounting. As outlined above,
LIFO will increase COGS, and therefore decrease taxable income. Thus, although your Net Income
would be lower, your tax liability would be lower and your cash flow would be higher (compared to
using FIFO).
9. Why would a company want to switch from LIFO to FIFO accounting?
Switching from LIFO to FIFO accounting has a few major outcomes:

1. Value of inventory will increase
2. Net Income will increase (going forward)
3. A tax liability will be incurred
Companies that make the switch must retroactively apply these accounting changes to their financial
statements. A re-valuation of inventory occurs due to the fact that the most recently purchased (and
most expensive) inventory is now kept on the books, while the oldest (and cheapest) inventory is
assumed to have been sold. Thus, the value of inventory increases. As well, for the same reasons
listed above, COGS will have retroactively decreased, causing an increase in Net Income. An income
tax liability will be incurred for having higher Net Income under the new FIFO accounting method;
this will need to be paid off over the next several years.
A switch from LIFO to FIFO will also produce a higher taxable income going forward, which results
in lower cash flow (more cash taxes will be paid to the government while no cash changes have
actually occurred). A company might do this to artificially inflate its EBITDA and Net Income
figures, though this has negative consequences on a company’s free cash flow.
(23.3) General Valuation - Basic

1. What are the major methods of valuation? Rank them in terms of highest to lowest expected
valuation.
The three most common methods are Transaction Comparables Analysis (or “Precedent
Transactions”), Comparable Companies Analysis (or “Equity Comparables” or “Public
Comparables”), and Discounted Cash Flow Analysis (“DCF”). Generally speaking, Transaction
Comps will place a higher value on a company than Equity Comps due to the incorporation of a
“control premium” (excess price paid to take a controlling stake in a company) and anticipated
synergies. A DCF is the most volatile valuation method and can be the highest or lowest form of
valuation depending on assumptions.
Transaction Comps: Compile a list of previous transactions based on specific criteria similar to the
company you are valuing (same industry, same size, same geographic presence, similar financial
metrics, etc.). Calculate various transaction multiples related to the deals (EV/EBITDA,
EV/Revenue, etc.) to find averages. Value is then obtained by applying this range of average
multiples to your company’s financial metrics (EBITDA, Revenue, etc.).
Equity Comps: Compile a list of companies that are comparable to the company you are valuing
based on factors such as industry, capitalization/size, geography, growth, liquidity, margins, product
offering, etc. Calculate various trading multiples and metrics (Price/Earnings, EV/EBITDA, etc.) and
find averages. Apply these averages to your company’s financial metrics to obtain a range of values.
DCF: This is also known as an “intrinsic” valuation of a company. In a nutshell, a DCF takes the
present value of expected future cash flows of a business as well as the terminal value and discounts
them by an inferred discount rate.
2. What other valuation methods are there besides DCF, Public Comparables, and Acquisition
Comparables?
While it is important to have an in-depth understanding of the three major valuation methods,
recognize that several other more specialized, less common valuation methods exist. Interviewers
may want to see that you have at least a high-level understanding of these (below are a few more
common valuation methods outside of the core three):
• Liquidation Value: the value of tangible assets within a company if it were to go out of
business. This is a conservative valuation method, often forming a low-end value when
analyzing a company (commonly a company on the verge of bankruptcy). This is similar to
an appraisal value and ignores the value of the “going concern” of the business (only valuing
the company’s assets at their cumulative sale price in the market).
• LBO Value: the value a “financial buyer” would be willing to pay to acquire the company.
This type of analysis assumes the absence of strategic buyers and thus the absence of
synergies (thus providing a floor purchase valuation), but it can also establish a ceiling
valuation by determining the highest purchase price possible to achieve a required IRR for
the financial buyer (given maximum debt levels).
• Sum-of-the-Parts/Breakup Value: the value derived by dividing the business into different
operating segments and valuing each independently. Each segment has its own valuation
multiple applied to it and the valuations are summed to reach a combined value for the
company.
3. What is the formula for Enterprise Value? How is it different than Equity Value?
Enterprise Value measures the value of the company as a whole (debt and equity) while Equity Value
only measures the value to equity holders in the company.
4. Why do you add Non-controlling Interest to Enterprise Value?
Companies that purchase controlling stakes (50%+) in other companies must report 100% of the
subsidiary’s financial operations on their own financial statements (even though they own less than
100% of the subsidiary). Since the denominator figures (Revenue, EBITDA, etc.) include 100% of
the subsidiary’s financials, the numerator (Enterprise Value) must also assume 100% ownership of
the subsidiary. The difference in value between your actual ownership percentage and the full value
of the subsidiary is referred to as Non-Controlling Interest. Adding this back to Enterprise Value
ensures that you are comparing the full value of the business to the fully consolidated financial
metrics.
To think about this another way, adding back Non-Controlling Interest (thus increasing your
valuation) is the same as adding the price that you would need to pay to buy out the <50% owner of
any subsidiaries. You are reporting his portion of Revenue and EBITDA and therefore would need to
compensate the minority investor to take control of his portion of the company.
5. What are some commonly used Enterprise Value and Equity Value multiples? Why do you use
Equity Value/Net Income and Enterprise Value/EBITDA?
Common Enterprise Value multiples:

• EV/EBITDA
• EV/Sales
• EV/FCF
Common Equity Value multiples:

• Price/EPS
• PEG
• Price to Book Value of Equity
When calculating these ratios, consider which party (debt, equity, or both) the denominator applies to.
Enterprise Value is the value of a company attributable to all investors and therefore requires a
denominator reflective of this fact. Revenue, EBITDA, and EBIT represent financial metrics
available to both debt and equity holders as interest has not yet been paid out to debt holders. Net
Income and EPS are only available to equity holders and are therefore used with Equity Value
multiples.
6. What is the normal range for an EV/EBITDA multiple?
This is a trick question as there is no universal “normal range” for an EBITDA multiple. It is possible
to get closer to a generalization when looking at specific industries, and even closer when looking at
similar companies within the same industry. Similar to looking at P/E, the EV/EBITDA multiple is
highly dependent upon assumptions and forecasts such as expected EBITDA growth, as well as other
tangible and intangible factors (such as credit risk, management aptitude, etc.). Generally, high
growth industries will exhibit higher multiples and low growth industries lower multiples. For
example, the technology sector tends to grow faster than the utilities sector, so companies in its
industry often draw higher valuation multiples given the higher growth prospects.
7. If you issue $100 of new shares how does this effect enterprise value?
Recall the Enterprise Value Calculation described earlier:
When a company issues $100 of new shares (AKA $100 of new equity), ceteris paribus, its market
value of equity will increase $100 and its cash will also increase $100. Per the EV formula above,
this results in a net change of $0. Thus, there is no change to Enterprise Value as a result of issuing
$100 of new shares.
8. Continuing from the previous question, what happens if the company uses $50 of that new cash
to pay out a dividend to shareholders?
Diving further into how capital structure decisions affect Enterprise Value, issuing a dividend to
shareholders is straightforward in how it affects EV. If a company issues a $50 cash dividend, two
things happen:
1. Cash decreases by $50
2. Equity decreases by $50
Following the EV formula, #1 increases Enterprise Value by $50 while #2 decreases Enterprise Value
by $50. Thus, there is no change to Enterprise Value, ceteris paribus.
Note: This assumes a theoretical world where investor reactions to capital structure decisions are
irrelevant. In the real world, the issuance of new equity, new debt, a dividend, etc. could drive a
stock higher or lower based on the signal it sends to investors (as well as tax implications with a debt
issuance). This would affect the market value of equity and, therefore, a company’s Enterprise Value.
9. If you have a savings account with $100 deposited into it, what is the Enterprise Value of that
account? What is the Equity Value? Assume no interest income.
This question is designed to test a more abstract understanding of Enterprise Value. In this example,
an account with $100 of cash deposited into it results in an Enterprise Value of $0 ($100 of equity,
less $100 of cash = $0). The account itself has equity value ($100), but it is not producing anything.
In a sense, there is no “enterprise”/business of any value associated with it. If the account was
earning interest income, then there is something being “produced” with that capital and the interest
earned on the account would have an inherent Enterprise Value associated with it.
From a theoretical perspective, this is what is meant by Enterprise Value: what is the value of the
business that has been created? This is why we seek to eliminate or add the various elements of the
EV formula to come to an Enterprise Value. For example, you might ask, “Why subtract cash in the
EV formula?” Frankly, cash is cash and it is not part of the ongoing business. We are trying to find a
value for the business that has been developed, and cash is just an accumulation of the earnings
achieved so far (which will be captured in the equity value of the company). We strip out that cash
from the equity value (which is part of the EV formula) to determine the amount of debt value, equity
value, and other aspects of the EV formula that are attributable only to the ongoing operations of the
business.
10. How do you calculate the present value of a future stream of cash flows?
In finance, “present value” refers to the value today of a future payment or future stream of payments
(cash flows). The guiding principle is that individuals prefer to have money now versus receiving
money in the future; money today can be invested and can earn a return moving forward. When
calculating the present value, we must assume a required rate of return that an investor demands on
their money (this is called the discount rate). Below is the formula to calculate present value for each
future cash flow:
payment
PV =
(1 + r) ^ t
Where:
payment = amount of money to be received (also known as future value)
r = discount rate
t = length of time until you receive the payment***
If an individual will receive more than one cash flow, then apply the present value formula to each
future payment and discount them using the appropriate timeframe and discount rate.
11. How much would you pay for a tree that grows 10 dollars every year in perpetuity? What if
growth is accelerating at 5% per year?
This is simply a present value of a perpetuity question. The formula for valuing cash flows into
perpetuity is as follows:
Perpetuity Value = C / r
Where:
C = cash flow each year
r = discount rate
If you assume a 10% discount rate, then the value of $10 per year forever is $100 ($10 / 0.1).
The formula for valuing a perpetuity that grows each year is as follows:
Perpetuity Value = C / (r – g)
Where:
r = discount rate
g = perpetuity growth rate
If you assume the same 10% discount rate, then the value of $10 per year forever growing at 5% per
year is $200 ($10 / (.1 – .05) ).
12. Would you rather have $100 now or $10 per year for the rest of your life?
You cannot answer this question without knowing the discount rate. Demonstrate your understanding
of this fact and ask for a rate (or assume one). In this example, let us use a 5% discount rate. The
formula for the present value of a perpetuity payment is as follows:
PV = PMT / (r – g)
Where:
PMT = payment
r = discount rate
g = growth rate of PMT (if any)
Plugging in our numbers, the present value of $10 per year for the rest of your life is $200 (which is
higher than the other scenario of $100 today). At a 5% discount rate, you would prefer to have the
$10 payment into perpetuity.
If the discount rate is >10% in this example, the present value of the perpetuity payment falls below
$100 and you would instead prefer to take the $100 today.
(23.4) General Valuation – Advanced

1. When analyzing a company going through bankruptcy or on the brink of bankruptcy, which
valuation methods are the most useful?
• Liquidation Value: to establish a low-end “worst case scenario” valuation, Liquidation
Value can serve as a useful valuation method for a company on the brink of bankruptcy. This
method is particularly relevant for a company that files for Chapter 7 Bankruptcy.
• Sum-of-the-Parts Analysis: commonly, companies that are going through bankruptcy are
broken apart and different divisions are sold off to separate firms while other divisions are
liquidated or carried on as separate entities. Calculating the value of different divisions of the
business proves useful as a company approaches bankruptcy and these breakups are
negotiated by creditors.
• Public Comparables and Acquisition Comparables: though discounted slightly, these
multiples-methods of valuation are still useful for companies that are near bankruptcy as they
will need to be applied to revised management estimates for the business. As well, distressed
acquisitions are commonplace among bankrupt companies, so finding comparable distressed
acquisitions proves useful.
• DCF: similar to the explanation above on comparables, despite being in bankruptcy it is still
possible to value a company’s cash flows by using revised estimates from management.
2. What metric would be appropriate in valuing a company with negative earnings
Companies with negative earnings (AKA negative Net Income) cannot be valued using multiples that
rely on Net Income or EPS (because they will be negative numbers and the multiples will not be
applicable). For this reason, you must go “above” Net Income on the Income Statement to find
useable metrics for valuation. The most common metrics would be:
• Enterprise Value/EBITDA
• Enterprise Value/EBIT
• Enterprise Value/Revenue
Understand that if EBITDA is negative as well, you will have to continue to work your way up the
Income Statement to find a material multiple. In this case EV/Revenue may be the best multiple.
Using the above metrics, you can then derive multiples using Acquisition Comparables and Public
Comparables analyses and apply them to the company being analyzed.
In addition to using the above multiples, DCF analysis can be a useful form of valuation as companies
with negative earnings can sometimes have positive cash flow (just because Net Income is negative
does not mean that Free Cash Flow will be negative, too).
Other valuation methodologies that may be more applicable here include:

• Liquidation Value
• Historical Cost
• Replacement Cost
• Book Value
3. How would you value a company with negative cash flow?
Similar to the previous question, a company with negative cash flow does not mean that it has
negative EBITDA, though it might. Companies with positive EBITDA can be valued off of multiples
such as EV/EBITDA or EV/Revenue.
Factors that could contribute to a company that has positive EBITDA but negative cash flow include:
• High capital expenditures (i.e. an early-stage company in a high growth stage)
• Fast-increasing working capital
• Significant tax liabilities
A Discounted Cash Flow analysis will not be of too much use here, so you must rely on other
valuation techniques. Public comparables and acquisition comparables are still useful for the same
reasons stated above. Sum-of-the-Parts analysis and Liquidation Value may be useful as well given
the likelihood of eventual bankruptcy for a company with continuous negative cash flows is high.
4. What factors determine the value of an option?
There are various models used to price options (Black-Scholes being the most popular). These
models take into account numerous factors and aim to define a fair market value. Some of the more
important factors include:
• Current price of the underlying security vs. the strike price of the security (known as
“intrinsic value”); the current price and strike price are used in conjunction to calculate what
the option is worth if exercised today.
• Time to expiration: an option with a longer time until expiration will be valued at a
premium since it has a higher chance/more opportunity over time to be in the money.
• Volatility: stocks with higher volatility are more likely to exhibit price swings and will be
sold at a premium.
• Interest rates: though less directly related to the value of an option, fluctuating market
interest rates affect the return demanded by an option investor, thus affecting option price.
5. If two stocks have a P/E of 20x and 40x, respectively, which one should I prefer as an investor?
What if they both have the same growth rate?
The answer to this question is “it depends”: you cannot determine which company is a more
worthwhile investment by comparing P/E alone.
To answer, you must understand what P/E represents and its limitations. In a nutshell, P/E (Price /
Earnings per Share) signifies how many dollars an investor is willing to pay for $1 of earnings.
Investing in a 40x P/E stock may seem more expensive than 20x P/E, but the 40x P/E stock has
growth expectations and risk already baked into this price. Put another way, the 40x P/E stock is
expected to have higher future earnings and you must pay a premium now for this expected benefit.
Another important thing to note is that P/E multiples tend to vary from one industry to another. For
this reason, an investor must compare P/E multiples within the same industry to have a clearer
valuation comparison. More established industries (with less expected growth) tend to have lower
P/E ratios while hot and developing industries (with higher growth) tend to have higher P/E ratios.
Even within a single industry, older companies may have lower growth prospects than newer players.
Thus, P/E comparisons are more accurate the more similar a company is to the comp within its own
industry. P/E alone does not paint a complete valuation story and therefore it is not possible to
answer this question without more information.
6. Continuing from the question above, what if they both have the same growth rate?
If both stocks have the same growth rate, all else equal, you would prefer the stock trading at 20x P/E.
You would prefer to pay $20 per $1 of earnings vs. $40 dollars per $1 of earnings if you knew the
growth prospects down the road are the same. In reality it is not this easy since, as discussed above,
many other factors affect P/E. One such example would be the how likely the company is to achieve
its past earnings growth predictions (how risky the investment is).
7. Assuming the same industry, why would the P/E ratio for one company be higher than the P/E
ratio of another?
There are many reasons why two companies in the same industry would have different P/E ratios.
Common examples of why a company’s P/E ratio would be higher than another’s include:
• Better growth opportunities: better prospects for higher earnings in the future lead to a
higher premium on earnings today.
• Lower operational risk: investors will pay more for more stable earnings.
• Better management team: respected and proven management teams drive lower costs and
streamline operations, thus leading to higher valuations.
• Stronger financial health: companies with less debt and interest expense (relative to their
EBITDA) are less likely to go bankrupt and have more flexibility to raise money in the future
to fund growth.
8. As an investor, do you care more about trailing P/E or next twelve months P/E?
Trailing P/E refers to the current stock price divided by the last twelve months (“LTM”) EPS. Next
twelve months (“NTM”) P/E refers to the current stock price divided by projected NTM EPS.
Next twelve months P/E is more important to investors because it is much more relevant to them.
Price/EPS means that you are, in a sense, paying a specific price for that company’s earnings. As an
investor, you are inherently purchasing the rights to any future earnings of that company: you cannot
buy a company’s historical earnings. Due to this, investors care more about projected EPS and,
hence, NTM P/E. In general, investors are usually more concerned with the future performance of a
company rather than historical performance.
9. Regarding forward P/E or EV/EBITDA multiples, should they increase or decrease as we look
at future years’ numbers?
Let us look at an example to help answer this question: which row below is abnormal in a normal
business environment?
2013 P/E 2014 P/E
A 10x 15x
B 20x 16x
Under normal circumstances, forward valuation multiples should typically trend downwards. In the
example above, row A would be abnormal. Think of it this way: EBITDA (or Net
Income/Revenue/etc.) should increase over time for a company in a normal business environment.
Holding Enterprise Value or stock price constant, as you move forward in time, your denominator
should keep increasing, causing the forward multiples to drop.
EV/2013 EBITDA should be greater than EV/2014 EBITDA, and so on...
10. You are doing a valuation of a company that manufactures shoes. You are only able to choose 1
valuation methodology to use. Which do you choose and why?
This question tests your understanding of the major valuation types and what information is required
to perform each. There is no truly “right” answer here; instead, justify your choice and use reason to
come to a proper answer. Knowing that the shoe industry is large, developed, and has many players,
it is safe to assume public company comparables and transaction comparables would be good
valuation methodologies. There should be a large and diverse set of comps allowing for increased
valuation accuracy with these methodologies.
(23.5) Comparables Analysis

1. What makes a good candidate for a public comp?
When finding companies to compare, there are several factors that Analysts look for in a peer group
to match with their target company. Ideally, there are publicly traded companies that are relatively
similar to the company being analyzed, allowing an Analyst access to their operational and financial
data (but this is not always the case). Companies with similar criteria in the following areas make
good candidates for a public comp:
• Industry/operations: This is the most important factor. First and foremost, your comparable
companies need to be classified in the same industry as your target company. Ideally, they
also have very similar operations in terms of types of products/services offered.
• Size/Maturity: You want to compare companies that are similar in size. This includes not
only breadth and number of employees, but (more importantly) revenue, EBITDA, and other
financial metrics. Comparing a small/early-stage company with a large/mature company is
not as effective as comparing companies in the same maturity phase.
• Capitalization: Capital structure can play a large role in determining whether or not
companies are comparable. For example, you do not want to compare a company with low
debt levels with another that is on the verge of bankruptcy. Ideally, companies will have
similar capital structures
• Geography: Companies that operate in the same geographies are the most comparable. You
at least want companies operating in the same country, if not the same regions.
For more information on each of these characteristics, see Section (21.4).
2. What metrics do you look at when evaluating comparable companies?
When analyzing comparable companies, you tend to look at the following metrics (though these can
vary slightly by industry):
• Revenue Growth % (y-o-y)
• EBITDA Margin %
• EPS
• EPS Growth %
• Valuation multiples (EV/EBITDA, EV/EBIT, EV/Revenue, P/E, PEG)
• Leverage levels (Debt/EBITDA, Net Debt/EBITDA)
Note: you will typically be comparing future projections of these metrics (not historical trends).
For more information on these metrics, see Section (21.4).
3. Are there any factors I need to take into account when comparing a private company to a set of
publicly comparable companies?
When comparing a private company to a set of public comps, there are numerous factors to consider:
• Liquidity: private company equity is less liquid and therefore should be discounted slightly
(exiting the investment is more difficult, so the equity lacks a liquidity premium).
• Cost of borrowing: sometimes this is higher for public companies (less access to new
debt/equity compared to a public firm), so valuation should be discounted slightly.
• Size: private companies tend to be smaller (which usually means more risk and/or less market
share or economies of scale).
• Management control: often fewer shareholders as well as major equity holders involved in
management; more risk when fewer individuals are in control due to the lack of a succession
plan and management’s ability to fully control direction of company (without input from
others).
• Earnings reporting: it is often difficult to obtain private company financials; private
companies may report earnings and cash flows differently and are commonly not audited;
often aim to minimize reported profit (for tax reasons).
As a general note, private companies are commonly discounted (often by 20-30%) after being valued
in comparison to a public peer set due to the risks and considerations above.
4. What makes a good candidate for a transaction comp?
Characteristics used to build a set of transaction comparables are very similar to finding a good public
comp, with a few other factors to consider:
• Industry
• Geography
• Date completed
• Transaction size
• Consideration
• Buyer profile: hostile/friendly, institutional buyer/strategic buyer
For more information on each of these characteristics, see Section (21.5).
5. What metrics do you look at when evaluating comparable transactions?
When analyzing comparable transactions, you tend to look at the following metrics:
• Enterprise Value or Transaction Value or Equity Value
• Revenue
• EBITDA
• EBIT
• Earnings (Net Income)
• Free Cash Flow
• Valuation multiples (EV/EBITDA, EV/EBIT, EV/Revenue, P/E, PEG)
• Leverage levels (Debt/EBITDA, Net Debt/EBITDA)
For more information on each of these metrics, see Section (21.5).
(23.6) Discounted Cash Flow Analysis

1. Walk me through a DCF valuation.
At a high level, a DCF is a short-form valuation model that projects out future FCF of a business and
then discounts that cash flow back to the present using a set discount rate. Below we summarize the
DCF Analysis process:
1. Obtain the discount rate
2. Project unlevered FCF into the future
3. Calculate the terminal value
4. Discount future unlevered FCF’s and the terminal value back to the present
5. Sum all of the present values to reach your company’s Enterprise Value
For a full overview of DCF, see Section (A.6).
2. What is the difference between levered and unlevered FCF?
Levered FCF: Cash flows that have accounted for payments made to debt holders (i.e. cash flows
after interest payments and mandatory debt repayments).
Unlevered FCF: Cash flows before debt service (represents the purely operational cash flows of the
business, independent of its capital structure).
For more information, see Section (A.6).
3. How do you get from EBTIDA to unlevered FCF? Revenue to unlevered FCF? Net Income to
unlevered FCF? Why must you multiply EBIT by (1-tax rate)?
Notice that the key to arriving at unlevered FCF is to always return back to EBIT first, then continue
the formula from there. As long as you know how to get from EBIT to unlevered FCF, you should be
able to calculate it under any circumstances.
EBITDA to FCF
EBITDA – D&A = EBIT * (1 – t) = EBI + D&A – Capex – Increase in Working Capital
Revenue to FCF
Revenue – COGS = Gross Profit – operating expenses = EBIT * (1 – t) + D&A – Capex – Increase in
Working Capital
Net Income to FCF

Net Income / (1 – t) = EBT + Interest Exp. = EBIT * (1 – t) + D&A – Capex – Increase in Working
Capital
Where:
t = tax rate
operating expenses = SG&A, payroll expense, marketing expense, etc.
By multiplying EBIT by (1 – t) you are arriving at a “tax effected EBIT”. You are effectively
applying taxes to the figure so that FCF does not include the tax benefits of interest expense (which
are tax deductible). When looking at Free Cash Flow we want an after tax figure (cash will have to
be used to pay taxes) and therefore must account for this tax while at the same time keeping a
company’s capital structure independent of this calculation.
4. If I did a DCF on levered FCF, what value would that get me?
When conducting a DCF on unlevered FCF, the resulting value is the company’s Enterprise Value.
Unlevered FCF does not include interest from debt and is therefore “capital structure independent”
(cash flow available to both debt and equity holders). This results in Enterprise Value, a figure
reflective of the value of the company to both debt and equity holders.
When conducting a DCF on levered FCF, the resulting value is the company’s Equity Value. Levered
FCF takes into account interest expense from debt, meaning debt holders have been paid. This results
in a value of cash flows available only to equity holders in the company, also known as Equity Value.
5. How do you determine the terminal value in a DCF valuation?
The final portion of a DCF is the calculation of a terminal value. There are two major methods: the
Gordon Growth method and the Exit Multiples method.
• Gordon Growth: Assume a growth rate of the company’s Free Cash Flow (“FCF”) into
perpetuity and apply the following formula to the final year’s FCF:
(Terminal year FCF) * (1 + growth rate) / (WACC – growth rate)
• Exit Multiples: Apply an exit multiple to your terminal year financials based on Transaction
Comps or comparable financial metrics for similar companies.
6. When using the Gordon Growth method to calculate a terminal value, what is an appropriate
growth rate to use? When using the exit multiples method, how do you determine an
appropriate exit multiple?
When using the Gordon Growth method, it is common to choose a conservative growth rate such as
long term expected GDP growth; more aggressive choices would imply that into perpetuity the target
company would be larger than the U.S. Economy! Typically, a DCF is projected into the future until
a low, stable growth rate is realized.
When using the exit multiples method, transaction comparables are most commonly used to
determine an average exit multiple (usually EV/EBITDA). Comparable company valuation multiples
are sometimes used as well, but it must be noted that these often do not reflect a necessary control
premium.
7. What are the three ways to manipulate a discounted cash flow model?
There are three major components to a DCF, and adjusting these will heavily affect the outcome of
the model:
1. Discount rate: The discount rate directly affects the present value of future cash flows projected
in the DCF. Adjusting the WACC even slightly can cause major shifts in the output of a DCF
model.
2. Terminal value: Oftentimes, a majority of the valuation in a DCF is derived from the terminal
value calculation. Making tweaks to the assumed growth rate for a Gordon Growth methodology
or adjusting the exit multiple will shift a DCF valuation significantly.
3. Free cash flow: Obviously, a major part of a Discounted Cash Flow model is Free Cash Flow.
Adjusting EBITDA margins/growth, capital expenditures, and working capital requirements are
all ways to impact FCF and thus change the value of your DCF.
Note: as it may be apparent, a major disadvantage of the DCF valuation method is a heavy reliance
on assumptions that are often difficult to precisely determine.
8. How would you build a DCF for a pre-revenue company?
The short answer is you likely wouldn’t. However, if you were to try and model out a DCF, you
would need to project out the DCF for a significantly long period (maybe upwards of 20 years).
During the earlier periods, the company would have significantly negative cash flow: no/little revenue
with likely high capex and working capital increases. You would then need to continue projecting out
the company’s operations until FCF became positive and reached a stable/mature point, so that you
could calculate a reasonable terminal value. Though, again, this would be a far-fetched valuation
with lots of questionable assumptions.
9. What is the formula for the Weighted Average Cost of Capital (WACC)? Where does this
come into play in a DCF?
WACC is a formula used to calculate a discount rate and it consists of several parts: cost of equity,
cost of debt, and cost of preferred equity (if applicable).
Cost of Debt Cost of Equity Cost of Pref.

D E P
WACC = [rd * (1 - t)] * + re * + rp *
(D + E + P) (D + E + P) (D + E + P)
Where:
re = cost of equity
rd = cost of debt
rp = cost of preferred equity
t = tax rate
P = market value of preferred equity
Since the Weighted Average Cost of Capital is equivalent to a company’s discount rate, this comes
into play in a DCF by acting as the percentage used to discount future cash flows to the present value
(and thus arrive at a company valuation today).
10. What is the cost of equity? How do you calculate the cost of equity?
The cost of equity is equivalent to the return on investment demanded by equity holders based on the
risk associated with an investment. To find the cost of equity, we use a formula known as the Capital
Asset Pricing Model (or CAPM).
CAPM = rf + β * (rm - rf )
Where:
rf = risk free rate (equal to U.S. Treasury Bill with maturity equal to length of DCF, usually 10 years)
β = levered beta of the company’s equity
rm = expected return of the stock market
11. What is the cost of debt? How do you calculate the cost of debt?
The cost of debt is equivalent to the return on investment demanded by debt holders based on the risk
associated with an investment. The cost of debt can be calculated by taking the weighted average
yield on all outstanding debt within the company. If no market prices of debt are publicly available,
then taking a weighted average of the company’s interest expense to its book value of debt is usually
accurate enough.
12. For a company with normal business operations, why is the cost of equity higher than the cost
of debt?
Under normal circumstances, the cost of equity is higher than the cost of debt for the following
reasons:
• Equity holders are behind debt holders in the capital structure: they take on more risk as
investors in the event that the company becomes insolvent since debt holders get paid first.
• Debt tax shield: interest expense is removed from earnings before income taxes are applied
or, put another way, interest on debt is tax deductible.
• Debt is often collateralized: equity investors have no guarantee on their investment, but debt
holders often have specific assets backing their investment, which can be sold to help cover
any losses.
13. Which has a higher WACC: an all-equity company, or the same company with some debt?
Usually, an all-equity company will have a higher WACC. Given that the cost of equity is higher
than the cost of debt, and the fact that the all-equity company does not benefit from the debt tax
shield, it is likely that the all-equity company has a higher WACC. Each company has an optimal
capital structure that minimizes its WACC, and this almost always involves some combination of
debt and equity; at some point, raising additional debt actually increases the firm’s overall WACC,
but it is safe to assume that a company with NO debt does not have the optimal capital structure in
place.
14. What components of WACC change for a company that isn't based in the U.S.?
The changes to WACC for non-U.S. companies are mostly related to the cost of equity. CAPM will
differ in the following ways:
• Beta will differ: its correlation to the market will be based off of that respective region’s
market index.
• The market risk premium will differ: again, the excess premium demanded by the market
on equity investments will be based on a different equity index (not the S&P 500).
• The risk free rate might differ: sometimes people still use the U.S. Treasury rate as the Risk
Free Rate in the CAPM equation.
Beyond the CAPM portion of the WACC equation, the cost of debt could be affected in certain areas
where accounting rules differ: the debt tax shield may or may not be applicable in certain countries.
15. What is the difference between levered and unlevered Beta? How do you get from on to the
other?
Levered Beta refers to the Beta of a stock relative to the market after taking into account its capital
structure (i.e. how much debt it has). In a sense, it tells you how risky the equity is in relation to the
market.
Unlevered Beta measures the risk of the business as a whole in relation to the market (not taking into
account leverage/financial risk).
When determining the Beta for a company, you typically gather a set of comparable companies and
use a financial program (i.e. Bloomberg) to gather their Betas. These will be levered Betas. You
must unlever each of the Betas to then find a median that can be applied to the company you are
analyzing. After finding this median unlevered Beta, you apply this number to your company’s
capital structure to determine its levered Beta, which is the relevant metric for use in the CAPM
formula. You cannot simply find a median levered Beta from a company’s competitors because you
need to find the assumed average business risk of the company, then see how your company’s
specific capital structure affects its own risk profile.
Levered β = βU * [1 + [(D / E) * (1 - t)]]
Where:
βL = levered Beta
βU = unlevered Beta
E = Market value of equity
D = Market value of debt
t = corporate tax rate
16. Can you give me an example of a company or investment with a Beta that is negative, 0,
between 0 and 1, greater than 1?
Beta is a measure of volatility that compares the return company or investment in question with the
return of the overall market. This is relevant for the CAPM formula (as described earlier). The S&P
500 (or a comparable market index) is assumed to have a Beta=1. For example, if the “market” goes
up 3%, then an investment with a Beta of 1 should also go up 3%. A description of different Betas
and their significance is below:
• Beta>1: This investment is more volatile than the market. If the market goes up or down
1%, then this investment should go up or down by more than 1%. The higher the Beta, the
larger the volatility. Examples of investments with Beta>1 include technology companies,
early-stage companies, and companies in highly cyclical industries.
• Beta=1: This investment’s volatility matches that of the market. Examples include market
indices: S&P 500, Nasdaq, Dow Jones Industrial Average, etc.
• 1>Beta>0: This investment is less volatile than the market. If the market goes up or down
1%, then this investment should go up or down by less than 1%. Examples include blue chip
stocks (Hershey, Coca Cola) and companies in non-cyclical industries.
• Beta=0: This investment is not correlated with the market (and is therefore “riskless”).
Applying it to the CAPM formula gives us the Risk Free Rate. Examples of these types of
investments include U.S. Treasuries.
• Beta<0: This investment is inversely related to the market. When the market goes up or
down, this investment moves in the opposite direction. The most traditional example of this
type of investment is gold, but other examples include put options and short ETFs.
17. How would you determine Beta, cost of debt, and cost of equity for a private company?
Beta
Betas measure a stock’s historical volatility compared to the entire market. Since private companies
do not trade on a public exchange, Betas must be estimated based on the trading volatility of public
comparable companies.
Cost of Debt
Private companies often rely on private bank loans as primary funding. These loans are not in line
with the current public cost of debt and instead are usually offered at a premium. For this reason,
similar to dealing with a private company’s Beta, cost of debt would need to be found by analyzing
the cost of debt for publicly comparable companies. Another way to value debt for a private
company would be to analyze the cost of acquiring new funding at the time of valuation.
Cost of Equity
The formula for cost of equity is the same for both public and private companies (using the CAPM
formula). Since private companies are riskier than public companies (they carry more liquidity risk),
when calculating cost of equity a private company will have a higher market risk premium (and
higher Beta, as described above) which will increase the cost of equity.
18. What are the major problems with a DCF valuation?
This method of valuation is heavily dependent on assumptions and inputs. Minor changes in discount
rate, growth rates, exit multiples, cash flow projections, etc. can cause extreme shifts in valuation. As
well, the terminal value usually makes up a significant portion of the overall value of a company and
is an extremely subjective part of the valuation.
(23.7) Leveraged Buyouts

1. What is an LBO?
A leveraged buyout is a transaction in which an investor group (usually including a private equity
sponsor) acquires a target company. The investor group takes a controlling stake in the target
company and funds the transaction mainly through debt (typical ratios are 20-40% equity with the
remainder in debt). It is this high use of debt (known as leverage) that gives this form of acquisition
its name. The debt is held at the target company level (secured by the target company’s assets) and
will be paid off over time using the target company’s free cash flow.
The goal of an LBO is to increase returns for the buyer by minimizing the equity invested in the target
company and maximizing cash flow to pay down the high level of debt. The investor group will
typically exit in 3-7 years through a sale, IPO, or recapitalization
2. What are the advantages of an LBO (i.e. why would management want to do an LBO)?
LBOs can have significant positive effects on a company’s operations and its overall valuation. Some
of the reasons why they are advantageous include:
• Increase management discipline: the amount of debt imposed on a company during an LBO
forces management to scrutinize operations and more effectively manage the business as
bankruptcy risk becomes much higher. Also, their jobs are now at stake as a financial
sponsor can much more easily replace the C-level executives (compared to a widely-owned
publicly traded company).
• Attract funding for growth capex: financial sponsors that execute LBO transactions have
lots of money to work with. Oftentimes, these private equity firms invest hundreds of
millions of dollars into companies that they take private to expand the business; this is capex
that the company would otherwise not have.
• Opportunity to focus on long-term growth: one of the major flaws of publicly traded
companies is that they often must focus on achieving or surpassing expected quarterly
earnings thresholds. This limits their ability to invest in long-term growth prospects that do
not yield any short-term benefits. Companies that are taken private have no such issues and
can take short-term losses to fund what might become extremely profitable future
opportunities.
• Optimize the capital structure: financial sponsors that purchase a company via an LBO
change the entire capital structure of that company. Old debt and equity that existed are often
wiped out and replaced by a completely new capital structure, which can be very favorable
for companies that are struggling with poor financial situations.
3. What variables impact LBO returns the most?
• Entry (or Purchase) Multiple: Minimizing your purchase price increases returns.
• Amount of Leverage: Maximizing the amount of debt raised will lower your initial equity
investment and amplify returns (up to a point; debt carries more interest as leverage rises).
• Free Cash Flow Growth: Debt paydown from increased free cash flow will increase your
equity stake in the company upon exit (in 3-7 years). More free cash flow will also result in a
higher valuation upon exit based on a set exit multiple.
• Exit Multiple: Sell or value the company at the highest price possible when exiting the
investment – the higher the sale price, the higher the returns.
4. What makes a good LBO candidate?
Not every company is a worthy candidate for an LBO; there are certain characteristics that make a
company desirable for this type of buyout:
• Stable Cash Flows: Companies with predictable and steady cash flows are ideal candidates.
Leverage will be high post-LBO, and large amounts of debt will need to be paid down (i.e.
risk of bankruptcy is higher now).
• Low Capital Expenditures: As an investor, you want to use cash flows to paydown debt, not
capital expenditure requirements. High capex requirements might necessitate another equity
investment by the financial sponsor somewhere down the road.
• Strong Management Team: An investor needs a strong, capable management team to run
the company after the buyout.
• Stable Customer Base: Prefer companies with low customer concentration/steady growth.
• Opportunity for Margin Improvement/Growth: Companies with room for improvement
make for good investments as cost cutting measures and new growth opportunities are ways
to increase the value of the business.
5. Who would be more willing to pay for the same target company: a private equity firm or a
strategic buyer?
The answer to this question should begin with “it depends”, but generally speaking it should be the
strategic buyer (another company in the same or related industry). Strategic buyers are more likely
to realize synergies in a transaction, thus increasing the potential purchase price they are willing to
pay. As well, private equity firms are more likely to demand a higher return on investment and look
more closely for a “good deal” (and thus pay less).
The exception to this would be if the private equity firm has one or more portfolio companies that are
synergistic with the target. This means that they would also pay a premium to realize these synergies.
6. As an LBO investor, what factors do you weigh when determining how to finance the
transaction? Would you prefer to have more bank debt or more bond debt, and why?
The right combination and type of debt used to finance an LBO comes down to flexibility vs. interest
rate. As an LBO investor, you can finance a purchase with secured bank debt (term loans) at lower
interest rates, and you have the ability to prepay this debt with minimal or no penalties. However,
this comes at the expense of tighter covenants and therefore less flexibility when adjusting the
operations of the business. You could possibly run into financial trouble when spending lots of
money on capital expenditures or when trying to pay yourself a dividend.
If an LBO investor finances a transaction with more unsecured/high yield debt (bonds), then interest
rates will likely be higher but there will be less restrictive covenants (allowing for more flexibility
and less of a chance to breach those covenants). This flexibility is useful for investors that seek a
financial cushion in the company being purchased (especially useful for companies that need to be
“turned around”).
Therefore, the answer to this question depends on the circumstances of the company being purchased
in the LBO. It is common practice for most LBOs to be financed via some combination of secured
bank debt and unsecured bonds to balance the effects of both.
7. How do you sell a company at the same price you bought it for, but still make a positive IRR?
This question is fundamentally asking, “What factors increase the IRR of a merger over time?” If
you purchase a company with a combination of debt and equity, then it is possible to earn a profit by
selling it at the same price. Look at the following example:
• You purchase a company for $100mm at the end of 2010
• The transaction is financed using all-debt at a 5% interest rate
• The purchased company earns $10mm in excess cash flow each year; they use this cash to
pay for the 5% interest expense and the rest is used to pay down the debt every year
• You sell company for $100mm at the end of 2014
2010 2011 2012 2013 2014
Debt Balance $100 $95 $90 $84 $78
Excess Cash Flow $ -- $10 $10 $10 $10

5% Interest Expense -- (5) (5) (4) (4)
Cash Available to Pay Down Deb $ -- $5 $5 $6 $6
At the end of 2010 you have a debt balance of $100mm, and each year you pay down a little bit of
that debt, which also gradually lowers your interest expense over time. By 2014 you have paid off
~$22mm of debt, resulting in a 2014 debt balance of $78mm.
When you sell the company at the end of 2014, though the sale price is only $100mm, $22mm of that
value is attributable to equity ($100mm – $78mm debt balance remaining = $22mm).
Therefore, your total return on capital is a $22mm profit from the sale of the company, which would
give you a positive IRR (in this case, an infinite IRR since you made no initial equity investment).
All of this happened even though the sale price did not change.
Beyond the example above, the purchaser of the company could earn a positive IRR by paying
himself a dividend. Even though the sale price is exactly the same, you would earn a positive equity
return from the investment by earning equity through dividend payouts from the company’s cash
flows.
(23.8) Mergers & Acquisitions

1. What are the reasons why a company would want to make an acquisition?
The two major strategies behind the majority of merger-related activity are horizontal and vertical
integration:
• Horizontal Integration: involves acquiring competitors and companies engaged in similar
lines of business to eliminate competition and increase economies of scale.
• Vertical Integration: involves acquiring companies in different stages of the supply chain in
an effort to control all aspects of production. This type of acquisition aids in reducing costs
of production, eliminates uncertainty in production, synchronizes the overall supply chain,
and allows for internal streamlining of the entire process.
2. What is a merger defense? Give me some examples of ways that a company could defend itself
against a merger.
A merger defense is an action taken by a company to thwart a potential takeover by another party.
This is mostly aimed at protecting oneself from a hostile takeover, a threat that only publicly traded
companies face. Usually, merger defenses are put in place well-ahead of any anticipated merger
activity. Below are some common examples of merger defense:
• Poison pill (AKA a shareholder rights plan): allows shareholders to purchase additional
shares of a company’s stock at a discounted rate when an intended acquisition of their
company is announced. This discourages purchases by severely diluting the equity of a
potential buyer.
• Staggered board: splits the board of directors of a company into different groups that are
voted into their positions at different times (for multi-year terms). This prevents a purchaser
from gaining control of the company immediately after obtaining a majority of the shares (it
could take years to replace all of the board members and gain control of the company).
• Supermajority voting: requires a high % of shares to approve a merger (usually 80%).
• Making another acquisition: detracts potential buyers from acquiring the company as it is
going through its own internal integration related to a separate merger. It would be very
difficult to complete one merger after the other.
• Maintaining a high debt balance: forces buyers to be extremely financially stable (or risk
bankruptcy).
3. What is a control premium?
A control premium is a valuation premium placed on a company in order to own a controlling stake in
the business. A buyer who will have control over the operations of a business must pay more for this
power and influence as the group with control over the company has the final say in the strategic
direction and future of the business. Otherwise, minority investors simply sit on the sidelines and
provide input/opinions on the future of the company, but are at the whim of the controlling
stakeholders. Let us look at two scenarios and compare the difference in ownership % and valuation
multiple:
1. Company A intends to buy 30% of Company B  30% is not a controlling stake and therefore
Company A will tend to pay a lower valuation premium, say 8x EV/EBITDA.
2. Company A intends to buy 51% of Company B  51% will give the buyer control of the
company and its operations. Therefore, Company A must incorporate a control premium into
their valuation of Company B and may pay 10x EV/EBITDA. Given that the buyer will have
control, they are willing to pay a higher premium for the same earnings.
4. What are accretion and dilution? If a company with low P/E acquires a company with a high
P/E in an all-stock deal, will the deal likely be accretive or dilutive?
Accretion and dilution refer to the net effect of an M&A transaction on shareholder value and
whether EPS for the acquirer increases (accretive) or decreases (dilutive). In any M&A transaction,
the factors that influence whether or not the combined entity’s EPS is higher than the standalone
acquirer’s EPS include:
• Interest expense on debt raised for the acquisition
• Number of new shares issued by the acquirer to purchase the target company
• Increased amortization expense from write-up of assets
In an all-stock deal, follow this quick rule: when an acquirer with a higher P/E buys a target
company with a lower P/E, the deal will be accretive (and vice versa). Think of it as a company
buying “cheaper” earnings.
5. What are the major types of synergies? Give examples of each.
The two major types of synergies are cost and revenue synergies. Both are derived from M&A
activity and can be summarized as follows:
• Revenue Synergies: Synergies that increase revenue items of an Income Statement via
increased sales, prices, etc. Examples include cross selling products, increased product reach,
and co-branding.
• Cost Synergies: Synergies that reduce expenses and increase profit margins via cost cutting,
economies of scale, etc. Examples include consolidation or elimination of facilities, reduced
head count, consolidation of supply chain and distribution channels, and increased purchasing
power.
6. If Company A acquired Company B and achieved a positive $10mm in EBITDA synergies, how
would this flow through the financial statements?
Typically, we assume that synergies are pre-tax, which means that they are generally just added to
EBITDA. This is because the synergies could be either revenue or expense based ($10mm higher
revenues or $10mm lower expenses).
Therefore, the Income Statement would reflect a $10mm increase “above the line” and, adjusted for
taxes, Net Income would increase $6mm (assuming a 40% tax rate). This flows through the Cash
Flow Statement as an increase in Cash Flow from Operations of $6mm, and a net increase in Cash of
$6mm. On the Balance Sheet, Assets increase by $6mm from the increase in cash and Equity
increases by $6mm from the increase in Net Income, thus balancing the A = L + E equation.
7. How do you calculate Goodwill in a merger?
Before calculating Goodwill, you must first deduct the existing book value of Net Identifiable Assets
of the target company to determine the excess purchase price to be allocated to Asset write-ups. The
amount of Net Identifiable Assets in a target company is roughly equivalent to its book value of
common equity less existing Goodwill (both found on the target company’s Balance Sheet). Excess
purchase price refers to the amount the target company is being purchased for, less its book value of
assets.
Next, allocate this excess purchase price to write-up the acquired target company’s tangible and
intangible assets. Oftentimes the book value of assets is lower than the market value of these assets
(as they are valued at the time of purchase, at a historical date), which is why they must be “written-
up”.
The excess purchase price remaining (after deducting the amount of assets that are written-up) is
then added to new deferred tax liabilities created by the new write-ups of assets. Deferred tax
liabilities can be calculated as follows:
DTL = ($ value of asset write-ups) * (tax rate)
This will result in the total Goodwill created from the transaction.
(23.9) Capital Structure & Debt

1. Explain how a company’s capital structure works.
The capital structure of a company varies significantly by industry and by each individual
corporation. The below chart outlines the order of different types of capital, starting with the most
senior (AKA secured):
Senior Secured Debt Most

(Bank Debt and often High Yield Debt) Secured
Senior Unsecured Debt

(High Yield Debt and sometimes Bank Debt)
Debt
Senior Subordinated Debt
(High Yield Debt and sometimes Mezzanine Debt)
Subordinated Debt
(Mezzanine Debt and PIK Debt)
Preferred Equity
Equity
Least
Common Equity
Secured
The upper-most items in the chart reflect individuals with a priority claim on assets of the company
(as well as cash flows). Each type of capital is a source of financing that can be used by a company to
fund its operations. The combination of different types of debt and equity used is called a “capital
structure”.
2. Beyond common stock, what other types of equity could exist in a company?
Different forms of equity include:

• Non-voting common stock
• Preferred stock
• Contingent Equity Interests (convertible debt, restricted stock grants, equity warrants, and
stock options )
For more information about different types of equity, refer to Section (21.7).
3. Why would a company issue one type of debt over another (i.e. Bank Debt vs. High Yield
Debt)?
Each type of debt has its own pros and cons, below we outline some of them:
Pros & Cons

Bank Debt High Yield Debt
 Cheapest form of debt w/ lowest interest  Lock-in fixed interest rates
rates  Generally does not require collateral
 Generally prepayable with no penalties  No amortization payments
 Can issue smaller amounts of debt  Generally fewer/no maintenance covenants
 Requires collateral (cannot share  Higher interest rates
collateral with other creditors in the  Requires large offerings ($100’s of millions)
future)  Generally requires mandatory “non-call”
 Generally have maintenance covenants, periods where debt prepayment is associated
limiting operational flexibility with penalty
 Mandatory amortization payments
4. Who is more senior, a bondholder or stockholder?
Bondholders are more senior than stockholders. In a typical capital structure, debtholders are more
secured (AKA more senior) than equity holders; unlike bondholders, equity holders have no
guarantee on their investment. In bankruptcy, creditors must be paid in full before equity holders can
claim any proceeds from the bankrupt company. This makes equity more risky than debt and is a
contributing factor to why investors typically demand a higher return on equity than debt. (See chart
in Section (23.9), Question 1 for visual ranking of seniority).
5. What is a revolving credit facility and why do companies prefer it (while lenders tend not to)?
A revolving credit facility (AKA “revolver”) is akin to a large-scale corporate credit card. A
revolver is a debt instrument made available to a company when it has (mostly) short-term financing
needs. Companies often pay off this type of debt quickly to maintain a high available balance that
can be potentially used in the future. Companies pay a set commitment fee (typically 25-100bps of
the face value of the revolver) to maintain access to the debt, but they only pay the full interest rate on
the drawn/used portion of the revolver.
While companies love the flexibility of a revolver, lenders do not prefer to issue revolving credit
facilities. Lenders earn minimal fees on unused revolver balances (usually less than 1% interest), but
must still carve out enough cash from their Balance Sheet in case the full revolver needs to be funded
quickly.
6. What is the difference between a term bond vs. a coupon bond?
A coupon bond is a debt obligation that requires the debtor to pay fixed coupon payments at
designated periods of time (semiannual, annual, etc.) as well as the original principal at maturity. The
name of these bonds (coupon) is derived from the original practice of tearing a coupon off of the
physical bond certificate and redeeming it semiannually. Coupons are usually discussed as a
percentage known as the “coupon rate” which is the sum of total coupon payments made per year
divided by face value of the bond.
Term bonds (or “zero-coupon bonds”) have no coupon payments between issuance and the time of
maturity (the coupon rate is 0%). Instead of earning these coupon interest payments, the zero-coupon
bond is sold at a deep discount to face value and the owner makes up the difference by getting the full
face value at maturity.
7. How do interest rates affect the two bond types discussed above?
In general, bond value and interest rates (coupon rates) have an inverse relationship, meaning that
when one goes up the other goes down. As bonds usually have a fixed coupon rate, investors will
continually benchmark the return of a given bond with what else is available on the market. As
market interest rates fluctuate, a bond’s fixed coupon rate will become more or less attractive to
investors, which will affect their desire to pay more or less for the bond itself.
As an example, say you own a $100 bond that pays a 5% coupon. If the market is paying coupon
rates of 7%, investors can just buy a $100 bond at 7% and will not be willing to pay you face value
($100) for your bond that only yields 5%. Since interest rates have gone up, the value of your 5%
bond will decline. If market interest rates fell below your 5% coupon, the opposite would be true and
investors would pay you over face value ($100) for your bond that yields an interest rate above the
current market rate.
Zero-coupon bonds are unique when it comes to interest rates. As their name implies, zero coupon
bonds do not make coupon payments, but this does not mean that they are unaffected by interest rates.
Usually, zero-coupon bonds see the most volatile price movements as interest rates change. This is
because without periodic coupon payments, there is no cushion to mitigate interest rate changes
during the life of the bond. Owners of zero coupon bonds receive the entire cash flow at maturity
instead of spreading out cash flows over the life of the bond. The present value of this cash flow at
maturity is more sensitive to interest rate changes than a coupon bond that has cash flows spread over
time.
8. What are the major types of debt covenants? Give examples of each.
When a company enters into a legal agreement with creditors to borrow money, there are specific
terms listed in the agreement that force the borrower to adhere to certain guidelines/restrictions.
These are known as “covenants”. Violation of a covenant often forces a company to provide a
remedy to creditors in some way (i.e. paying a fee), but creditors can also force a company into
default (usually the first step in a bankruptcy process). There are various forms of covenants,
including:
• Affirmative covenants: require the debt issuer to adhere to and perform specific
requirements. For example, a company must deliver quarterly audited financial statements.
• Restrictive covenants (AKA negative covenants): prevent the debt issuer from conducting
certain activities. For example, the company cannot issue new debt, make certain
investments, pay out dividends, etc.
• Financial covenants: force the debt issuer to meet certain minimum financial metrics such as
Fixed Charge Coverage Ratio (FCCR), Debt/EBITDA, Net Debt/EBITDA, etc. Financial
covenants can be further categorized as either incurrence or maintenance covenants:
o Incurrence covenants: tested only if and when a debtor takes a particular action, such
as wanting to issue new debt or make an acquisition. For example, to issue additional
debt the company must maintain a Total Debt/EBITDA ratio of less than 4.0x.
o Maintenance covenants: debtor must pass periodically scheduled financial tests
(usually quarterly) to ensure that they are meeting minimum financial performance
metrics. For example, the company must maintain a trailing twelve months FCCR of
more than 1.0x (tested quarterly).
9. Which types of debt are likely to have more restrictive covenants and why?
In general, more senior debt (i.e. secured debt and/or bank debt) tends to have more restrictive
covenants, especially if all tranches are issued at the same time. These senior tranches are the most
secure and therefore will require the most covenants for protection. More restrictive covenants make
the debt safer and more secure (from a lender’s perspective), and therefore contribute to lower interest
rates on these more senior and secured debt instruments (bonds/loans). An exception to this rule can
occur when tranches of debt are issued at different points in time. If secured debt is already in place,
potential future holders of more junior debt may demand stricter and more restrictive covenants to
increase their security and thus the attractiveness of the bond.
10. Why does a bond price decrease as the interest rate increases?
This question looks at the cause of the inverse relationship between bonds and their interest rates.
Bonds carry fixed interest rates, meaning that the investor will obtain a pre-determined and
designated coupon each period (for example, every 6 months). If the current market environment is
characteristic of increasing interest rates, then the value (desirability) of your fixed-rate bond
decreases as investors can flock to similar (equivalent) bonds that pay higher interest rates.
Ultimately, as a bond price decreases (due to an increase in market interest rates), the yield on the
bond increases to match the equivalent interest rate that is currently being offered by the market. Let
us demonstrate this with an example:
Bond A:
Par/Face Value = $1,000
Coupon = 8%
Bond B:
Par/Face Value = $1,000
Coupon = 10%
Assume that Bond A and Bond B are equivalent in every way, except that Bond A was issued just
yesterday and is set at an 8% coupon, while Bond B is being sold today at a 10% coupon. Since
Bond B offers a higher coupon, Bond A’s price will drop to a level that makes its yield to maturity
equivalent to Bond B’s coupon; if you buy Bond A at a discount then you earn a higher overall return
than 8% as you not only earn the coupon but also the excess face value of the bond. For example, if
you buy Bond A in the market at $900, you earn a $100 profit when it matures as the face value of the
bond is actually $1,000. In this example, you would earn the 8% coupon as well as an 11.1% return
from the purchase of the bond ($100 / $900). In other words, Bond A would trade at a discount to par
to earn a higher overall yield to maturity.
11. What is “Yield to Maturity” on a bond? Give me a rough estimate for Yield to Maturity
(YTM) on a bond currently trading at 95, maturing in 5 years, and with a coupon of 10%.
Yield to Maturity (“YTM”) is the internal rate of return earned by an investor assuming that they
hold the bond until maturity (this ignores items such as the “callable date” for a bond). Put another
way, YTM is the discount rate at which the sum of all the bond’s future cash flows (coupon and
principle) equals the price of the bond. A back-of-the-envelope formula for calculating a bond’s
YTM is as follows:
YTM = Coupon % + (% discount / years to maturity)
We can illustrate this with the following example:
100 – 95 = 5% discount
5% / 5 years = 1%
YTM = 10% + 1% = ~11%
12. What is the “Yield to Worst” on a bond?
Yield to Worst (“YTW”) is defined as the lowest possible yield that can be expected on a callable
bond investment. This figure acts as a “worst case scenario” for investors and takes into
consideration factors such as when the bond is callable, call premiums, and current price of the bond,
among other items.
To calculate YTW, we usually assume it will be called on the first possible call date. To see why this
brings up a “worst case scenario”, recognize that although we do get our money back, we will be
missing out on future interest payments that would have been received had the bond not been called.
By calculating the Yield to Call (“YTC”) on this call date, we will get the YTW. By comparing this
to the YTM that could have been achieved had the bond not been called, one can see the lost potential
for return.
For example, let us assume that there is a $100 bond with a 10% coupon trading at 110 (AKA 110%
of face value) with a maturity in 5 years. The bond is callable at the end of Year 3 at 102% of face
value. Its YTM = ~7.6% given where the bond is trading and assuming we hold the bond to maturity.
Its YTW = ~6.9% based on the fact that you purchased the bond at an excess of its face value and will
be earning two fewer interest payments over the life of the bond (which would help recoup the excess
price paid for the bond). The 2% premium you are given when the bond is called does not provide a
high enough premium to remedy your investment.
13. Does inflation help or hurt creditors? Equity owners?
Inflation hurts creditors but is either good or bad for equity owners (usually rather neutral). Creditors
hate inflation because it devalues the money they receive from the debtors over time. Let us
demonstrate this with an example:
• You borrow $1,000 today and plan to pay it back in 5 years (assume 0% interest expense here
for simplicity).
• If there is 0% inflation per year, the creditor will break even on his loan (the $1,000 that you
pay him back has the same purchasing power 5 years later).
• If there is 5% inflation per year, the creditor will lose money (the $1,000 that you pay him
back is worth less in 5 years relative to everything else in the market: it has less purchasing
power than $1,000 today).
Creditors normally plan for some amount of inflation by baking that into the interest rate they charge
debtors.
Stocks tend to move in tandem with inflation (rising prices inflate company earnings and therefore
valuations), but the benefits of inflation to equity holders are often debated. In general, just know that
equity investments tend to rise in value with rises in inflation, and that (if given the choice) you
would rather be an equity owner than a creditor in a high inflationary environment.
14. What are some creditor-specific concerns that equity investors would worry less about?
Creditors and equity holders both want a good return on their investment, but there are specific items
and issues that are more relevant to those that lend money to a company. Here are some common
creditor-specific concerns:
• Security: is the investment secured by specific assets of the company? Which ones? Equity
holders do not have any form of security backing their investment.
• Seniority: similar to security, seniority refers to the preference that creditors have in their
claims on a company’s assets. The more senior a creditor is, the more likely it is that they
will get paid back by a company (in the event of a bankruptcy). Equity holders are always
last in line in terms of seniority.
• Uses of free cash flow: though equity investors are concerned with a company’s cash flow
and how it is used to advance the business, creditors can restrict a company’s ability to use
free cash flow for specific items (such as paying dividends, paying down other debt, making
excess capital expenditures, etc.).
• Investment protection in M&A: equity holders could theoretically worry about this in the
form of a poison-pill, but creditors establish legal terms that specifically outline what happens
in the event a company is sold or mergers with another company. Oftentimes, creditors have
the ability to force a company to pay them back when a transaction occurs.
15. Why would two companies with the same EV/EBITDA multiple have different leverage
multiples?
This is a bit of a trick question: appropriate leverage levels fluctuate by industry. Companies with
more physical/tangible assets can generally take on more debt as they have more assets to secure the
debt. An equivalent EV/EBITDA might be more of a coincidence as this is independent of the
leverage multiples of the two companies.
16. What causes a company to go bankrupt?
Companies can only go bankrupt if they violate agreements with creditors. When legal terms of a
debt agreement are violated, creditors can force a company into default; the two parties must then
negotiate some sort of remedy (often a one-time fee). However, if no agreements can be reached or
the company is in dire financial trouble, oftentimes the company will declare bankruptcy to protect
itself from its creditors (to prevent them from simply seizing the company or its assets). Below are
some ways that a company can violate its legal agreements with creditors:
• Breaching covenants
• Failing to make interest payments
• Failing to make mandatory amortization payments
• Failing to pay creditors upon maturity of the debt
Any one of these items allows the creditor to push a company into default, but default does not
necessarily translate into bankruptcy. Oftentimes, it is in both parties’ best interests to renegotiate the
terms of the credit agreement or bond indenture to avoid forcing the company and its creditors into a
long, expensive bankruptcy process.
17. What are the major types of corporate bankruptcy in the United States? Which is more
common and why?
• Chapter 7: bankruptcy liquidation – the company stops all operations and goes completely
out of business. A trustee is appointed to liquidate (sell) the company's assets, and the money
is used to pay off debt.
• Chapter 11: bankruptcy restructuring – reorganization of business and assets. A company
restructures its operations and capital structure to return to a healthy state in the future. The
goal is to become healthy enough again to turn a profit and pay back creditors. The company
still has control in this process versus Chapter 7.
Corporations have historically favored Chapter 11 bankruptcy over Chapter 7 bankruptcy due to the
fact that the liquidation often fails to yield the same returns that the ongoing business could attain; the
inherent value of the business outweighs the liquidation value of the assets. Also, corporations and
creditors get a say in the strategic future of the company when filing for Chapter 11 bankruptcy. It
gives both parties time to deliberate and debate a future course of action for the company from an
operational and financial perspective.
18. What is the fulcrum security?
The fulcrum security is the security in a company’s capital structure that will be converted from debt
to equity when the company undergoes a restructuring (after filing for bankruptcy). Securities that
are senior to the fulcrum security will be paid-out (i.e. not receive equity stakes in the future
business), and securities that are subordinated to the fulcrum security will not receive any form of
compensation. Distressed investors are highly interested in identifying this security as it gives them
voting power in a company’s reorganization and equity ownership in the ongoing business post-
reorganization. To demonstrate, let us use an example:
A company has the following three types of debt (in order of most secured to least secured):
• $250mm senior secured debt
• $400mm senior debt
• $150mm subordinated debt
After conducting extensive valuation work, the potential distressed investor determines that the
company’s Enterprise Value is near $450mm. Based on this valuation, he believes the company’s
fulcrum security is the senior debt (since the company is worth less than $650mm, the $150mm
subordinated debt would be “out of the money” while the $250mm senior secured debt would be fully
“in the money”, leaving the $400mm senior debt caught in the middle of only partly being “in the
money”). The distressed investor would want to purchase some of the company’s $400mm senior
debt if they are interested in participating in the company’s plan of reorganization.
19. As a company on the brink of bankruptcy, what are your options to avoid bankruptcy?
Companies that are about to go bankrupt often fall into desperate situations. Equity holders will try to
do anything possible to avoid having their ownership taken away and maintain the business as a going
concern. There are a few potential options that near-bankrupt companies can consider, including the
following:
• Internal Transformation: attempt to turn the company around internally without the help of
creditors. The company will take measures to increase revenue and reduce expenses in order
to boost profits and repay creditors. This strategy is likely unattainable for most companies
that are about to declare bankruptcy.
• Refinancing/Distressed Financing: the company can look to raise additional debt financing
or refinance existing debt to replace the existing creditors with new ones and push out
maturity dates. Again, this strategy is usually not a possibility for companies about to go
bankrupt; which creditors would want to lend new debt to a company that is about to become
financially insolvent? Some companies, though, specialize in providing very expensive (i.e.
high interest rate) debt to distressed businesses.
• Re-equitizing: this strategy looks to increase equity stakes in order to use the proceeds for
working capital needs. Equity can come from new investors, management, current equity
owners who want to increase their stake, etc. This form of capital may be hard to come
across as investors are hesitant to take on equity in a company already in a risky state.
• Creditor Negotiation: under this strategy the debtor would attempt to negotiate with
creditors to amend existing loan or bond agreements to avoid bankruptcy. Amendments can
be used to adjust amortization payments, change financial covenants, lower interest rate
payments, push out maturity, etc. Amendments/adjustments require a company to make
certain concessions (often payment of a one-time fee to creditors). This strategy requires
cooperation by creditors as they will likely be taking a hit in order to help the company get
back on its feet.
• Distressed Sale: this involves selling the company as a whole and using the proceeds to pay
back creditors. Sometimes distressed companies are purchased simply by finding a buyer
that is willing to assume all of the debt of the distressed business.
20. How could a company that has been earning positive EBITDA for several years still go
bankrupt?
The key to this question is understanding the limitations of EBITDA; it does not factor in certain
material aspects of a business operations. Examples of how a company could go bankrupt with
positive EBITDA include:
• Debt Service: EBITDA does not account for interest expense on debt or mandatory debt
paydown. A highly leveraged company could have huge interest expense or debt
amortization that causes it to have negative cash flow, even with positive EBITDA
(remember, it is earnings BEFORE interest).
• High Capital Expenditures: A company can have positive EBITDA but negative cash flow
by spending large amounts on capex (this is not reflected in EBITDA).
• Inability to Refinance: If a company has impending debt maturities and cannot refinance or
pay back creditors, it will be forced to declare bankruptcy, even if EBITDA AND cash flow
are positive.
• Violate Covenants: Even if a company is earning positive EBITDA, they must uphold
agreements made with debt investors to maintain certain financial ratios (i.e. Net
Debt/EBITDA). Breaching covenants can result in debtors taking control of the company
(though unlikely).
(23.10) Miscellaneous & Brain Teasers

1. What is a league table?
This question tests a more obscure component in the investment banking world and would most likely
be presented to gauge just how deep a candidate’s industry knowledge or experience is. League
tables are charts that rank investment banks on criteria such as number of deals completed,
cumulative deal value, percent of market share, etc. Table parameters are designed to differentiate
various factors such as region, deal size, product offering, industry, etc. These tables are put together
by both investment banks (to present to potential clients) and third parties (to “objectively” compare
how different banks stack up against one another). Note that these tables are taken as more of a rough
guide than an absolute truth; oftentimes they are manipulated to most favorably reflect a bank’s
position on the table and may contain certain exclusions.
2. What is a Confidentiality Agreement?
A Confidentiality Agreement is also commonly known as a Non-disclosure Agreement (“NDA”).

These are legal documents, or contracts, between multiple parties to ensure the privacy of confidential
information. In the financial world, investment banks and buy-side firms regularly sign
confidentiality agreements with companies to gain inside information regarding detailed financial
performance as well as projected financial performance (particularly in the cases of LBOs and
merger-related activity). By signing an NDA, all parties are held legally responsible for the non-
disclosure of this private information and can face harsh penalties for any leaks or improper use of the
data.
3. Why would a company want to go public?
Going public has both positive and negative consequences. On one hand, increased financial
regulation and the development of an internal investor relations team can be time consuming,
difficult, and costly. However, there are many benefits to going public, including:
• Access to financial markets/quick financing sources: the transparency and investor
awareness built through an IPO gives public companies the opportunity to raise both debt and
equity more quickly than private companies.
• Liquidity: equity is more readily purchased and sold in public markets.
• Exit by owners: a common way for early investors to monetize their investment in a
company is via an IPO; they can sell their shares to the public after or during the IPO.
• Publicity: going public builds awareness about a company that might otherwise be unknown
to the majority of retail investors (due to the hype surrounding the IPO).
• Currency to fund new acquisition: can issue public stock to buy a company.
• Compensation perk to acquire and retain talent: public companies can allow employees to
participate in a wide array of stock-based compensation plans.
• Too many private investors: private companies can only have a limited number of
investors; at a certain point they must legally go public to add investors (i.e. the controversy
surrounding Facebook’s delay in trying to go public).
4. What is a stock split? Why would a company engage in this action?
A stock split is an action undertaken by corporations whereby existing shares are each divided into
multiple shares. As a result of this action, the number of outstanding shares increases while the
market cap remains constant (this is important to note). Many different exchange ratios are
possible for a stock split, but the most common splits are 2-for-1, 3-for-1, or 3-for-2. In the case of a
2-for-1 split, a stockholder will receive twice as many shares post-split, but each share will be worth
half as much as it was pre-split (thus in terms of value, the split is a wash). To see a split in action, let
us look at an example:
Assume stock A is trading at $10 per share and there are 50 shares issued. At this point in time it has
a market capitalization of $500 ($10 x 50 shares). If a 2-for-1 stock split is implemented, each
shareholder will be given twice as many shares, and each will be worth half as much. Following the
example, stock A w ill now trade at $5 per share and there will be 100 total shares outstanding.
Looking at the market capitalization post-split, we get $500 ($5 x 100 shares). Notice that the market
cap is the same before and after the split.
Although technically a stock split itself has no effect on value, the main reason they are implemented
is to increase liquidity. A stock split increases the number of shares outstanding, thus increasing the
liquidity of a stock. Investors commonly see stock splits occur when the price of a stock becomes
extremely high. Psychologically, high share prices can “price out” some investors who are only able
to buy a few shares and feel that each one is very “expensive”. Because stock splits are most
commonly associated with rising share prices, they are often viewed as a positive signal to the market
despite their lack of effect on stock value itself.
5. Say I bring you with me to Las Vegas to meet a client that provides linens to hotels and
restaurants. You need to find out important non-public information about the company, so
come prepared with 5-10 questions about their business. What are your questions?
This question tests your understanding of important operating considerations when looking at a client
company’s business. It is not uncommon to face this scenario on-the-job in a buy-side or sell-side
M&A position. Interviewers want to see how you think and if you understand what relevant and
important non-public information an investor would want to know when analyzing a company. There
is no correct answer, but in this situation some basic examples include:
• How are your contracts structured with hotels and restaurants?
• What prospective hotels and restaurants are you currently negotiating with?
• How do you source your linen?
• Are you planning an expansion into other industries beyond hotels and restaurants?
• What is the useful life of the different linens you provide to your customers? How do you
calculate recurring sales for replacements?
You need to be able to think quickly to frame questions about a company or industry you have never
spent time learning. Try to think of the basic functions of the business, where its risks lie, and what
information would help you reach a conclusion of whether or not you would want to invest in the
company.
6. Say I am a CFO of a public company with excess cash on hand, what are my options?
You can:
• Acquire another company
• Issue a dividend
• Buy back stock
• Pay down debt
• Invest in growth capital expenditures
Some interviewers may go one step deeper and ask you how to analyze what decision you would
make. Explain that you would compare your options and determine which one will have the highest
return on investment.
7. What is 1/32 in decimal form (or what is 1 ÷ 32)?
Although less common, some investment banking, private equity, and hedge fund interviews can
include random math or computation problems. With these questions, interviewers aim to test a
candidate’s mental math and problem solving capabilities under a pressured situation. Ultimately,
they want to see how smart you are as well as your analytical capabilities. These types of questions
will usually come from more “quant” focused groups or interviewers. In general, the trick is to break
down the problem into easier elements when possible. Although at first 1/32 (or 1 ÷ 32) seems a bit
tricky, it can easily be broken down into much simpler math:
1/2 = 0.5
1/4 = 0.25
1/8 = 0.125
1/16 = 0.0625
1/32 = 0.03125
Notice each answer is just half of the previous (and much simpler) math problem.
8. You flip 3 separate coins at the same time. What's the probability of getting at least 1 heads?
Understanding probability is a useful skill in financial analysis; sometimes different operating

scenarios are weighed by their respective probabilities to reach a more accurate valuation range for a
company. This question (or similar versions) has been used to quickly test not only your statistical
knowledge, but also your ability to do quick math in your head.
Flipping three coins at the same time can yield the following outcomes:
 HHH  HTT  TTH  THT
 HHT  HTH  THH  TTT
Out of the 8 possible outcomes, 7 of them have at least one heads, so the answer would be 7/8 or
87.5%.
9. You have two buckets of marbles, one with 50 white marbles and one with 50 black marbles.
You can distribute the marbles however you please into either bucket (does not need to be
50/50), but then you will reach into one of the buckets at random and will pull out a marble,
also at random. How would you distribute the marbles between the two buckets to maximize
your probability of choosing a black marble? What is that probability (roughly)?
To maximize the odds of choosing a black marble, you must place one black marble into one bucket
(bucket A) and all remaining marbles (49 black and 50 white) into the second bucket (bucket B).
With this in place, there are only 3 possible outcomes when choosing from the buckets:
1. You choose bucket A (50% chance), and will pick a black ball (100% chance of picking a black
ball because it is the only ball in bucket A)  50% x 100% = 50%
2. You choose bucket B (50% chance), and pick a black ball (49/99 = ~50%)  50% x ~50% =
25%
3. You choose bucket B (50% chance), and pick a white ball (50/99 = ~50%) 50% x ~50% =
25%
Notice that the total of situations 1, 2, and 3 (50% + 25% + 25%) equals 100%.
To get the total probability of picking a black ball, you add situation 1 and situation 2 (50% + 25%) to
get a 75% chance of picking black ball.
10. How many ping pong balls could you fit inside a 747?
Interviewers often like asking questions that gauge your ability to reach logical estimations; they use
these questions as a way to understand your thought process. The trick with these questions is to start
big and slowly get smaller and smaller in your details and analysis. You must gauge if the question
requires you to ask questions of the interviewer or if they want you to come to a conclusion all on
your own. You will notice that in answering you must make assumptions and go with them. You
will not be docked if your guesstimates are not exact, but interviewers want to see that you have
common sense. Though there are many variations to these types of questions, we will use this classic
example to demonstrate how to walk through a proper answer.
Because they are asking about one physical object fitting into another, this question is best answered
using size guesstimates and basic volume formulas:
The body of a Boeing 747 is basically a cylinder about 200 feet long and 20 feet wide (therefore the
radius is ~10 feet). Converting this to meters for ease of conversion, we get ~60 meters long by ~6
meters wide (radius is ~3 meters).
The volume of a cylinder = π x r2 x length

The volume of our 747 body = 3 x (3)2 x 60 = 3 x 9 x 60 = ~1,600 m3
Next, we go one level of detail deeper: let us assume that the wings, jets, tires, tail, etc. will hold
another 10% of volume on top of the body:
1,600 cubic meters x 1.10% = 1,760 = ~1,800 m3 (or 1.8 x 109 m3)
Now that we have estimated the volume (capacity) of the 747, we must determine the size of a ping
pong ball. We know from experience that a ping pong ball is about 1.5 inches in diameter (so 0.75
inches in radius). Converting this to meters we get ~4 centimeters in diameter (so 2cm in radius).
The volume of a sphere = 4/3 x π x r3

The volume of our ping pong ball = 4/3 x 3 x (2)3 = ~32 cm3 (or ~30 cm3)
Putting these two volumes together, we get 1.8 x 109 / 30 = ~60 x 106 (or 60,000,000) ping pong
balls.
11. How do you value a perpetuity that grows at $1,000/year? For example, $1,000 in Year 1 |
$2,000 in Year 2 | $3,000 in Year 3 | etc.? Assume a 5% discount rate.
This question tests your understanding of the perpetuity growth formula, but also makes you think
outside the box. You cannot simply apply the perpetuity growth formula to this question because the
growth rate is changing every year: this is not a set growth rate %, but it is instead growing by a set
dollar amount each year. Recall the perpetuity growth formula:
Perpetuity Value = C / (r – g)
Where:
r = discount rate
g = perpetuity growth rate
You must break down this question into separate sections and treat each year independently. Think of
it like this: each year you are getting a new perpetuity payment. This is demonstrated in the chart
below:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
1st Payment $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
2nd Payment $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
3rd Payment $1,000 $1,000 $1,000 $1,000 $1,000
4th Payment $1,000 $1,000 $1,000 $1,000
5th Payment $1,000 $1,000 $1,000
6th Payment $1,000 $1,000
7th Payment $1,000
Total $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000
Again, each year you receive a NEW $1,000 payment per year that will go into infinity. Therefore,
the present value of the each payment in each year is:
PV 1st Payment = $1,000 / 0.05 = $20,000

PV 2nd Payment = $1,000 / 0.05 = $20,000
PV 3rd Payment = $1,000 / 0.05 = $20,000
PV 4th Payment = $1,000 / 0.05 = $20,000
And so on…
Each year you are getting something that is worth $20,000, based on the present value of an annuity
into infinity. Now, treat each of these $20,000 per year values as an annuity itself. Therefore, you
are getting a $20,000 “payment” each year into infinity, and the present value can be calculated as
follows:
PV = $20,000 / .05 = $400,000
Appendix A: Questions For The Interviewer
1. What attracted you to [your bank]?
2. How would you describe your group’s culture?
3. How are your deal teams typically structured?
4. Do Analysts commonly interact with senior bankers?
5. How are deal sourcing and execution handled in your office? Are the roles fairly separate or do
Analysts in your office see a deal through from start to finish?
6. Have you noticed any effects at your firm from the recent changes on Wall Street/economic
landscape?
7. What kinds of deals has your firm/office/group been working on recently?
8. What are the most common deal types that Summer Analysts can expect to work on?
9. What are your interactions like with other offices and internationally? Do you work on a significant
number of deals with teams from other regions?
10. How often are Summer Analysts staffed on live deals versus pitches?
11. Do you have any sort of mentorship program for Summer Analysts?
12. What pieces of advice would you give an intern regarding how to be a successful Summer Analyst?
13. Within [your bank], what led you to work at a regional office instead of the New York office (or vice
versa when interviewing in New York)?
14. Is it common and/or possible for Analysts to stay a third year with your group? What do most of your
Analysts typically do after their two-year program?
15. Where do you see the economy (or industry) heading in the next several months/year?
16. I know that [well-known senior banker] runs your group, what is it like working with them?
Appendix B: Email Address Formula List
Each investment bank has a different “formula” for corporate email addresses; this formula is composed
of two parts.
1. The email prefix: Consists of the portion of an email address before the @ sign. These are presented
in several different ways:
• First.last@ - this is the most common email prefix (john.doe@)

• First initial Last name@ - this is another extremely common email prefix (jdoe@)
• Last name@ - this is more common among buy-side firms but is used by some smaller banks
(doe@)
• First.middle initial.last@ - this is common for individuals with popular names (john.w.doe@)
• First.last.#@ - this is a less common way to distinguish individuals with popular names
(john.doe.2@)
Senior executives will often alter their email prefix as to avoid matching the firm’s email formula (this
helps prevent cold emails). There is no harm in trying multiple variations of the above formulas when
guessing a banker’s email address: at worst, the email fails to go through. In rare cases, individuals may
have an obscure symbol or format; these will be nearly impossible to guess.
2. The email suffix: Refers to the portion of an email address following the @ sign (i.e.
@bankname.com). This will be some derivation of the bank’s name (usually an abbreviation of some
sort for banks with a long name).
Below is an insider list of current email formulas. We have used an employee by the name of Joseph T.
Smith to demonstrate the formulas:
Bulge Bracket:
• Bank of America Merrill Lynch: joseph.smith@baml.com
• Barclays: joseph.smith@barclayscapital.com
• Citi: joseph.smith@citi.com
• Credit Suisse: joseph.smith@credit-suisse.com
• Deutsche Bank: joseph.smith@db.com
• Goldman Sachs: joseph.smith@gs.com
• JPMorgan: joseph.t.smith@jpmorgan.com
• Morgan Stanley: joseph.smith@morganstanley.com
• UBS: joseph.smith@ubs.com
• Wells Fargo: joseph.smith@wellsfargo.com
Middle Market:
• Jefferies & Company: jsmith@jefferies.com
• RBC: joseph.smith@rbccm.com
• Houlihan Lokey: jsmith@hl.com
• HSBC: joseph.smith@us.hsbc.com
• RBS: joseph.smith@rbs.com
• BNP Paribas: joseph.smith@americas.bnpparibas.com
• Rothschild: joseph.t.smith@us.rothschild.com
• Macquarie: joseph.smith@macquarie.com
Elite Boutique:
• Moelis & Company: joseph.smith@moelis.com
• Lazard: joseph.smith@lazard.com
• Blackstone: smith@blackstone.com
• Evercore: smith@evercore.com
• Centerview: jsmith@centerviewpartners.com
• Greenhill: joseph.smith@greenhill.com
Some third-party websites offer email verification services for free. These can be helpful when verifying
whether or not an email you guessed is correct. These include jigsaw.com, verifyemailaddress.org,
verify-email.org, etc.
Remember, if you are in contact with one person at an investment bank, you have the formula to
reach out to other individuals at that bank: all you need is a name.
Appendix C: Financial Crisis Overview
2008 Financial Crisis

The financial crisis itself can be traced back to 2006, beginning with a decline in the subprime mortgage
market. The repercussions of loose mortgage lending practices began to surface and manifest themselves
through a rising number of mortgage defaults. This rise in mortgage defaults increased the supply of
houses on the market and drove down housing prices. This problem in the mortgage market leaked to
other sectors of the economy due to mortgage-backed securities (bundled groups of mortgages that were
sold in tranches to institutional investors). These relatively “low risk” investments began losing most of
their value as the subprime (highest risk) assets within them defaulted. The financial crisis was further
fueled by the prevalence of Credit Default Swaps (“CDSs”), financial instruments that “insured” losses
on mortgage backed securities. The increasing number of defaults hurt the companies that issued and
sold CDSs by forcing payouts to the investors that bought them.
Drops in value of mortgage-backed securities and CDSs caused a shrinking of bank balance sheets and
froze credit markets as banks were not willing to lend to one another. The unwillingness to lend carried
over to non-financial companies and caused a freeze in private lending as a whole.
The economy witnessed a steep drop in consumption, leading to a reduction in GDP and the beginning of
a deep recession. Consumer confidence was crushed and people began spending less money as
unemployment rose significantly (companies were forced to reduce employee head counts). The U.S.
government responded by passing the Troubled Asset Relief Program (TARP) designed to unfreeze credit
markets and get the economy moving forward again.
Source: 2008 Financial Crisis & Global Recession; http://2008financialcrisis.umwblogs.org/executive-summary/
In-Depth Table Of Contents
Chapter 1: What An Investment Bank Is ................................................................................................... 5
(1.1) Overview Of An Investment Bank .................................................................................. 5

What Is An Investment Bank? ...................................................................................... 5
How Investment Banks Are Structured ........................................................................ 5
Investment Bank Divisional Breakdown ...................................................................... 6
The “Chinese Wall” (Public vs. Private Information Barrier) ...................................... 6
(1.2) The Functions Of An Investment Bank ........................................................................... 7

Corporate Finance ......................................................................................................... 7
Capital Markets ............................................................................................................. 7
Sales & Trading/Research ............................................................................................ 8
Other Departments ........................................................................................................ 9
(1.3) Investment Banking Corporate Ladder ............................................................................ 9

Investment Banking Hierarchy ..................................................................................... 9
Deal Teams ................................................................................................................... 10
(1.4) How Investment Banks Make Money ............................................................................. 10

1. Advisory Fees .......................................................................................................... 10
2. Underwriting Fees ................................................................................................... 10
(1.5) Commercial Banking vs. Investment Banking ................................................................ 11
(1.6) Other Finance Participants ............................................................................................... 12

Venture Capital Fund .................................................................................................... 12
Private Equity Fund ...................................................................................................... 12
Hedge Funds And Mutual Funds .................................................................................. 12
(1.7) Changing Nature Of The Industry ................................................................................... 13

Increased Regulation .................................................................................................... 13
Loss Of Major Firms And Consolidation ..................................................................... 13
Wall Street Scrutiny ...................................................................................................... 13
Chapter 2: The Major Players .................................................................................................................... 14
(2.1) By Size ............................................................................................................................ 14

Bulge Bracket ............................................................................................................... 14
Middle Market .............................................................................................................. 15
Boutique ........................................................................................................................ 15
Elite Boutique ............................................................................................................... 16
(2.2) By Region ........................................................................................................................ 16

New York City .............................................................................................................. 16
Regional Offices ........................................................................................................... 17
International Offices ..................................................................................................... 17
(2.3) League Tables .................................................................................................................. 18
Chapter 3: What The Job Entails ............................................................................................................... 19
(3.1) By Types Of Staffings (Projects) ..................................................................................... 19

Pitches ........................................................................................................................... 19
Deals ............................................................................................................................. 20
Internal/Infrastructure Projects ..................................................................................... 24
Favors ........................................................................................................................... 25
(3.2) By Types Of Work Performed ......................................................................................... 25

Administrative Work .................................................................................................... 25
Technical Work ............................................................................................................ 26
Qualitative Work .......................................................................................................... 27
Research ........................................................................................................................ 28
(3.3) By Groups ........................................................................................................................ 28

Industry/Coverage Groups ............................................................................................ 29
Product Groups – Corporate Finance ............................................................................ 29
Product Groups – Capital Markets ............................................................................... 30
(3.4) “Heard In The Bullpen” ................................................................................................... 31

Bonus Season And Reviews ......................................................................................... 31
Culture .......................................................................................................................... 31
Auxiliary Staff Support ................................................................................................. 31
Face Time ..................................................................................................................... 31
Friday Night Specials ................................................................................................... 32
All-Nighters .................................................................................................................. 32
“The Red Light Of Doom” ........................................................................................... 32
Red Pen Markups .......................................................................................................... 32
Data Room And Lucite Companies Spoil You ............................................................. 33
ALT + Tab .................................................................................................................... 33
Attention To Detail ....................................................................................................... 33
A Day In The Life ......................................................................................................... 33

Chapter 4: Publicly Available Positives ...................................................................................................... 38
(4.1) Compensation .................................................................................................................. 38

Factors that Affect Compensation ................................................................................ 38
Junior Bankers .............................................................................................................. 39
Senior Bankers .............................................................................................................. 40
(4.2) Exit Opportunities ........................................................................................................... 40

The Buy-side ................................................................................................................. 40
Business School ............................................................................................................ 41
Other ............................................................................................................................. 41
(4.3) Unparalleled Learning Experience .................................................................................. 41

Responsibility ............................................................................................................... 41
Hours ............................................................................................................................ 41
Teamwork ..................................................................................................................... 42
Material Deals ............................................................................................................... 42
Technical Skills ............................................................................................................ 42
Senior Exposure ............................................................................................................ 42
(4.4) Pedigreed Colleagues And Future Network .................................................................... 42
(4.5) Prestige ............................................................................................................................ 43
Chapter 5: Insider Positives ........................................................................................................................ 44
(5.1) Learning To Deal With Stress ......................................................................................... 44
(5.2) Badge Of Honor .............................................................................................................. 44
(5.3) Transferrable Skill Set ..................................................................................................... 44
(5.4) Future Jobs Will Be Less Difficult ................................................................................. 44
(5.5) Full-Time Analyst Training ............................................................................................ 45
(5.6) A Humbling Experience ................................................................................................. 45
(5.7) Leadership And Management ......................................................................................... 45
(5.8) Small, Exclusive Industry ............................................................................................... 45
(5.9) Industry Expertise ........................................................................................................... 45
(5.10) Ideal Starting Point ......................................................................................................... 45
Chapter 6: Publicly Available Negatives .................................................................................................... 46
(6.1) Long Hours ..................................................................................................................... 46
(6.2) Stress .............................................................................................................................. 46
(6.3) Big Personality Bosses ................................................................................................... 47
(6.4) Lack of Fitness And Overall Health ............................................................................... 47
(6.5) Negative Public Image ................................................................................................... 47
Chapter 7: Insider Negatives ....................................................................................................................... 48
(7.1) Pay Is Lower Across The Board ..................................................................................... 48
(7.2) Large Amounts Of Administrative Work ....................................................................... 48
(7.3) Unnecessary, Unrecognized, Or Irrelevant Work Completed ........................................ 48
(7.4) Limited Ability To Control Work Flow ......................................................................... 49
(7.5) Investment Banking Is In A Volatile State ..................................................................... 49
(7.6) Low Bank Loyalty .......................................................................................................... 49
(7.7) Unrealistic Expectations For Exit Opportunities ............................................................ 49
Chapter 8: Step 1 – Evaluate Your Current Situation .............................................................................. 51
(8.1) Are You At A Target Or Non-Target School? ............................................................... 51

Target Schools .............................................................................................................. 51
Non-Target Schools ...................................................................................................... 51
Chapter 9: Step 2 – Excel In The Classroom ............................................................................................. 53
(9.1) Major .............................................................................................................................. 53
(9.2) Essential Classes ............................................................................................................. 53
(9.3) GPA ................................................................................................................................ 54
Chapter 10: Step 3 – Get Involved On Campus ........................................................................................... 55
(10.1) Join The Right Student Groups ...................................................................................... 55
(10.2) Form Your Own Student Organization ........................................................................... 55
(10.3) Honors Societies And Distinctions ................................................................................. 56
(10.4) Student Government ....................................................................................................... 56
Chapter 11: Step 4 – Create And Perfect Your Resume ............................................................................. 57
(11.1) Format/Appearance ........................................................................................................ 57
(11.2) Detailed And Quantitative .............................................................................................. 59

1. Detail Oriented .......................................................................................................... 59
2. Specific Numbers ...................................................................................................... 59
3. Finance Terminology ................................................................................................ 59
(11.3) Results Driven ................................................................................................................ 60

Stress Exposure To Senior Employees ......................................................................... 60
(11.4) Finance Resume Structure .............................................................................................. 60

Major Sections .............................................................................................................. 61
Essential Resume Do’s And Don’ts .............................................................................. 63
(11.5) Review Process (What An Insider Looks For) ............................................................... 64

The Resume Packet ....................................................................................................... 64
Who Reviews It ............................................................................................................ 64
How An Insider Reviews Your Resume ....................................................................... 65
Selection Process .......................................................................................................... 65
(11.6) The Cover Letter ............................................................................................................ 66
Chapter 12: Step 5 – Network ....................................................................................................................... 67
(12.1) Whom To Network With ................................................................................................ 67

Current Upper-Classmen .............................................................................................. 67
Alumni .......................................................................................................................... 67
Family And Friends ...................................................................................................... 68
Other Industry Insiders ................................................................................................. 68
(12.2) Where To Network ......................................................................................................... 68
Student Groups ............................................................................................................. 68
Alumni Center .............................................................................................................. 68
Career Center ................................................................................................................ 69
Firm Events ................................................................................................................... 69
Online ........................................................................................................................... 69
(12.3) How To Network ............................................................................................................ 70

1. Prepare ...................................................................................................................... 70
2. Execute ..................................................................................................................... 72
3. Follow-Up ................................................................................................................. 73
4. Maintain And Exploit The Relationship ................................................................... 74
(12.4) Non-Target Strategy: Going Above And Beyond .......................................................... 75

Start Early ..................................................................................................................... 75
Attend (Or “Crash”) Nearby School Events ................................................................. 75
Reaching Out “Cold Turkey” ....................................................................................... 76
Let Your Personality Shine .......................................................................................... 78
Chapter 13: Step 6 – Obtain Pre-Internship Internships ............................................................................ 79
(13.1) Types Of Internships ...................................................................................................... 79

Summer Internships ...................................................................................................... 79
Part-Time, School Year Internships .............................................................................. 79
(13.2) How Different Internships Stack Up .............................................................................. 80

High Finance Internship ................................................................................................ 80
General Corporate Finance/Consulting/Accounting ..................................................... 80
General Financial Services ........................................................................................... 80
Financial Education Programs ...................................................................................... 80
Other ............................................................................................................................. 81
(13.3) How To Get These Internships ....................................................................................... 81

Start Small .................................................................................................................... 81
Friends & Family Connections ..................................................................................... 82
Career Center ................................................................................................................ 82
Networking ................................................................................................................... 82
Online Job Boards ......................................................................................................... 83
(13.4) What To Take Away From Your Internships ................................................................. 83
Chapter 14: Step 7 – Prepare For Junior Year Summer Analyst Interviews ........................................... 84
(14.1) Action Item 1 – Talk To Experienced Peers ................................................................... 84
(14.2) Action Item 2 – Understand The Industry And The Job ................................................. 84
(14.3) Action Item 3 – Continue Networking ........................................................................... 85
(14.4) Action Item 4 – Master Your Story (Introduction) ......................................................... 86

1. Background ............................................................................................................... 86
2. Why Finance ............................................................................................................. 87
3. The Road To Investment Banking ............................................................................ 87
4. Why This Interview .................................................................................................. 87
(14.5) Action Item 5 – Prepare For Qualitative Questions ........................................................ 88
(14.6) Action Item 6 – Study Technical Questions ................................................................... 89
(14.7) Action Item 7 – Conduct Mock Interviews .................................................................... 89

What To Focus On ........................................................................................................ 90
(14.8) Action Item 8 – Research The Banks ............................................................................. 90
(14.9) Interview Essentials ........................................................................................................ 90

Back Pocket Items ........................................................................................................ 90
Words of Wisdom ......................................................................................................... 91
Chapter 15: Step 8 – Obtain Your Junior Year Summer Analyst Internship .......................................... 92
(15.1) Action Item 1 – Understand The Internship’s Importance ............................................. 92

Internships Lead To Full-Time Jobs ............................................................................. 92
Find The Right Fit ........................................................................................................ 92
Can You Handle Investment Banking? ......................................................................... 92
(15.2) Action Item 2 – Stay On Top Of The Recruiting Cycle ................................................. 93
(15.3) Action Item 3 – Apply .................................................................................................... 93

Target Schools .............................................................................................................. 93
Non-Target Schools ...................................................................................................... 93
(15.4) Action Item 4 – Network ................................................................................................ 94

1. After Securing An Interview ..................................................................................... 95
2. When Trying To Leverage Other Interviews ............................................................ 95
3. To Stay On A Firms Radar After Failing To Secure An Interview .......................... 95
(15.5) Action Item 5 – Continue Preparing For Your Interview ............................................... 96
(15.6) Action Item 6 – Dominate Your Interviews ................................................................... 96

General Interview Tips & Strategies ............................................................................. 96
Phone Screen ................................................................................................................ 97
First Round Interview (On-Campus) ............................................................................ 97
Second Round Interview ............................................................................................... 100
Juggling Interviews ....................................................................................................... 102
(15.7) Action Item 7 – Follow-Up ............................................................................................ 102
(15.8) Action Item 8 – Choose An Offer .................................................................................. 103

Exploding Offers .......................................................................................................... 103
Shopping Your Offer .................................................................................................... 104
Choosing Your Offer .................................................................................................... 104
(15.9) So You Didn’t Get An Investment Banking Internship .................................................. 15

Assess Why ................................................................................................................... 105
Fix It ............................................................................................................................. 105
Your Options ................................................................................................................ 106
Formulate A Plan .......................................................................................................... 107
Chapter 16: Step 9 – Excel During Your Summer And Secure The Full-Time Job ................................. 108
(16.1) Getting Ahead ................................................................................................................. 108

Take Workshops & Online Courses ............................................................................. 108
Read These Books ........................................................................................................ 109
Utilize These Forums And Websites ............................................................................ 109
Practice With MS Office ............................................................................................... 109
(16.2) Excelling On The Job ..................................................................................................... 109

Leave A Good Impression ............................................................................................ 109
Stay Organized .............................................................................................................. 110
Practice Proper Email Etiquette .................................................................................... 110
Practice Proper Phone Etiquette .................................................................................... 111
Always Be Learning ..................................................................................................... 111
Understand Office Politics ............................................................................................ 112
Do The Little Things .................................................................................................... 113
(16.3) Understanding The Summer Review Process ................................................................. 113

Mid-Summer Review .................................................................................................... 113
Last Chance Review (Semi-Final Review) ................................................................... 114
Final (“Round Table”) Review ..................................................................................... 114
(16.4) Receiving Your Offer ..................................................................................................... 115

Choosing A Group ........................................................................................................ 115
Chapter 17: Step 10 – Full-Time Recruiting ................................................................................................ 116
(17.1) Number Of Openings ..................................................................................................... 116
(17.2) Recruiting Cycle And Structure ..................................................................................... 116
(17.3) Assess Your Situation And Execute A Plan ................................................................... 117

Situation A – Received A Full-Time Offer From Banking Summer Internship ........... 117
Situation B – Banking Summer Analyst Internship With No Full-Time Offer ............ 119
Situation C – No Investment Banking Internship ......................................................... 120
Chapter 18: Step 11 – I Did Not Get A Full-Time Job, Now What? .......................................................... 122
(18.1) You Still Want To Get Into Banking .............................................................................. 122

Delay Graduation .......................................................................................................... 122
Masters Program ........................................................................................................... 122
Enter As An Associate .................................................................................................. 122
Get Lucky ..................................................................................................................... 123
Back Office: A Common Misconception ...................................................................... 123
(18.2) You Want To Do Something Else Finance Related ........................................................ 123

Chapter 19: How To Be A Successful Full-Time Analyst ........................................................................... 125
(19.1) Preparing For The Job .................................................................................................... 125

Keep Up With Financial News ..................................................................................... 125
Brush Up On Summer Training Materials ................................................................... 125
Continue Your Finance And Accounting Education .................................................... 125
Get “Fitted” ................................................................................................................... 125
(19.2) Full-Time Training ......................................................................................................... 125
(19.3) First Impressions 2.0 ...................................................................................................... 126
(19.4) Settling In ....................................................................................................................... 127
How To Be A Superstar ................................................................................................ 127
How To Be A Sufficient Slacker .................................................................................. 128
(19.5) “Things I Wish I Would Have Known” ......................................................................... 130

The Analyst/Associate Dynamic ................................................................................... 130
Importance Of Finding A Mentor ................................................................................. 130
Bonus Payment And Reviews ....................................................................................... 130
Long Hours & Weekends ............................................................................................. 131
Organization ................................................................................................................. 131
Managing Expectations ................................................................................................. 131
Forming Relationships Across The Bank ..................................................................... 131
Leveraging Existing Work ............................................................................................ 132
Importance Of Attitude ................................................................................................. 132
Importance Of Judgment .............................................................................................. 132
Taking Vacation/Missing Work .................................................................................... 132
Ways To Stay In Shape ................................................................................................. 132
What To Keep At Your Desk ....................................................................................... 133
Work-Life Balance ....................................................................................................... 133
Importance Of Having Good Relationships With Back-Office Services ...................... 133
How Early Exit Opportunity Recruiting Begins ........................................................... 133
Chapter 20: Banking And Beyond ................................................................................................................ 134
(20.1) Making It A Career ......................................................................................................... 134
(20.2) Exit Opportunities .......................................................................................................... 134

Private Equity & Hedge Funds ..................................................................................... 135
Venture Capital ............................................................................................................. 136
Internal Corporate Finance ........................................................................................... 137
Business School ............................................................................................................ 138
Entrepreneurship .......................................................................................................... 138

Chapter 21: Technical Guide – Accounting, Valuation & More ................................................................ 140
(21.1) Accounting Overview ..................................................................................................... 140

Income Statement ......................................................................................................... 140
Statement Of Cash Flows ............................................................................................ 141
Balance Sheet ................................................................................................................ 143
(21.2) Financial Ratios .............................................................................................................. 144

Solvency & Liquidity Ratios ........................................................................................ 144
Profitability & Efficiency Ratios .................................................................................. 145
(21.3) Introduction To Valuation .............................................................................................. 146

Enterprise Value vs. Equity Value ................................................................................ 146
(21.4) Public Comparables Analysis ......................................................................................... 146
(21.5) Transaction Comparables Analysis ................................................................................ 148
(21.6) Discounted Cash Flow Analysis ..................................................................................... 150

Present Value & Discount Rates ................................................................................... 150
Free Cash Flow ............................................................................................................. 152
Terminal Value ............................................................................................................. 153
Step-By-Step ................................................................................................................. 154
(21.7) Capital Structure ............................................................................................................. 155

Debt .............................................................................................................................. 156
Equity ............................................................................................................................ 157
(21.8) Options ........................................................................................................................... 158
(21.9) Mergers & Acquisitions ................................................................................................. 159

Consideration ................................................................................................................ 160
Accretion & Dilution .................................................................................................... 161
(21.10) Leveraged Buyouts ......................................................................................................... 162

Key Participants ............................................................................................................ 162
What Makes For An Attractive LBO Candidate? ......................................................... 162
LBO Valuation .............................................................................................................. 163
LBO Analysis – The Process ........................................................................................ 164
Exit Strategies ............................................................................................................... 165
Chapter 22: Qualitative Interview Questions & Answers ........................................................................... 166
(22.1) “Why…?” ....................................................................................................................... 166
(22.2) Understanding The Job ................................................................................................... 169
(22.3) Character Attributes ........................................................................................................ 171
(22.4) Work & Personal History ............................................................................................... 174
(22.5) Macroeconomics & Microeconomics ............................................................................. 177
Chapter 23: Technical Interview Questions & Answers ............................................................................. 180
(23.1) Accounting – Basic ......................................................................................................... 180
(23.2) Accounting – Advanced ................................................................................................. 182
(23.3) General Valuation – Basic .............................................................................................. 186
(23.4) General Valuation – Advanced ....................................................................................... 190
(23.5) Comparables Analysis .................................................................................................... 193
(23.6) Discounted Cash Flow Analysis ..................................................................................... 195
(23.7) Leveraged Buyouts ......................................................................................................... 200
(23.8) Mergers & Acquisitions ................................................................................................. 203
(23.9) Capital Structure & Debt ................................................................................................ 205
(23.10) Miscellaneous & Brain Teasers ...................................................................................... 212
List Of Insider Insights
Chapter 1: What An Investment Bank Is ................................................................................................... 5

Importance Of Understanding Investment Banks ......................................................... 5
Stock Trading Considerations ....................................................................................... 6
The Role of Capital Markets ........................................................................................ 8
Lead-Left Bookrunner .................................................................................................. 11
Chapter 2: The Major Players .................................................................................................................... 14

Working In New York City .......................................................................................... 17
Working In International Offices .................................................................................. 18
Investment Banking League Tables .............................................................................. 18
Chapter 3: What The Job Entails ............................................................................................................... 19

Pitches ........................................................................................................................... 20
IPOs .............................................................................................................................. 22
Buy-side & Sell-side Deal Workflow ........................................................................... 23
Deal Toys ...................................................................................................................... 24
Working On Internal Projects ....................................................................................... 25
Performing Favors ........................................................................................................ 25
Administrative Work .................................................................................................... 25
Technical Work ............................................................................................................ 26
Financial Modeling ....................................................................................................... 27
Qualitative Work .......................................................................................................... 28
Conducting Research .................................................................................................... 28
Product vs. Industry Groups ......................................................................................... 30
Bonus Timing ............................................................................................................... 31
Pulling All-Nighters ...................................................................................................... 32
Turning Comments ....................................................................................................... 33
Chapter 4: Publicly Available Positives ...................................................................................................... 38

Workload & Pay In Down Markets .............................................................................. 38
Overtime Meals ............................................................................................................ 39
Analyst Rankings & Bonuses ....................................................................................... 39
Senior Banker Compensation ....................................................................................... 40
Learning From Colleagues ............................................................................................ 42
Displaying Humility ..................................................................................................... 43
Chapter 5: Insider Positives ........................................................................................................................ 44

Boredom With Future Jobs ........................................................................................... 44
Chapter 6: Publicly Available Negatives .................................................................................................... 46

Leaving The Office Early ............................................................................................. 46
Working Weekends ...................................................................................................... 46
“Red Light Of Doom” ................................................................................................... 47
Establishing A Gym Regiment ..................................................................................... 47
Chapter 7: Insider Negatives ....................................................................................................................... 48

Working On Unused Materials ..................................................................................... 48
Chapter 8: Step 1 – Evaluate Your Current Situation .............................................................................. 51

What Makes A Target School A Target School ........................................................... 51
Chapter 9: Step 2 – Excel In The Classroom ............................................................................................. 53

Pursuing Non-Finance Minors ...................................................................................... 53
Academic Classes That Get You Ahead ....................................................................... 54
GPA Considerations ..................................................................................................... 54
Chapter 10: Step 3 – Get Involved On Campus ........................................................................................... 55

Student Group Considerations ...................................................................................... 55
Chapter 11: Step 4 – Create And Perfect Your Resume ............................................................................. 57

Importance Of Resume Formatting .............................................................................. 57
Finance Terminology On Your Resume ....................................................................... 60
Importance Of SAT Scores ........................................................................................... 61
Considerations When Listing Skills On Your Resume ................................................. 63
Considerations When Listing Interests On Your Resume ............................................ 63
Resume Review at Smaller Banks ................................................................................ 65
Resume Review Considerations ................................................................................... 65
Chapter 12: Step 5 – Network ....................................................................................................................... 67

Whom To Contact In HR .............................................................................................. 68
Attending Information Sessions .................................................................................... 69
Utilizing Facebook & LinkedIn .................................................................................... 69
Researching Individual Bankers ................................................................................... 71
Networking Event Conversation Tips ........................................................................... 72
Networking Event Strategies ........................................................................................ 73
Sending Follow-Up Emails ........................................................................................... 74
Strategies For Contacting Other Schools ...................................................................... 76
Contacting Insiders: Email vs. LinkedIn ...................................................................... 77
Cold Emailing Considerations ...................................................................................... 78
Chapter 13: Step 6 – Obtain Pre-Internship Internships ............................................................................ 79

Sophomore Summer Programs ..................................................................................... 79
Unpaid Internship Considerations ................................................................................. 80
Gaining Actual Interview Experience ........................................................................... 82
Pre-Internship Internship Takeaways ........................................................................... 83
Chapter 14: Step 7 – Prepare For Junior Year Summer Analyst Interviews ........................................... 84
Networking Event Repetition ....................................................................................... 85
Your Story For Regional Offices .................................................................................. 86
Making Time To Study For Interviews ........................................................................ 89
Understand Concepts, Not Answers ............................................................................. 89
Mock Interview Strategy .............................................................................................. 90
Quoting Stock Prices .................................................................................................... 91
Chapter 15: Step 8 – Obtain Your Junior Year Summer Analyst Internship .......................................... 92
Screening Calls During Recruiting ............................................................................... 97
Choosing Interview Time Slots .................................................................................... 98
Making Interview Small Talk ....................................................................................... 98
Sell-Mode After First Round Interviews ...................................................................... 98
Strategies Employed By Interviewers ........................................................................... 99
Scheduling Second Round Interviews at Smaller Banks .............................................. 100
Interview Meals & Social Events ................................................................................. 100
Interviewing With Senior Bankers ................................................................................ 101
Thinking Aloud During Interviews ............................................................................... 101
Sending Thank You Emails .......................................................................................... 102
Recruiting Competition Between Investment Banks .................................................... 103
Reneging On A Summer Offer ..................................................................................... 104
Considerations When Choosing An Internship Offer ................................................... 105
Breaking Into IBD Through Different Departments ..................................................... 107
Chapter 16: Step 9 – Excel During Your Summer And Secure The Full-Time Job ................................. 108
Being Late To Work As An Intern ............................................................................... 110
Summer Analyst Face Time ......................................................................................... 112
Importance Of Relationships In Intern Reviews ........................................................... 113
Note Taking Strategy .................................................................................................... 113
Mid-Summer Analyst Review ...................................................................................... 114
Round-Table Summer Analyst Reviews ....................................................................... 115
Analyst Signing Bonuses .............................................................................................. 115
Chapter 17: Step 10 – Full-Time Recruiting ................................................................................................ 116

Shopping Your Offer To Previous Contacts ................................................................. 118
Chapter 18: Step 11 – I Did Not Get A Full-Time Job, Now What? .......................................................... 122
Deferring Graduation To Recruit .................................................................................. 122
Entering Banking As An Associate .............................................................................. 122
Chapter 19: How To Be A Successful Full-Time Analyst ........................................................................... 125

Full-Time Analyst Training Considerations ................................................................. 126
Conveying Your Staffing Preferences .......................................................................... 127
Analyst Rank vs. Exit Opportunities ............................................................................ 128
Getting Away With Slacking Off ................................................................................. 128
Banker Influence In Bonus Decisions ........................................................................... 130
Getting On Good Terms With Auxiliary Staff .............................................................. 133
Firm Help In Exit Opportunity Recruiting ................................................................... 133
Chapter 20: Banking And Beyond ................................................................................................................ 134

Working Your Way Up In An Investment Bank .......................................................... 134
Setting Yourself Up For Exit Opportunities ................................................................. 135
Work In Private Equity vs. Investment Banking .......................................................... 135
Hours In Private Equity vs. Investment Banking .......................................................... 135
Buy-side Recruiter Considerations ............................................................................... 136
Timing For Buy-side Recruiting ................................................................................... 136
Corporate Finance Compensation ................................................................................. 137
Chapter 21: Technical Guide – Accounting, Valuation & More ................................................................ 140
Above & Below “The Line” ......................................................................................... 141
Free Cash Flow .............................................................................................................. 143
Present Value of the Terminal Value ............................................................................ 153
Exit Multiple Method ................................................................................................... 154
Synergies ...................................................................................................................... 160
All-Cash Deals .............................................................................................................. 160
Accretion & Dilution .................................................................................................... 161
LBO Valuation .............................................................................................................. 163

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Copyright 2012-2013 iBanking Insider LLC

Part I: What is Investment Banking?

Chapter 2: The Major Players ............................................................................................ 14

Chapter 3: What The Job Entails ....................................................................................... 19

Part II: Why Investment Banking?

Chapter 5: Insider Positives ................................................................................................ 44

Chapter 6: Publicly Available Negatives ............................................................................ 46

Chapter 7: Insider Negatives ............................................................................................... 48

Part III: How To Get The Job

Chapter 9: Step 2 – Excel In The Classroom ..................................................................... 53

Chapter 10: Step 3 – Get Involved On Campus .................................................................. 55

Chapter 11: Step 4 – Create And Perfect Your Resume .................................................... 57

Chapter 13: Step 6 – Obtain Pre-Internship Internships ................................................... 79

Chapter 17: Step 10 – Full-Time Recruiting ........................................................................116

Part IV: How To Succeed On The Job And Next Steps

Chapter 20: Banking And Beyond ........................................................................................134

Part V: Technical Concepts & Interview Questions

Chapter 22: Qualitative Interview Questions & Answers ..................................................166

Chapter 23: Technical Interview Questions & Answers .....................................................180

Appendix A: Questions For The Interviewer ............................................................218

Appendix B: Email Address Formula List .................................................................219

Appendix C: Financial Crisis Overview ......................................................................221

In-Depth Table Of Contents ............................................................................................222

List Of Insider Insights ......................................................................................................231

How To Use This Guide

Part I: What Is Investment Banking?

Part II: Why Investment Banking?

Part IV: How To Succeed On The Job And Next Steps

Part V: Technical Concepts & Interview Questions

Detailed Table Of Contents

List Of Insider Insights

We provide customizable email templates to aid in networking and recruiting.

To aid in a comprehensive learning process, these boxes contain relevant examples.

Pros & Cons

Please feel free to contact us with comments, suggestions, or questions at contact@ibankinginsider.com.

See you on the inside.

-The iBanking Insider Team

(1.1) Overview Of An Investment Bank

Insider Insight Importance Of Understanding Investment Banks

How Investment Banks Are Structured

Sales & Trading / Research Investment Banking Division Other

Research Corporate Finance – Product Groups Insurance Services

Private Equity & Merchant Banking Capital Markets Retail Banking

The “Chinese Wall” (Public vs. Private Information Barrier)

Insider Insight Stock Trading Restrictions

Coverage Groups (or Industry Groups)

Relationship Between Corporate Finance And Capital Markets:

Below is an example to illustrate the relationship between the two groups:

Sales & Trading/Research

(1.3) Investment Banking Corporate Ladder

Position Role Overview Tenure

 Responsible for managing day-to-day components of a deal, monitoring and reviewing

(1.4) How Investment Banks Make Money

Insider Insight Lead-Left Bookrunner

(1.5) Commercial Banking vs. Investment Banking

- Vice President, Bulge Bracket Investment Bank

(1.6) Other Finance Participants

We detail each of the major buy-side firms below:

Venture Capital Fund

Private Equity Fund

Hedge Funds And Mutual Funds

(1.7) Changing Nature Of The Industry

Loss Of Major Firms And Consolidation