Investment Banking 101:

What Is Investment Banking?

David Kwan Geoffrey Kwan

September 25, 2003

What Is Investment Banking?

 Contrary to popular belief, Investment Bankers are NOT

stock brokers!
 Stock brokers deal with individuals and manage money
 Investment Bankers deal primarily with corporations
 Investment Bankers provide financial advice to corporations
and assist them with services, some of which include:
 Mergers & Acquisitions (M&A)
 Financing (Equity and Debt)
 Restructurings and Divestitures
 General Advisory Services
 Examples of Investment Banks:
 Canada: RBC Capital Markets, BMO Nesbitt Burns,
CIBC World Markets, TD Securities, Scotia Capital
 U.S.: Goldman Sachs, Merrill Lynch, Morgan Stanley,
CSFB, JP Morgan Chase
 Services Provided by an Investment Bank

 Investment Bankers work with the different “product” groups

within the broader Investment Bank to service our clients’
needs
Transaction Product Group

Equity Capital
Equity
Markets (ECM)

Debt Capital
Debt - Bonds
Markets (DCM)
Investment Bankers Client

Debt - Loans Corporate Bankers

M&A, Restructuring,
M&A Group
Divestiture

 Other key resources: Equity and Debt Research, Merchant

Bank, Sales & Trading (e.g. Derivative instruments)
The Day in the Life of an Analyst

 There is no such thing as a typical day

 Each “assignment” you work on is either a live deal or a
pitch
 Things you could be doing on any given day:
 Financial modeling and analysis
 Developing client presentations
 Prospectus / circular drafting
 Valuation analysis (DCFs, Comps, Precedents)
 Other analytical work
 Competitive strategic analysis for companies and
industries
 Development of marketing materials
 Market analysis
 Maintaining databases
The Typical Term of an Analyst

 Contract terms are typically two years in length but which

can be extended for a third year based on performance
 After the three years, some potential outcomes include:
 Promotion to Associate (based on performance)
 Transfer to another product group or even a new city
 Pursue an MBA or other advanced degree
 Leave the industry to pursue other interests
 You can start as a Generalist (work for any industry group)
and eventually “funnel” into one specific industry group or
immediately be dedicated to a specific industry group (e.g.
Real Estate, Power & Utilities, Mining, Technology, etc.)
 Royal Bank, Bank of Montréal and Scotiabank have
Generalist programs
 CIBC and TD have Analysts start in specific industry
groups
Investment Banking Analyst Required Skills

 Exceptional analytical and quantitative skills and attention to

detail
 Excel and PowerPoint will become your best friend
 Interpersonal and communication skills
 Demonstrated teamwork and leadership abilities
 Proven track record of initiative, achievement and success
 Good academic record and involvement in extracurricular
activities
 Focus on Finance and/or Accounting are assets but
not necessarily required
 Excellent work ethic and time management skills
 Solid business acumen
 Knowledge of a specific industry is helpful, but not expected
What Is So Great About Investment Banking?

 Incredible learning experience

 Develop an exceptional skill set that you can leverage
to other positions
 Learn many transferable skills in a short period of time
 Most banks offer a 1-3 week training course before you
start working
 Excellent networking opportunities both within the firm and
with top executives at major corporations
 Fast-paced challenging environment with as much
responsibility as you can handle
 Work hard, play hard
 Money
The Downside of Investment Banking

 Long, unpredictable hours

 In Canada, expect, on average, 80 hours per week
which can easily top 100 hours when busy
 Hours in the U.S. are significantly higher, especially at
the “bulge bracket” U.S. Investment Banks
 Exceptional sacrifices
 Must keep flexible as frequently required to work late
nights and weekends (all-nighters are not unheard of)
 Usually non-existent social life
 Steep learning curve
 You are expected to learn concepts quicker than most
other jobs
Useful Job Application and Résumé Tips

 Keep it clean and simple!!!

 Cover letters should not be more than one page
 3/4 of a page is ideal
 Highlight one (or more) relevant skills/achievements that
makes you unique versus all the other applicants
 Résumés should be no more than 2 pages, ideally 1 page
 Include only relevant info
 Double check your spelling and grammar
 Ensure you have the correct company name and contact
person
Job Interview Tips

 DON’T LIE!!!!!
 If you don’t know the answer to a question, say “I don’t
know” but add that you would take the necessary steps
to find the answer
 Investment Bankers are very good at knowing
when you are lying
 Research the firm you are interviewing with
 E.g. know transactions that they recently worked/
advised on
 Keep answers short and concise
 Interviewers are looking for people they can work with so
personality fit is a key criteria
 At the end of the interview, ask good and memorable
questions demonstrating interest and a desire to work for
that firm
Potential Job Interview “Technical” Questions

 You will be asked the usual behavioural questions

 What does an investment banker (analyst) do?
 Why do you want to become an investment banker?
 Why do you want to work for us?
 How would you value a company?
 Discounted Cash Flow
 Comparable Company Analysis
 Precedent Transaction Analysis
 Discuss what has recently been going on in the capital
markets
 Other finance theory-related questions
So You Got A Job Offer...Now What?

 Some things you should consider before accepting an offer

 Corporate culture
 Meet with as many people as possible from every
firm to see if you think you would fit in
 Ask yourself “Can I see myself working with these
people for 15 hours a day, everyday?”
 Deal flow
 Typically, the greater the deal flow, the better the
learning experience
 Location
 Branch vs. Head Office
 International offices
Useful Commerce Courses / Other Suggestions

 Courses related to:

 Financial statement analysis
 Company and asset valuation
 Strategic management
 Finance-theory
 Accounting (e.g. corporate tax, consolidation)
 Chartered Financial Analyst (CFA) Program
 Read the Business section of the Globe & Mail and/or
Financial Post (or other financial publications if available)
EVERYDAY!
Who Should Consider Investment Banking?

 People who are:

 Willing to focus on career first
 Willing to work however long it takes to get the job
done right
 Looking for a great learning experience
 Looking for a challenge
 You have to want to be an Investment Banker to be able to
survive!