Investment Banking

What is Investment Banking?

  • Investment Banking (I-Banking) is the business of creating capital for other companies and advising on financing and merger alternatives.
  • It is a sector of an investment bank that is responsible for corporate finance and advisory; the purpose is to provide advisory on transactions, mergers and acquisitions, and to arrange for and/or provide financing for these transactions.
  •  Investment bankers are concerned with the value of a company.
  •  I-Banking is the umbrella term for underwriting, selling, and trading securities (stocks and bonds), providing financial advisory services, and managing assets for companies, governments, nonprofit organizations, and individuals.

*Much of this content is courtesy of the “Wetfeet Insider Guide: Careers in Investment Banking”

What is an Investment Bank?

  • An investment bank provides financing services to corporations, including stock and bond offerings, M&A advice, and some strategic planning.
  • An investment bank’s primary service is to raise capital for corporations, governments, and other institutions by selling those clients’ stock, debt, or other financial paper. The bank helps the client determine a reasonable price for the stock or bond issue and then buys the securities and resells them to investors. The investment bank makes its money on the spread: the difference between the securities’ purchase and resale prices.

5 Primary Functions of an Investment Bank

  1. Capital raising and underwriting services
  2. Financial advisory services
  3. Sales and distribution
  4. Trading and market-making services
  5. Research

A full-service investment bank has three major professional divisions:

  • Investment Banking (I-Banking)
  • Sales & Trading
  • Research

An Investment Bank serves both users of capital and providers of capital. I-Banking or “corporate finance” serves users of capital. Sales & Trading and Research serve providers of capital.

*Much of this content is courtesy of the “Wetfeet Insider Guide: Careers in Investment Banking”

Type of Investment Banks

Large Banks

Large Banks are firms that deal with all divisions of investment banking, and have clients with revenue over a billion dollars.

  • Goldman Sachs
  • JP Morgan
  • Credit Suisse
  • Morgan Stanley
  • Citigroup
  • Deutsche Bank
  • Nomura

Boutique Banks

Boutique Banks are firms that focus on one division in investment banking. They usually work on smaller deals with middle market companies.

  • Blackstone
  • Lazard
  • Evercore Partners
  • Greenhill & Co.
  • Moelis & Company
  • William Blair

What does an I-Banker do?

The main position for a recent graduate is an Analyst. Analysts usually stay in their role for 2-3 years, and then pursue an MBA, which takes them to the Associate level.

Within I-Banking, there are different Product Groups that an I-Banker might work within:

  • Mergers and Acquisitions (M&A): advisory on sale, merger, and purchase of companies
  • Leveraged Finance (LevFin): lending money to firms to help finance acquisitions
  • Equity Capital Markets (ECM): advice on equity and equity-derived products (shares, options, futures, etc.)
  • Debt Capital Markets (DCM): advice on raising and structuring of debt to finance acquisitions
  • Restructuring: improving a company’s capital structure to make it more profitable and efficient

Some examples of what an I-Banker might do within these product groups include:

Capital Raising & Underwriting Services

Determine value and riskiness of business
Help firms devise and implement financial strategies
Price and underwrite new securities
Underwrite equity offerings
Underwrite fixed-income (debt/bond) offerings
Sell new securities

Financial Advisory Services

  • Advise companies, government entities, and other institutions about financial strategies and the most effective use of the financial market
  • Analyze financial needs
  • Mergers & Acquisitions  (M&A Advisory):
    • Business valuation (“due diligence”- the gathering, analyzing, and interpreting of a target’s financials, historical and projected fiscal results, synergies, etc. to determine what the target company is worth)
    • Negotiation
    • Pricing and structuring of transactions
    • Creation of “Fairness Opinions” (documents created by the investment bank which evaluate whether the terms of a merger, acquisition, buyback, etc. accurately depict the transaction value)
    • Pitch investment ideas to potential clients
  • Advise clients on joint ventures, takeovers, divestitures, spinoffs, takeover defense, and other strategic financial decisions

*Much of this content is courtesy of the “Wetfeet Insider Guide: Careers in Investment Banking”

Skills for Investment Banking

As you prepare for a career in Investment Banking, consider the following skills needed to succeed in the industry:

  • Quantitative skills (finance, accounting, economics, statistics, mathematics, engineering)
  • Analytical
  • Tolerance for risk
  • Excellent PowerPoint and Excel skills
  • Strong accounting and valuation knowledge
  • Effective communication
  • Ability to work well in teams
  • Entrepreneurial, self-starting
  • Critical, detail-oriented thinking
  • Ability to use numbers to understand patterns
  • Leadership, with a focus on results
  • Industry language and terminology

Recruiting Timelines

Type of Recruit Pre-Recruitment Recruitment Application/Interviews Offer
Full Time Spring & Summer prior to Senior Year

Summer and Early Fall

(August & September)*

August & September September & October
Internship Summer prior to Junior Year and Fall of Junior Year November/December-Early-Mid January January & February January & February

*Some employers might post full-time positions as early as mid-summer if they are looking to round out 1-2 open positions. Be sure to stay current on CareerCat and employers’ websites to learn of any full-time openings throughout the summer. 

Student Groups

Investment Banking Club (IBC)

The Investment Banking Club serves as a comprehensive platform for high achieving Northwestern students to further develop their knowledge of investment banking and to successfully prepare for recruitment and a career in the industry.

Institute for Student Business Education (ISBE), Northwestern’s Undergraduate Business Organization

ISBE is the leading resource for all Northwestern undergraduates to discover the possibilities of a career in business. This organization has twelve different student groups that focus on a variety of different aspects in business like marketing, corporate relations, analytics, etc.

Investment Banking Resources

For information use the Investment Banking 4-year career plan (PDF).