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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
- Capital raising and underwriting services
- Financial advisory services
- Sales and distribution
- Trading and market-making services
- 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 Handshake and employers’ websites to learn of any full-time openings throughout the summer.
Student Groups
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).
620 Lincoln Street, Evanston, IL 60208
(847) 491-3700
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