NORTHWESTERN CAREER ADVANCEMENT

• 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”

• 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”

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

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”

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

*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.