Investment Banking Overview

Select Financial Services Segments

Investment Banking
Industry Coverage Product Group Capital Markets Sales & Trading Equity Research

Hedge Funds
Value, Growth, Blend Long-only, Long/Short, Shortonly Fundamental, Distressed, Macro, Event-Driven, Trading, Quant Investment Analysis Portfolio Management Trading

Private Equity
Growth Equity Large-Cap Fund Middle Market Control Equity Secondaries Co-Investing

Venture Capital
Control Equity Co-Investing

Front Office

Client Pitching Valuation / Modeling Deal Execution o M&A o Leveraged Finance o Equity & Debt Solutions

Deal Origination Valuation Investment Analysis Modeling Portfolio Management

Deal Origination Valuation Investment Analysis Modeling Portfolio Management

Middle Office

Portfolio Credit Analysis Pricing Counterparty Risk Ratings P&L Reporting Mark to Market Cash Operations Settlements

CFO/COO Cash Management Marketing Legal

Cash Management Legal Entities Tax Structuring Investor Reporting Fund Valuation

Cash Management Legal Entities Tax Structuring Fund Valuation

Investment Banking Overview

Investment Banks serve as intermediaries between providers and users of capital Chinese Wall

Strategic advisory Securities underwriting

Users of capital
Corporations Governments Municipalities

Investment Banking

Sales & Trading Research

Providers of Capital
Individuals Pension Funds Insurance Companies Asset Managers Corporate Treasuries Sovereign Wealth Funds

Private side

Public side

Overview of Investment Banking

Capital Markets
Equity capital-raising o Initial public offerings (IPOs) o Follow-on offerings o Equity-linked (convertible) Debt capital-raising o High-grade or investment grade o High-yield o Syndicated loans o Tax-exempt

Advisory
Mergers & Acquisitions o Buyside o Sellside o Spin-offs / Splitoffs / Carveouts o Hostile defense o Hostile takeovers / proxy fights o Joint Ventures Restructuring Ratings

What Does An Investment Banker Do?

Origination
Client Relationship Management o Ongoing dialogue on financial markets, industry developments, new products o Long-term relationship as advisor to Senior Management and Boards Idea Generation and Problem Solving o Strategic Alternatives o Capital Raising o Optimizing Capital Structure o Risk Management, Dividend Policy Assessment Of Opportunities

Execution
Financial Analysis Communication o Management, Board of Directors o Internal Committees Identify Potential Investors Negotiation / Structuring Transactions Due Diligence Documentation

Investment Banking Groups

Capital Markets
Equity Capital Markets Debt Capital Markets Tax-exempt Leveraged Finance Securitized Products

Industry Coverage
Consumer & Retail Healthcare Technology Media & Telecom Industrials Natural Resources Real Estate

Product
M&A Corporate Finance

Markets

Technical

Investment Banking Competitive Landscape

Bulge bracket

Middle Market

Boutiqu e

Low

Capabilities

High

Life of an Investment Banking Analyst

Overview of Investment Banking analyst programs

Two-year program with opportunity for a 3rd year 6-8 week training Mentorship programs Networking opportunities Summer internship program serves as primary feeder to full-time analyst positions

Role of an Investment Banking Analyst

Be a member of a deal team, executing day-to-day activities surrounding live transactions Perform financial analysis and modeling Develop and prepare client presentation materials (pitches, roadshows, board materials, etc.) Coordinate roadshows, and M&A processes Research and due diligence

Why Investment Banking?

Benefits
Everyday is different Exposure to senior management Steep learning curve Work with talented and motivated people Gain a strong background in financial analysis Help execute exciting, landmark transactions Networking Exit opportunities

Challenges
Long and unpredictable hours Traveling Demanding senior bankers High stress/pressure environment

Typical Analyst Wish List

Strong communication skills (written and oral) Quantitative / technical skills Teamwork and leadership skills Motivation and strong work ethic Self-confidence and positive attitude Time management skills Personality (sense of humor, enthusiasm and ability to adapt to different situations) Knowledge of firm and industry Ability to work well under pressure Creativity

General Preparation
Network with peers and alumni Internships Research - Do I want to do Investment Banking? What type of firms? Make sure your resume is clear, concise and error free o Take advantage of resources available to you (alumni, Feld Career Center, etc.) o Everything is fair game Practice, practice, practice

The Interview
Be prepared: know as much about the bank and position as possible Know yourself: what motivates you, your strengths and weaknesses and be able to articulate those points Know EVERYTHING on your resume Be honest and demonstrate enthusiasm and motivation Read the Wall Street Journal EVERYDAY and use the Vault Guides Practice interviewing (mock interviews, preparing answers, etc.) Ask questions

Resources

Vault Career Guides Breaking Into Wall Street Wall Street Prep Wall Street Training DealMaven Wall Street Training

Corporate Banking

Select Bank Divisions

Corporate Banking
Varies significantly from bank to bank: One end of spectrum: Corporate Bankers are the Industry Coverage Team Other end of spectrum: Corporate Bankers are Credit Analysts

Wealth Management
Managing money for: High net worth Retail Corporate sponsored retirement plans including pensions, 401k plans, nonqualified plans, etc.

Sales & Trading

Sales: Calling investors to suggest trade ideas Trading: Buying and selling financial products with the goal of achieving a gain

Research
Stocks = Equity Research Bonds = Fixed Income Research Assigned to Various Sectors Energy, technology, media, telecom, consumer Financial Modeling Investment recommendations Earnings reviews Participate on investor calls Company visits Travel to industry conferences

Various Group Structures

Types of Analysis Performed

Counterparty Credit Loan Pricing / Terms & Covenants Negotiation Industry Studies Sales Cross Selling Know the Client Know Your Bank Relationships Across Both Series 79 (depends on firm) Interview Selling Points: o Financial Statement Analysis o Credit Analysis o Law

Qualifications

Investment research and screening Analyze the research Investment recommendations Tactical allocation decisions and rebalancing Interact with individuals, executives, investment Series 7 & 66 & committees, fund Insurance managers License Chartered Financial Analyst (CFA) Chartered Retirement Plan Specialist (CRPS) Certified Investment Management Analyst (CIMA) Certified Financial Planner (CFP)

Buy and sell financial products on behalf of clients

Series 7 & 63 Chartered Financial Analyst (CFA)

Chartered Financial Analyst (CFA)

Corporate Banking: Deal Dynamics High Level

Client (Corporation) e.g. Insurance Co. Corporate & Investment Bank (CIB)

Client Need Bank Line / Working Capital Liquidity Facility / Commercial Paper Backstop Letters of Credit (LCs or LOCs) Project Financing Structured Vehicle Funding Capital Markets Hedging Programs

Corporate Banking Solutions Revolving Credit Facility (RCF): Revolver Revolving Credit Facility (RCF): Revolver Letter of Credit Facility Term Loans RCFs & LCs etc., Trading Lines

Revolvers from banks perspective: o Large, Long-Term (1-15 yrs) Commitments: Puts Balance Sheet of bank at Risk
Typically serve as liquidity / back-up facilities and are priced to incentivize the client NOT to draw Clients desire these facilities as well as their investors + rating agencies + other stakeholders - expensive, like a credit card Banks do not make a lot of money on undrawn revolver commitments: The bank gets paid to provide a

promise

Covenants
Banks do not lend unconditionally Long-term commitments are made under the condition that the borrower maintains a largely consistent risk profile o So, legal protections are built in: Covenants
Examples: Minimum Credit Rating of BBB Maximum Debt-to-Capital Ratio of 35%

o o

If client fails to meet these criteria, they are in breach A client in breach of a covenant will have no legal right to draw funds from the bank

Corporate Banking: Deal Dynamics High Level

Client (Corporation) e.g. Insurance Co. Corporate & Investment Bank (CIB)

Client Need Bank Line / Working Capital Liquidity Facility / Commercial Paper Backstop Letters of Credit Project Financing Structured Vehicle Funding Capital Markets Hedging Programs

Corporate Banking Solutions Revolving Credit Facility (RCF): Revolver Revolving Credit Facility (RCF): Revolver Letter of Credit Facility Term Loans RCFs & LCs etc., Trading Lines

Revolvers from banks perspective: o Large, Long-Term (1-15 yrs) Commitments: Puts Balance Sheet of bank at Risk

o

Typically serve as liquidity / back-up facilities and are priced to incentivize the client NOT to draw Clients desire these facilities as well as their investors + rating agencies + other stakeholders - expensive, like a credit card Banks do not make a lot of money on undrawn revolver commitment: The bank gets paid to simply provide a

In periods of stress, these facilities go from having relatively relaxed surveillance profiles to receiving intense attention
They are LARGE commitments and represent money out the door when the client draws American International Group (AIG) promise

So, banks usually commit the largest amounts with the most favorable terms (pricing + covenants), to their best clients o Clients in turn recognize this strategic partnership and open their doors to more business:
Sales & Trading, Debt Capital Markets, Equity Capital Markets, Foreign Exchange & Cash Management, M&A Advisory etc.,

Corporate Banking: Revolving Credit Facility

Example - Syndicated RCF:

Lead Bank (Agent Bank or Lead Arranger) Corporate Banker

Discuss Client Needs (Size and purpose of RCF) Discuss Market Appetite for lending: Bank Group + Allocations Determine Target Terms: Pricing, Covenants, Tenor (length)

XYZ Client (Corporation) Treasurer (sometimes CFO)

Launch Deal

2010 XYZ Company US$3.0bn Revolving Credit Facility

Banks Group HSBC JP Morgan Citigroup BAML UBS + others Post DD Negotiations: Due Diligence (DD) Meeting / Call

Lead Arranger

Agent/Lead Bank largely responsible for negotiating on behalf of banks group

Allocations $350 m $350 m $250 m $250 m $150 m $650 m

1st Tier 2nd Tier

What to Expect
The Job
Long Hours (less hours than Investment Banking) Life will revolve around deals Good salary + bonus package (less than Investment Banking) A lot of phone time / meetings with clients, other banks, lawyers, & internal colleagues Credit analysis o Financial Statement Analysis / Modeling o Industry Studies Must know your clients better than the competition o Investor Calls / Presentations o Company press releases as well as reports in the media o 10-Ks, transcripts, sell-side research etc., Broad product experience / limited understanding of each product Competitive / High Pressure Environment o Can be said about any position at a bank. Especially front office but also middle and back.

Middle Market Financing Positioning

Investment Banking Middle Market Financing Corporate Banking

Provide similar but expanded services to corporate and institutional clients: o Capital raising in the form of syndicated loans, public and private issues of debt and equity o Specialized services such as M&A and ratings advisory, industry and competitive analyses and market-making in complex instruments o Sales, trading and research of publicly traded issues and currencies Product groups specialize in a certain service or instrument, such as M&A, bonds, equity Industry groups cover all client firms which operate in a certain field (i.e. healthcare, gaming, energy, media)

Focus on supporting middle market clients by providing corp. loans for acquisitions, recaps, refinances & other corp. needs Business largely driven by private equity activity Firms focused underwriting fees and greater interest rate spreads Many MM firms also have advisory & capital market services, but not broader corporate banking services

Responsibilities include: o Issuing loans (vs. bonds, high yield) o Taxes strategy o Treasury management o FX management o Cash management o Project financing Traditional Corporate Banking offered by large banks with diverse product offerings Focus on relationship with company as cross-selling of products There is often an overlap between corporate banking and IB capital markets when capital markets expertise is utilized to issue equity or debt

Middle Market Financing Overview

Landscape Overview
More fragmented market led by pure commercial banks and finance companies, specialty funds, hedge funds and mezzanine funds Focus on smaller and medium sized leveraged loans ($250MM or less) and mezzanine debt (typically $100MM or smaller) for companies with less than $500MM in revenues and EBITDA between $10MM and $75MM Private investors driven with focus on club deals (deals with only 2 6 lenders & no broader syndication) and investment returns, given the companies smaller sizes and increased risk profile Underwriters emphasize senior loan club transactions, smaller scale loan syndications and portfolio lending/investment Pure commercial banks and financial companies dominate senior loan market Specialty funds, hedge funds and mezzanine funds dominate junior capital market

Middle Market New Issue Volume (<$50MM EBITDA)

Deal Financing Timeline Example

Career Considerations
Analyst Role / Responsibilities
Financial analysis and financial modeling Company valuation Comparable analysis Preparation internal credit / approval memos Industry and company research Developing client presentations Marketing material (i.e. Teaser, Confidential Information Memorandum) Updating all internal databases and systems Administrative tasks (set up calls, fax, FedEx, etc.)

Career / Role Benefits

Banking-like training programs Greater access to superiors & senior management Truly understand corporate growth, financial analysis & capitalization Develop strong knowledge of many industries Analysts tend to wear more hats than in larger banks Quality of life: Hours, flexibility, goals & expectations Defined career paths & competitive compensation Opportunity to change career path both internal / externally Introduction to numerous business owners

Career Options Firm Types

Commercial banks Finance companies / specialty funds Hedge funds and mezzanine funds

Environment Work / Life Balance

10-12 hour days, weekend work depending on firm Medium/High stress levels: Pressure to perform, competitive environment & demanding superiors with little room for error Multiple deals / companies / projects at one time Work frequently with others in deal teams of 2 4 people within your group Frequent fire-drill deadlines for client driven approvals Frequent meetings & conference calls throughout the day

Representative Companies
Large Commercial Banks
Citibank Bank of America Wells Fargo / Wachovia

Super-Regional Banks
Comerica Union Bank of California Bank of New York Mellon Key Bank SunTrust Fifth Third PNC

Foreign Banks
CIBC Toronto Dominion Royal Bank of Canada Bank of Montreal / Harris Societe Generale HSBC National Australia Bank ANZ Banking Group Royal Bank of Scotland Macquarie Group Sumitomo

Finance Companies / Funds

GE Capital CIT Group Churchill Financial Madison Capital Capital Source Freeport Financial Denali Capital Newstar Financial Orchard/First Source Jefferies Finance American Capital Golub Cerberus Orix Ares Capital

Next Steps
Take advantage of ALL Feld Career Center services, job postings and info sessions

NETWORK: Utilize the BU Alumni network and all family & friend contacts

Practice your interviewing skills and have all book knowledge down cold

Have a story about who you are, where you have been and where you are going

Get the JOB!

Utilize all resources including the Vault Guide, publications (WSJ, etc.), websites (LinkedIn, eFinancialCareers, etc.)

Search yourself: Make sure this is the field for you BEFORE going through the process

Commit: Once you decide to go for any finance job, give it your all or it will show otherwise

Questions

Appendix

Thoughts How to Make it Happen

Get any available on campus interviews practice makes perfect o Talk to the career center about firms that will be recruiting as well as firms that used to recruit o Begin emailing junior BU alums at the firm as soon as possible and well ahead of interview o After exchanging emails, ask for a few minutes on the phone

o

PROOF READ your emails. If there is a typo or a grammar error, it can kill your momentum Be sensitive to the interviewers time constraints. Do not insists on times / topics / sending your resume Remember: Alums are BUSY and they are doing you a big FAVOR by talking

Make sure you have a story about who you are and why you want the position / company / industry you are applying for Specialize your resume o Todays job market is extremely tough: Employers are looking for the perfect candidate o It is a numbers game but make sure you target positions for which you are a good fit o Make sure your resume is FLAWLESS; bad formatting, a strange layout or something that is hard to read can easily give someone a bad impression and/or cause them to overlook your talents If you dont have a 4.0 GPA or all of the relevant course work, guess what? - It is OK! o Will cost you initially but can be recovered from
Get the best job you can Work hard and be the best STAY in TOUCH with people Always be aware of and open to new opportunities

Corporate Banking: Some more detail

Career Options Large Corporate & Investment Banks: o Citigroup, JP Morgan, Bank of America Merrill Lynch, Barclays, Goldman Sachs, Morgan Stanley, UBS, Credit Suisse Middle Market Financing: o Commercial Banks, Hedge Funds, Specialty / Finance Companies Typical Entry Point (for Large CIBs) Out of undergrad (Analyst Program) From Business School (Associate Level) After 2+ years at a Rating Agency o Or other relevant field