The Truth About Investment Banking

August 7, 2008 | Leave a Comment

The truth about investment banking is there is more to success than just knowing the numbers.  You have to understand that investment banks provide a service and that service requires multiple teams to execute at a high level.  Read below to understand where you may fit amongst the different teams at an investment bank.

Corporate Finance. This team is like the financial consulting arm of the bank. You will provide strategic advice in fund raising and merger situations. To do well on this team, you must have a good understanding of foreign exchange, economic trends, and specific financial strategies. As an MBA you will normally begin in the associate role with an opportunity to supervise some analysts.  You should plan to be in the associate role for about 3-4 years.

Sales/Trading. Corporate Finance comes up with a new proposal it is the job of the Sales/Trading team to sell this new item to the marketplace. As part of your role, you will have to interpret news, events, and market shifts to your clients. Your clients invest large sums of money with you and they do not like to hear about bad news in the market.  Your job is to keep bad news from creating a panic in your clients.  If you can move sales volume and grow assets the under your control, you will be rewarded well.

Research. This team is typically separated into fixed income (debt) and equity departments. If you work in this group you probably focus on a particular industry such as software, oil, or health care. Simply  put, your will need to consistently predict the direction of stocks in your given industry.  You are responsible for the buy, sell, and hold recommendations that guide investor decisions.  The best analyst is the person whose   predictions are closest to the real quarterly results of the companies in their focus group.

Investment banks come small (boutique), medium (regional), and large (bulge bracket). Depending on the kind of company you work for your particular experience may vary.  Still, it is important to say again that a successful investment banker understands more than number crunching.  Your clients depend on your financial knowledge and judgment.  Understand your role as best you can and provide your clients top notch advice.

Posted by Alzay | Filed Under mba applicant, mba student 

Understanding Investment Banking

July 31, 2008 | Leave a Comment

If you are an MBA you must start understanding investment banking. “I-banking” as it is sometimes called, is a very popular career choice amongst MBAs. The salary is high, the pace is fast, and you get exposure across a number of different businesses. This article provides a straightforward explanation of what an investment bank really does. Typically, an investment bank serves one of two main functions:

Raise money for a company. In industry terms this is called “pricing a securities offering”. This is the first important element to understanding investment banking. If a company is trying to borrow money it will use an investment bank to sell bonds on the open market. If a company is trying to go public it will use an investment bank to sell shares of stock for its initial public offering (IPO). In both cases, the investment bank will work hard to make sure there are investors committed to purchasing the issue of stocks or bonds before they enter the marketplace.

Set the value of a company. In industry terms this is called “valuing a merger or acquisition”. This is the second important element to understanding investment banking. One company may be buying another, or two companies may be coming together to create one larger company. In either case, much analysis is necessary to set a proper value for the companies involved. The investment bank looks at past performance, current assets, and future projections in order to determine what the appropriate pricing should be.

For MBAs an experience in investment banking can be very potent. If you are finance oriented, it is clear to see why you are interested in understanding investment banking. To dig deeper, look into the operations of the larger, full service investment banks such as Goldman Sachs, Lehman Brothers, and Merrill Lynch. A position at these esteemed firms will be extremely valuable no matter where you decide to take your career in finance.

Posted by Alzay | Filed Under mba applicant, mba graduate, mba student