How to get into Investment Banking?
Who are Investment Bankers?
Investment bankers are basically advisers to corporates advising broadly on the above stated deals . You might have heard the terms like “Buyside” and “Sellside” advisors, well, as common sense tells, if an investment bank is advising a corporate entity which wishes to divest or exit from a business then we classify this role of the investment bank as a “Sellside Advisor” and vice-versa, if the bank is advising its client on acquiring potential targets or assets etc. then the role is classified as “Buyside Advisor”. Please note, an investment bank can take up either of these two types of transactions and thus can play the role of a buy side or sell side advisor depending on the nature of the transaction it is currently advising on.
These investment banks are often bucketed into categorized based on the ticket size of the transactions (deal size) they carry out. Some of the common slangs used includes "Bulge Bracket firms" in which the ticket size of the transactions is relative huge, the clients of such usually include big multi national corporates. Examples of such bulge bracket investment banks would be Bank of America, Citi, Barclays, Goldman Sachs etc. In simple terms, these guys are huge and offer multiple services in addition to investment banking advisory, next would be a set of mid-market investment banks. Then there are "Boutique Investment Banks" where the transaction sizes are relatively lower compared to the bulge bracket ones. Boutiques may not cover the entire gamut of services provided by a full service investment bank, but may offer a handful of the financial services.
The Basics
Without getting much into the jargon on this beautiful subject, let me start with the very basics, the financial statements (i.e. the P&L, BS and the CFS). If we put a perspective to our observation, the balance sheet tells you much more than just showing the assets and liabilities of a company. For instance: the avenues through which a company feeds on capital is through two main sources - debt (funds through bank loans, bonds which are floated in debt markets etc. and equity: funds sourced through IPOs, FPOs, rights issue etc. and promoters own equity committed to the company (popular jargon: promoter’s skin in the game)
Do you think for example, a manufacturing company, would be more proficient in running the manufacturing business or would have an expertise on the process/pricing/rates at which the company would raise this external finance from or would have the finesse to hand pick an attractive acquisition opportunity which might be hidden deep within an emerging economy or some random corner of the globe.
Do you think for example, a manufacturing company, would be more proficient in running the manufacturing business or would have an expertise on the process/pricing/rates at which the company would raise this external finance from or would have the finesse to hand pick an attractive acquisition opportunity which might be hidden deep within an emerging economy or some random corner of the globe.
I guess the answer has already hit you, there is a need for a set of professionals who would facilitate this fund raising process or hunt for that perfect target company to be acquired. This is where an investment banker steps in.
The Skill Set Required To Make It Big!
So if you are to join as an analyst in one these IB firms, the skill sets that would be expected from you would be to have a strong understanding of the financial statements and why do I say that. Well an investment banker is one of the key contributor in structuring a deal along with its clients, the banker is expected to understand its client's business in details and then suggest a deal structure which would not only provide its clients best valuations prevailing at the current markets, look for the ideal acquisition targets which would ensure effective and realizable synergies in the long run. All of this requires a rigorous analysis of the financial statements and understanding the business. So my first advice would be, scrub through those financial statements once again if possible. But, do not panic, I would provide posts on analysis of the financial statements, however I would encourage a consistent exercise of reading and deciphering financial statements. The best way to do this would be to read research reports, call transcripts of a result release of a company where the top management discuss in details what went right and what didn't go as per the plans for a company in the reporting time period.
You would be expected to create financial models for your clients. Those who might have sat in my lectures would recollect, a financial model is a blueprint of the entire business of the company. They just don't show you numbers, they tell you a story. A story in which you are required to analyze the historical performance of the company, identify any sort of trends in the business and check if the same trend can be continued in the future for your forecasts. I would be delving into much details in my future posts on each of the components of a financial model.
Investment Banks also demand the skill set to write a marketing document they call "Pitch Book". These documents act as a discussion starter when the IB makes an initial pitch to its client for a potential deal mandate. There is no fixed benchmark size of these documents, it can vary from a 20 slide document to a 100 pager one. A lot of research is involved in creating this document, briefly to mention some of the components of a typical pitch book would include industry slides giving out details on the industry trends, regulations governing that specific industry, market size, trends etc. There would be slides on the client company's business diving deep into the nuances of its business, any recent M&As incurring the sector, competition over view and the multiple at which they trade at etc.
Best Investment Banking Courses!
Nothing can beat self study, but yes a guiding hand can definitely steepen the learning curve to get into this industry. They key things that you need to look for in any investment banking training program are
Experienced/ Quality of Faculty
Course Content - How practical is the content?
Duration of the program
The pandemic has surely changed the way of learning, e-learning is the new normal now and while looking for best investment banking courses online the above checkpoints can surely help. Look for training programs where you get direct connectivity with your mentors not only during the lectures but also post training sessions for doubt solving and career counselling.
Unit then stay tuned for my next post, happy learning!
Team Wizenius
