Investment Banking Presentation at the UMass Boston College of Management March 25, 2009
Organization of a Typical Financial Services Company Investment Banking
Stanley Morgan, Inc.
Sales and Trading Principal Investing Wealth/Asset Management
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Investment Banking Corporate Finance
Investment Banking
Stanley Morgan, Inc.
Sales and Trading Principal Investing
M&A Equity Capital Markets Debt Capital Markets
Wealth/Asset Management 3/24/09
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Principal Investing Investment Banking
Stanley Morgan, Inc.
Sales and Trading Principal Investing Wealth/Asset Management
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Venture Capital LBO Fund
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Wealth/Asset Management Investment Banking
Stanley Morgan, Inc.
Sales and Trading Principal Investing
Private Client Services
Wealth/Asset Management
Mutual Funds Research
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What Do Investment Banks Do? • Help corporate clients to: ① Raise capital ② Consider and execute mergers, acquisitions or sales
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Investment Banking Services Investment Bank “Execution” Groups ECMS DCMS Corporate Client
Corporate Finance M&A
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Institutional Investors
UMass Boston College of Management Presentation
M&A Targets / Buyers; JV Partners
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Raising Capital • Firms often need/want to raise large amounts of capital by issuing debt or equity – To acquire another company – To undertake a new investment project – To change their capital structure
• The “Capital Markets Services” department of an investment bank provides this service
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Raising Capital: Capital Markets Services • Equity Capital Markets Services helps companies issue new equity (common stock, preferred stock) • Debt Capital Markets Services helps companies issue new debt products (bonds, notes, debentures, convertible bonds…)
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Raising Capital: Underwriting • What is underwriting? – Purchasing an entire new issue from a client with the intent of selling it to investors (for a profit)
• What are the benefits? – Takes risk off the client’s hands – Promotes wide distribution of the issue – Results in a profit for the bank if done well
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Advisory Services: M&A • A purchase, sale, merger or joint venture is often a very complicated process • Investment banks advise corporate clients on all steps of this process: – The decision that a purchase, sale, merger or JV is desirable – The identification of a target/buyer/partner – Analysis of the financial, legal and accounting aspects of the deal – Raising of capital (if necessary) – Execution of the deal
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Advisory Services: Corporate Finance • Corporate Finance is the liaison between the bank and the corporate client • Typically, first contacts and exploratory meetings occur with Corporate Finance • If the client wants to explore a specific transaction, Corporate Finance shepherds the process through – Get people from M&A or CMS involved – Coordinate the analysis and execution of the deal 3/24/09
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Investment Banking Services Investment Bank “Execution” Groups ECMS DCMS Corporate Client
Corporate Finance M&A
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Institutional Investors
UMass Boston College of Management Presentation
M&A Targets / Buyers; JV Partners
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What Would You DO at an Investment Bank? • Entry level people are “Analysts” • Job differs from department to department but there are similarities
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Corporate Finance Analyst • Conduct “comparable company analyses” – Determine how well your client is doing relative to its competitors – Involves making a spreadsheet of statistics using information from companies’ financial statements – Also involves making exhibits (graphs/charts) summarizing important information – These are used to look for ways the company could improve its standing 3/24/09
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Corporate Finance Analyst • Conduct hypothetical deal analyses – E.g. potential merger/acquisition • Create a model (spreadsheet) that projects the client’s financial statements for the next 10 years under various merger/acquisition scenarios • Typically, your bosses would help you to develop the assumptions that you base your projections on and you crunch all the numbers.
– E.g. potential equity offering • Create a model that shows what the company’s financials would look like if it undertook the offering 3/24/09
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Corporate Finance Analyst • Meetings and roadshows – Often, analysts are invited along to the meetings in which various deal ideas are pitched to clients – If a client decides to issue new equity, they typically travel around trying to convince investors to invest. Analysts typically go along on these.
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M&A Analyst • Spend almost all of your time building extremely detailed models projecting a company’s financials into the future under various M&A scenarios. • This involves extensive work on Excel, and the need to develop a familiarity with financial accounting—both in general and specifically with respect to M&A law. 3/24/09
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CMS Analyst • You spend most of your time on two things: – Working on models to try to determine what price the bank should purchase the offer at – Working on helping to figure out which Institutional Investors will want to be part of the group that purchases the issue, and what price to set for that sale
• ECMS analysts often go on Equity roadshows as well 3/24/09
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Why Do Analysts Work 100 Hour Weeks? • Much of the competitive advantage of investment banks comes from interpreting information well • This requires collecting and processing lots of information • Analysts are the ones that do most of this • And, since you’re salaried, it doesn’t cost your boss any extra to ask you to run 10 rather than 2 scenarios… 3/24/09
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Investment Banking: Some Pros & Cons • Some Pros: • • • •
Good education in the financial side of business Good springboard for other financial jobs Helps presentation skills Intense work environment—good experience
• Some Cons: • • • • 3/24/09
Intense work environment—long hours Danger of being used as a drone Involves only the financial side of business Fairly rigid hierarchical structure UMass Boston College of Management Presentation
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Q & A
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Investment Banking: Some Cons • Intense work environment—long hours • Involves only the financial side of business
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