So you want to be an Investment Banker

For those who are contemplating a career in finance, the below information would be useful to you in considering which areas are you interested to go in. Do you know the feeling that most of the time we wish to do something, but not very clear on what that something entails?

Mergers and Acquisitions (M&A) Group. The Group involves in consolidation of companies or assets through various types of financial transactions, including

  • mergers
  • acquisitions
  • tender offers
  • consolidations
  • management acquisitions
  • purchase of assets

Loan Syndication Group. The Group involves bringing lenders together to fund various portions of a loan for a single borrower. This happens when the amount required by a borrower is too large or beyond the risk tolerance level for a single lender to provide.

Capital Markets – Debt Capital Market (DCM) and Equity Capital Market (ECM). This Group involves debt financing for acquisitions, refinancing of existing debt, or restructuring of existing debt for corporate issuers. You have to be extremely up-to-date on fixed income markets (bonds, treasuries, money market instruments etc).

The major difference between DCM and ECM – for DCM, investors lend money (debt securities) to companies while for ECM, investors purchase a portion of ownership (equity securities) in companies. DCM operates in a fast-paced environment, focusing on short-term while ECM operates within a slower-moving environment and deal with longer horizons. With DCM, the risk is lower for short-term investment as compared to long-term investment for ECM.

Sales and Trading, Equity Research. This Group involves the selling and trading of financial products to distribute securities. Equity research cover groups of stocks, typically within the same industry, and publish reports with recommendations to induce market activities (whether investors should buy, sell, or hold) to execute trades.

Equity research requires:

  • Building financial models
  • Writing equity research reports (Initiating coverage, quarterly results, news updates, recommendation changes, etc.)
  • Performing industry research
  • Updating Excel spreadsheets and Word documents
  • Talking with the management of the companies they cover
  • Communicating investment updates to investors and the public

while Investment banking requires:

  • Creating pitch books (presentations in PowerPoint)
  • Building financial models in Excel
  • Performing ad hoc financial analysis
  • Building documents for transactions (Prospectus, Confidential Information Memorandum, Teaser, Letter of Intent etc.)

For those who are interest in a career in finance, do you have a clearer picture now?

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