Investment Banking Overview:An introduction to the industry
Investment Banking Overview:An introduction to the industry
Friday, November 3, 2006Friday, November 3, 2006
Goal of This PresentationGoal of This Presentation
What is an Investment Bank?
What are the opportunities?
Learning more about the business
What is an Investment Bank?
What are the opportunities?
Learning more about the business
What Does an Investment Bank Do?What Does an Investment Bank Do?
Raise capital for clients
Advise corporations, states, or other entities on capital structure, strategy, business combinations
Create and sell securities to institutional and retail clients
Manage money for institutional and retail clients
Trade on a proprietary basis
Raise capital for clients
Advise corporations, states, or other entities on capital structure, strategy, business combinations
Create and sell securities to institutional and retail clients
Manage money for institutional and retail clients
Trade on a proprietary basis
An Investment Bank’s ObjectivesAn Investment Bank’s Objectives
To be the leading investment bank as measured by share of client activity, market rank and profitability
Manage a diversified portfolio of business and asset classes, making prudent use of Firm capital
Out-perform through market cycles
Be the most relevant advisor to its target client base
To be the leading investment bank as measured by share of client activity, market rank and profitability
Manage a diversified portfolio of business and asset classes, making prudent use of Firm capital
Out-perform through market cycles
Be the most relevant advisor to its target client base
Investment Bank OrganizationInvestment Bank Organization
GLOBAL BANK
Investment ManagementGlobal Private Client
Global Securities Research
& Economics
Global DebtMarkets
Global EquityMarkets
Investment Bankingand
Capital Markets
GlobalPrivate Equity
Global Investment
BankingCommodities
GMI Business ConstructGMI Business Construct
LeveragedLeveragedFinanceFinance
LeveragedLeveragedFinanceFinance
Capital Capital Markets & Markets & FinancingFinancing
Capital Capital Markets & Markets & FinancingFinancing
Strategic Strategic AdvisoryAdvisory Strategic Strategic AdvisoryAdvisory
Sales and Sales and TradingTrading
Sales and Sales and TradingTrading
Principal Principal InvestingInvesting Principal Principal InvestingInvesting
Private Private EquityEquity
Private Private EquityEquity
Global MarketsGlobal Markets Investment BankingInvestment Banking
GMI – Global Markets and Investment Banking
GMI – Global Markets and Investment Banking
GLOBAL MARKETS It’s not just sales and trading
GLOBAL MARKETS It’s not just sales and trading
Global Markets encompasses sales, trading, structuring and origination activities in a variety of product areas. Global Markets professionals provide institutional clients worldwide with a comprehensive range of end-to-end products, services and solutions.
Global Markets encompasses sales, trading, structuring and origination activities in a variety of product areas. Global Markets professionals provide institutional clients worldwide with a comprehensive range of end-to-end products, services and solutions.
Global Markets Product AreasGlobal Markets Product Areas
Equity Trading (Cash, Equity-Linked, Equity Financing & Services, and Strategic Risk)
Credit, Real Estate and Structured Products
Investor Client (Debt & Equity Sales)
Rates and Foreign Exchange
Relationship Management
Hedge Fund Development & Management
Commodities
Investment BankingInvestment Banking Investment Banking professionals originate and execute transactions
– Client focus – identify and meet client needs
– Product focus – opportunistically position expertise with clients
Investment Banking draws on the diverse resources of the firm to deliver the best advisory solutions
– Mergers & Acquisitions Advisory
– Restructuring Situations
– Equity and Debt Issuance
– Financial Sponsors and Leverage Finance
– Corporate Finance
– Investment Management and Private Client
How Does Investment Banking Fit In?How Does Investment Banking Fit In? General Relationship Management: The RM is not only Merrill Lynch's ambassador to
the company, but also the company's advocate within Merrill Lynch
– Product agnostic Advisory: Investment Banking the primary driver
– Primarily M&A
– Expertise of other groups drawn upon Capital Raising:
– Equity: Heavy involvement from equity capital markets
– Debt: Heavy involvement from debt capital markets
– Lending increasingly important: Some companies favor their lenders when choosing an investment bank
Other
– Derivatives becoming increasingly important (opaque pricing)
– Private Equity creates opportunities
– Cross selling becoming increasingly important
– Today almost no interaction with research
IBK: A Wide Range of OpportunitiesIBK: A Wide Range of Opportunities
Mergers &Mergers &AcquisitionsAcquisitions
Mergers &Mergers &AcquisitionsAcquisitions
LeveragedLeveragedFinanceFinance
LeveragedLeveragedFinanceFinance
Financial Financial InstitutionsInstitutions
Financial Financial InstitutionsInstitutions
Energy & Energy & PowerPower
Energy & Energy & PowerPower
ConsumerConsumerConsumerConsumerHealthcareHealthcareHealthcareHealthcare
Telecom & Telecom & MediaMedia
Telecom & Telecom & MediaMedia
TechnologyTechnologyTechnologyTechnology
FinancialFinancialSponsorsSponsorsFinancialFinancialSponsorsSponsors
RetailRetailRetailRetailReal EstateReal EstateReal EstateReal Estate
Multi Multi IndustriesIndustries
Multi Multi IndustriesIndustries
CorporateCorporateFinanceFinance
CorporateCorporateFinanceFinance
RegionalRegionalOfficesOffices
RegionalRegionalOfficesOffices
Product GroupsProduct GroupsProduct GroupsProduct GroupsCoverage GroupsCoverage GroupsCoverage GroupsCoverage Groups
PrivatePrivateEquityEquityPrivatePrivateEquityEquity
Gaming, Gaming, Leisure &Leisure &
TransportationTransportation
Gaming, Gaming, Leisure &Leisure &
TransportationTransportation
Equity Equity CapitalCapital MarketsMarkets
Equity Equity CapitalCapital MarketsMarkets
Debt Debt CapitalCapitalMarketsMarkets
Debt Debt CapitalCapitalMarketsMarkets
Equity LinkedEquity LinkedCapital MarketsCapital MarketsEquity LinkedEquity Linked
Capital MarketsCapital Markets
Investment Banking OrganizationInvestment Banking Organization
Managing Director: Most senior industry professional with a minimum of 10+ years of investment banking experience
Director: Intermediate officer position with a minimum of 6-9 years of experience
Vice President: First officer position in most firms with a minimum of 3-6 years of experience
Associate: MBAs, first permanent position in investment banking
Analyst: Undergraduate, two to three year program
PositionPosition BackgroundBackground
What Do Investment Bankers Do?What Do Investment Bankers Do?
OriginationOrigination ExecutionExecution Idea Generation
– Strategic Alternatives
– Capital Raising
– Risk Management
Problem Solving
Pitch Book Production – Quantitative & Qualitative Analysis
Client Contact
Due Diligence
Documentation
– SEC Merger and Offering Documents
– Purchase and Sale Agreements, Other Agreements
Financial Analysis (Valuation, Accounting Impact)
Develop Presentation Materials for Board of Directors Meetings
– Financial Analysis
– Strategic Rationale
– Market Receptivity/reaction
Prepare Materials for Internal Committees (Merrill Lynch)
Identify Potential Investors and Develop Investor Marketing Materials
Negotiation/structuring
Client Management
What Does an Associate Do?What Does an Associate Do? Financial Forecasts and Projections Valuation Approach, Rationale and Modeling Capital Structure and Financing Impacts Merger Consequences
Client and Industry Competitive Analyses Briefing Materials
Idea/Solution Generation Outline and Organization Drafting and Editing
Client “Point Person” for Execution Drafting Documents Due Diligence Marketing Material Preparation
Acquisition Project Support Strategic Studies Special Projects
Financial Forecasts and Projections Valuation Approach, Rationale and Modeling Capital Structure and Financing Impacts Merger Consequences
Client and Industry Competitive Analyses Briefing Materials
Idea/Solution Generation Outline and Organization Drafting and Editing
Client “Point Person” for Execution Drafting Documents Due Diligence Marketing Material Preparation
Acquisition Project Support Strategic Studies Special Projects
Financial Analysis:
Industry Research:
Presentation Preparation:
Transaction Execution:
Client Support:
Financial Analysis:
Industry Research:
Presentation Preparation:
Transaction Execution:
Client Support:
What Makes a Successful BankerWhat Makes a Successful Banker
KEY QUALITIES
Quantitative Ability
Intellectual Curiosity
Communication Skills Presentation Skills
Entrepreneurial
Research Skills
Long-Term CommitmentHigh Energy Level
What Makes a Successful BankerWhat Makes a Successful Banker
Summer Associate
– Be a great first year associate
First Year Associate
– Be a great associate
Second Year Associate
– Start showing signs of being a great VP
Third Year Associate
– Be a great VP
ML Focus: Providing Custom Solutions To Clients For Complicated, Business Transforming Transactions
ML Focus: Providing Custom Solutions To Clients For Complicated, Business Transforming Transactions
$1.1B full recapitalization of AMERCO/UHaul
Refinancing of bankruptcy exit financing
$875mm Merrill Lynch commitment of capital
Firm-wide effort spanning three years
Variety of structures lending against a variety of assets and cash flow streams
Re-IPO of US Airways post-bankruptcy emergence
$332.5mm concurrent add-on and rule 144A senior convertible notes offering
Offerings were made as part of a $897mm total equity raise in support of the merger between America West and US Airways
Firm-wide effort spanning 21 months advising America West
Learning About the Business: Do Your Homework
Learning About the Business: Do Your Homework
Read the Wall Street Journal: Business Section (Credit Markets), Economic Commentary, Equity Markets section and Equity Volatility commentary
– Need to be current on major events in business world and current market levels
– Other good resources:• Barron’s
• Economist
• Institutional Investor, Investment Dealers’ Digest, Derivatives Week
Know what is going on in the markets (stocks, bonds, Federal Reserve)
Learn as much as you can about the business and the different functions
Understand the job: WHY you want to do it, WHAT you want to do
Read the Wall Street Journal: Business Section (Credit Markets), Economic Commentary, Equity Markets section and Equity Volatility commentary
– Need to be current on major events in business world and current market levels
– Other good resources:• Barron’s
• Economist
• Institutional Investor, Investment Dealers’ Digest, Derivatives Week
Know what is going on in the markets (stocks, bonds, Federal Reserve)
Learn as much as you can about the business and the different functions
Understand the job: WHY you want to do it, WHAT you want to do
Learning About the FirmLearning About the Firm Research each firm you are talking to
– Web site
– News stories over the past few months
– Know enough to have a general conversation about the firm
Seek out and talk to former employees or summer associates about their experiences at a firm
Every summer program is different, know the specifics
Research each firm you are talking to
– Web site
– News stories over the past few months
– Know enough to have a general conversation about the firm
Seek out and talk to former employees or summer associates about their experiences at a firm
Every summer program is different, know the specifics
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