Maximizing IBanking Opportunities

Graduate School Business School - MBA
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<p>FWIW: As to whether Salomon Bros was "a proper investment bank", that is a matter of opinion in some circles. They were a trading house, at heart, that added investment banking to get them more product. Their pitch was more "we can get you a great price on your commodity securities offering because we're cheap and have great trading", rather than "we can craft you the best plan of finance because we're the smartest investment bankers on the planet".</p>

<p>And Smith Barney was at its heart a retail brokerage for wealthy individuals, with limited institutional presence.</p>

<p>But I digress...</p>

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<p>Monydad,</p>

<p>I'm not going to get into semantics as to what Solly's major historical strengths or weaknesses were.</p>

<p>FACT is: At it's peak, a position at Salomon Brother's was one of THE if not THE most coveted destination for undergrads (read Michael Lewis' Liar's Poker). </p>

<p>The best and brightest flock to what's hot at any given point in time = i.e. what division is paying the most. Some years it's leverged finance (or buyouts), some years it's equity underwriting (IPOs), some years it's derivatives...</p>

<p>The fact that you equate pure corporate finance activity = M&A = investment banking is truly flawed. The truest definition of an investment bank is to not only having the resources and ability to advise corporations on financial structuring but also having the ability to underwrite (or put its own capital at risk) via equity, debt or equity-linked securities to provide a client financing. By the (only corporate finance) definition then, only pure advisory firms (such as Lazard) would be considered investment banks - when in fact, they don't underwrite, don't have provide research, don't have sales and traders - i.e. critical components to any investment bank. </p>

<p>There is an ebb and flow to Wall Street - a cyclicality, if you will, that any business endures: some years it's M&A, some years it's debt financing / trading, some years it's equity (IPOs). I acknowledge that Salomon Brothers was traditionally a dominant bond house, but to wholly discount that is totally flawed. Fact of the matter is the recent trend has been WAY down for M&A fees. In the current market environment, NOT ONLY do capital markets fees and revenues continue to remain a critical component to overall Wall Street revenues - they have literally DWARFED M&A over the last several years. Ask the department heads over the last few years who were ringing in the fatest bonuses: M&A heads or Fixed Income / Equity Heads? </p>

<p>Salomon Brothers was definitely a proper Bulge Bracket firm (throughout the decades ranking in the Top 5 or Top 10 in debt, equity and advisory) and will always be considered as much.</p>

<p>note: and NO I didn't work at Solly, though I have many friends who count themselves former alumni</p>

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<p>"The fact that you equate pure corporate finance activity = M&A = investment banking is truly flawed."</p>

<p>If you say so.</p>

<p>However I copied this from a website, so I guess at least one other person in the world has the same misconception. This paragraph I copied matches my evidently flawed perception. </p>

<p>" Firms have lots of different areas and groups within them. In most firms, there is sales and trading which works with owners of securities, investment banking which works with issuers of securities (firms and governments) and capital markets which goes in between the other two." </p>

<p>Except working with governments is in part Public Finance which we both have previously adressed.</p>

<p>Some people refer to all such firms as investment banks. If they don't have the investment banking component, as described above, to my way of thinking they are securities firms, or something else. See that other guy's definition above, which I agree with.</p>

<p>I stand by my comments about Solly. It was indeed a bulge-bracket firm, with its excellence grounded in trading rather than investment banking. Trading firms could be very desirable employers, for sure, and they did virtually corner the mortgage market for a long time. This was a natural offshoot of their tremendous strength in fixed income trading. Their commodities trading was also awesome. But feel free to object. Though this is at this point helping nobody on this board; I apologize for the digression.</p>

<p>As for which branch is currently making more money, I defer to you. It does vary. Doesn't change the job/role definitions though. A trader is not an investment banker, even if he is making more money than an investment banker. And vica versa.</p>

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<p>Monydad,</p>

<p>You seem to have some kind of "corporate finance" chip on your shoulder.</p>

<p>If you were at all a student of history and understood the roots of "investment banking", then you would know that the Glass Steagall act of 1930s (resulting from the Market collapse) separated commercial and investment banking - and what, pray tell, was the DEFINING characteristic that separated "investment" banks from others? Was it M&A? No. It was UNDERWRITING.</p>

<p>Further, you seem to have worked at a time (as I said before a snapshot in time) when M&A was HOT - I am thinking it was between either the mid-late 80s to early 90s... Fact is, "M&A" is a relatively "new" beast when taken into a historical context as to what services and products "investment banks" have provided - so what exactly did "investment banks" do decades before M&A ever came along? UNDERWRITING. Of course corporations acquired and merged way before i-banks came along, but frankly, the "middleman" role that i-banks have cornered was never deemed necessary until recently.</p>

<p>Next, Equity Capital Markets and Debt Capital Markets is AN ESSENTIAL component to investment banking. Please don't embarrass yourself. "Investment Bankers" are either peddling :</p>

<p>1) Advisory services (M&A) or
2) Underwriting services (Equity or Fixed Income)</p>

<p>Fact is simply this: Underwriting is AT LEAST 50%+ of what so-called "investment bankers" spend their time either pitching and/or executing. In fact, it's an even higher percentage nowadays. So while your off the cuff remark "a trader is not an investment banker" is technically correct, you are totally missing the point. Underwriting (i.e Capital Markets) not only represents HISTORICALLY what DEFINED what an investment bank IS, it continues to represent at least HALF OR MORE of what all investment bankers spend their time thinking, eating, living, breathing over.</p>

<p>And so back to the POINT of my previous post, if at any given point in time, when Fixed Income (bond activity - i.e. underwriting, structuring, trading) becomes "hot" and Salomon is literally "King" then, yes, they are the leading INVESTMENT BANK of that era. And yes even though "traders aren't investment bankers" they do have to work with Debt Capital Market specialists (yes THEY ARE investment bankers) and corporate finance specialists (yes THEY ARE investment bankers too!!!) Wow! (get over yourself.)</p>

<p>Further, having worked in M&A, Capital Markets and at a hedge fund, I can tell you that in terms of SHEER INTELLECTUAL FIREPOWER, the smartest and best of the best are no where near the M&A department. They are either in structured products (derivatives - by far the highest PhD per capita of ANY department in any i-bank - literally rocket scientists), or prop trading or hedge fund specialists.</p>

<p>And while you seem to relish the fact that you were a vaunted corporate finance guy - (investment banker!!!) - and that may even have been the "hot" area when you were at Wall St... BUT you should bear in mind while you condescend to that "lowly" trader who should be shining your shoes that:</p>

<ul>
<li>Pound for pound the TOP Prop traders earn WAY more than the TOP M&A guys. Period. It's not even CLOSE.</li>
<li>Pound for pound a position at a prop trading or hedge fund trading desk is (by the truest definition of scarcity and supply and demand) - MUCH more coveted than an "M&A" slot - which is frankly seen by the top prop guys as a complete waste of a life... 100+ hour work weeks, getting worked like a slave, being part of a shrinking business, being essentially a commodity and then STILL GETTING PAID LESS THAN THE PROP GUYS!<br></li>
</ul>

<p>Basically, times have changed, and M&A is not what it used to be. Not by a long shot.</p>

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<p>Frankly, M&A used to be a license to print money. They used to be the untouchable "BSDs" (see Liar's Poker for definition).</p>

<p>But no longer.</p>

<p>"Synergies" used to be the magic word on Wall St. - But now its more like a dirty word or cautionary tale.</p>

<p>Take a look at the most famous acquisition of the 80's - KKR's buyout of RJR Nabisco - that fiasco led to the infamous book "Barbarians at the Gate" which detailed the even more infamous $53 million "golden handshake" for the departing CEO.</p>

<p>And what about the largest M&A deal of the 90's? The $166 billion merger of Time Warner and AOL? That deal has been a complete disaster for shareholders. And now AOL is no longer part of AOL Time Warner's corporate moniker and now there is talk about spinning AOL off!!!... huh? What was the point of the merger in the first place? Answer? There WAS NO POINT! It was just a gigantic waste of time and money - while the corporate officers and M&A bankers got paid!</p>

<p>Very few mega-mergers succeed in producing the promised "accretive" pro-forma results. </p>

<p>Corporation have begun to smell the coffee. Shareholders (including the largest mutual funds) are becoming more activist. And now with Sarbanes Oxley, CEO's can go to jail if they try and pull any financial shenanigans.</p>

<p>Net/net?</p>

<p>M&A activity and fees have been plummeting from its highs in the late 80s / early 90s. </p>

<p>Those heydeys frankly are OVER.</p>

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<p>wow, u guys are damn intense!
good for u..........</p>

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<p>If I gave anyone the impression that I think corporate finance is "better" than some other area of the securities business, or more lucrative, that was not my intent. I truly don't believe that any area is uniformly "better", for all people. I also genuinely don't give a hoot which is more lucrative. If I have given anyone this impression, it is unintentional.</p>

<p>It was my personal experience that on the whole investment banking (as defined by the person I quoted, and apparently not by you) had snootier hiring practices than some other areas within securities firms and the finance field in general. I don't think this was necessarily appropriate, or that the people they got this way were on the whole "better". But that's what I experienced, and what I reported for the reference of people seeking such jobs. I thought. </p>

<p>The skill sets of bankers (as I define it), traders (as I define them) salespeople (as I define them), quants (ditto) are all somewhat different.</p>

<p>I may lack a historical perspective but I did work at a bulge bracket firm for about 12 years and the categories I indicated were pretty much how they organized their business operations. I apologize for my lack of historical perspective. </p>

<p>BTW,securities firms can underwrite securities by bidding on issues competitively, without having investment bankers on hand at all. Salomon was a major player in competititive bidding on new issues. I recall Prudential got rid of all investment banking I believe and solely relied on competitive bidding for obtaining new issue supply.</p>

<p>I apologize for the chip on my shoulder, but I remind you that the definition I copied above was not mine.</p>

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<p>monydad,</p>

<p>your comments on this board have always been excellent...</p>

<p>i apologize if i came off as sounding overly aggressive...</p>

<p>i too have bulge bracket experience (at two elite firms) over the course of 10 years - in both M&A and capital markets in addition to hedge fund experience.</p>

<p>our collective experiences should provide a solid resource for prospective i-bankers alike.</p>

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<p>I am wondering you could tell me a few things about the interview process for the public finance analyst position. I am meeting with at MD at Bank of America for my first interview. </p>

<p>Do they ask a lot of debt capital markets questions ? Bond Math ? </p>

<p>Typically how is the structure of the first round of interviews ?
Behavior ? Equity Valuation ? Debt Valuation ? etc .....</p>

<p>In your preparation, what was the most valuable source of information? Webstites, books, school etc ? </p>

<p>Any other comments, suggestions .....</p>

<p>Thank you,
Diogo - Seattle
You could just shoot me an email if it's best for you. <a href="mailto:dgbezerra@hotmail.com">dgbezerra@hotmail.com</a></p>

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<p>I would not expect many equity valuation questions- since public bodies do not issue equity securities!!!</p>

<p>Public finance analysts can expect to do 2 primary activities, so you should demonstrate that you might be exceptionally good at both of them:</p>

<p>1) prepare "pitch books" for bankers, and responses to questions in Requests For Proposals. For this, writing and editing skills are important, as is the ability to work late under deadline pressure and meet deadlines. Organizational skills too.</p>

<p>2) "crunch numbers" on bond deals, such as refinancing, new borrowings, etc. Your ability to excel at this could be evidenced by past math coursework, demonstrated facility creating complex spreadsheets,etc.</p>

<p>3) some bond math could come up, but moreso for MBAs than analysts, typically.</p>

<p>In addition, when analysts are hired their potential to become bankers down the road is also considered. You should be able to demonstrate that you possess social and salesmanship skills, and can think on your feet.</p>

<p>Typically you will meet with a number of current analysts, some Associates, maybe a VP or two. They will be trying to figure out if : i) they like you, and would want to be eating take-out Chinese food with you at 11pm while you're all working on proposals; and ii) (to a lesser extent) whether you appear to be better than other applicants at actually doing the analysts' job.</p>

<p>One reason I say ii) might be to a lesser extent is that I assume you and the other people who actually get interviews have all been extensively pre-screened on this score.</p>

<p>Good luck.</p>

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<p>It was alluded to above; just wanted to confirm that, yes, cornell now has an specific undergraduate business program: <a href="http://aem.cornell.edu/flash.htm%5B/url%5D"&gt;http://aem.cornell.edu/flash.htm&lt;/a&gt;&lt;/p>

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<p>Does my mom's 12-year work experience in Citibank and 2-year experience in JP Morgan count as a "connection"?
She worked overseas, I believe in Private banking (loans and stuff), got the Gold Service Star Award (Citibank), made it through to like the position right below Branch Manager (although she claims she was like Assistant Vice Prez of the department when she quit in 1998).</p>

<p>I want to work in investment banking, like in the advisory side (that would be my first choice) or sales/trading (second choice). Does that give me ANY edge whatsoever? I suppose it may give me a little bit of an edge in Citigroup...</p>

<p>Oh, and how much harder is Michigan (LSA) vs. Ross and NYU CAS vs. Stern?</p>

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<p>Both schools are hard, but I understand that Stern, being significantly larger than Ross, is easier to transfer into once you are a student at the University.</p>

<p>Your mom's connections could help a little, especially if she kept her firendships alive. But if you get into Ross or Stern, you won't really need connections, although it can never hurt to have them!</p>

<p>At Ross, each of the top 20 IBanks recruit at least 3 Ross undergrads annually. JP Morgan, Goldman Sachs, UBS and Credit Suisse generally hire 10 or more Ross undergrads. Altogether close to 100% of Ross students seeking jobs in the IBanking field are placed.</p>

<p><a href="http://www.bus.umich.edu/EmploymentProfile/TopHiringCompanies.htm?StudentType=BBAGrads%5B/url%5D"&gt;http://www.bus.umich.edu/EmploymentProfile/TopHiringCompanies.htm?StudentType=BBAGrads&lt;/a&gt;&lt;/p>

<p><a href="http://www.bus.umich.edu/EmploymentProfile/TopHiringCompanies.htm?StudentType=BBAInterns%5B/url%5D"&gt;http://www.bus.umich.edu/EmploymentProfile/TopHiringCompanies.htm?StudentType=BBAInterns&lt;/a&gt;&lt;/p>

<p><a href="http://www.bus.umich.edu/EmploymentProfile/ByIndustry.htm%5B/url%5D"&gt;http://www.bus.umich.edu/EmploymentProfile/ByIndustry.htm&lt;/a&gt;&lt;/p>

<p>I am sure Stern is as effective as Ross. </p>

<p>A word of caution however. Getting a job with an IB takes a lot more than just connections or a degree from Ross or Stern. You must have a good GPA (3.5 is the minimum most IBanks accept and let me tell you, pulling off a 3.5 GPA at Stern or Ross is not easy), excellent communication skills, charm and most of all, a clear desire to work hard in the field.</p>

<p>If you are fortunate enough to have the choice between those two excellent programs, I really recommend you chose based on personal preference.</p>

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<p>ihateCA:</p>

<p>It depends on who your mom still knows there, how well she knows them and what they do. Ask her.</p>

<p>I have about the same tenure in similar places. If I had a kid who wanted to do certain specific things, and was qualified, I could get him interviewed by a couple of people, at least. If I was still there, and particularly if I were a partner there, I might be able to get hiim/her a job. Or a [really] big client. Or an [important] politician. But I'm not, and a good number of my best contacts have moved on themselves. Your mom might be in my situation.</p>

<p>I have seen that employment is not a pure meritocracy in all cases. However all connections are not equal.</p>

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<p>Alexandre,</p>

<p>you said that "You must have a good GPA (3.5 is the minimum most IBanks accept and let me tell you, pulling off a 3.5 GPA at Stern or Ross is not easy), ".....I thought that top MBA schools such as Wharton/Harvard don't disclose marks to employers??or does this apply only to Stern/Ross</p>

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<p>sammy,</p>

<p>i believe alexandre was referring to Stern/Ross' UNDERGRAD business programs - i.e. i-banking analyst candidates not MBA Associate candidates. those applying for analyst positions will indeed be asked to provide GPA and in many cases full transcripts.</p>

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<p>I have an interview for a Summer Analyst position with GS & Co (2nd round, Finance) and DrKW (first round, Corp. Finance & Origination). How many students are usually invited for the second round? What %-age of them will receive an offer? Also, I have heard that DrKW interviews are very technical. Is that true? If so, what do I need to know?</p>

<p>Btw, I am not an ivy guy or anything close to that. I networked aggressively and was invited for the first round interviews and was able to impress many Goldman employees, as well as a VP from the Financing Group (IBD). While Goldman position that I am interviewing for may not be as appealing to some of you, I know if I get my foot in the door and do well, I will have many more exciting and lucrative doors opened to me.</p>

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<p>Sammy, Wharton undergrads, like all other undergrads who apply to IBanks (or almost any company worth two bits), must provide their GPA. However, I do believe that Wharton undergrads can get away with a slightly lower GPA. I have known Whartonites who got jobs with IBanks with 3.3 GPAs. That unheard of at most other programs.</p>

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<p>What is the average GPA at places like UMich, Illinois (and so on) for Ibanking?</p>

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<p>btw alexandre i know many many wharton undergrad who have gotten ibanking jobs with gpas in the 2.7-3.0 range (ex. 2 good friends of mine graduated last year with gpas of approx 2.8 and they both had 2 offers - one had offers from citigroup and lehman while the other had offers from citigroup and ML). approx. 60-65% of wharton's graduating class goes into ibanking...here on campus most people joke around saying that citigroup takes anyone :)</p>

<p>although the people with the gpa range that i stated above don't usually get offers from the more prestigious firms like GS, Morgan Stanley, etc.</p>