by the finance major | Feb 22, 2023 | Career, Education
These are the most common types of deals made in investment banking:
1. IPO (Initial Public Offering): This is when a company sells its shares to the public for the first time. When a company “goes public” through an IPO, it raises money from investors who buy its shares on a stock exchange like the New York Stock Exchange or NASDAQ. The investment bank helps the company prepare for the IPO by providing financial advice, underwriting the shares, and assisting with the regulatory process.
2. M&A (Merger and Acquisition): This is when one company buys another company, or when two companies merge to become one. An investment bank can help a company looking to buy another company by providing financial advice and helping to structure the deal. The investment bank may also provide financing for the deal by raising money from investors or by lending money to the acquiring company.
3. Debt Financing: This is when a company borrows money from investors instead of selling shares. The investment bank helps the company issue bonds or other types of debt securities to investors. The investment bank may also help the company negotiate the terms of the debt, such as the interest rate and maturity date.
4. Equity Financing: This is when a company sells shares to investors to raise money. Unlike debt financing, which requires the company to pay back the money it borrows, equity financing does not have to be repaid. The investment bank helps the company prepare for the equity offering by providing financial advice, underwriting the shares, and assisting with the regulatory process.
5. Restructuring: This is when a company is in financial distress and needs to make significant changes to its operations or finances in order to survive. The investment bank helps the company by providing financial advice, negotiating with creditors or investors, and assisting with the restructuring process.
by the finance major | Feb 22, 2023 | Career, Education, Fun
Here are some of the most common acronyms used and referenced in the finance world:
- IPO – Initial Public Offering
- M&A – Merger and Acquisition
- PE – Private Equity
- VC – Venture Capital
- IB – Investment Banking
- ECM – Equity Capital Markets
- DCM – Debt Capital Markets
- LBO – Leveraged Buyout
- FX – Foreign Exchange
- FICC – Fixed Income, Currency, and Commodities
- CDO – Collateralized Debt Obligation
- CDS – Credit Default Swap
- ABS – Asset-Backed Security
- CMBS – Commercial Mortgage-Backed Security
- MBS – Mortgage-Backed Security
- ROE – Return on Equity
- ROA – Return on Assets
- EPS – Earnings Per Share
- P/E – Price-to-Earnings Ratio
- ESG – Environmental, Social, and Governance
- FCF – Free Cash Flow
- DCF – Discounted Cash Flow
- CAGR – Compound Annual Growth Rate
- AUM – Assets Under Management
- NAV – Net Asset Value
- IRR – Internal Rate of Return
- WACC – Weighted Average Cost of Capital
- EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization
- GAAP – Generally Accepted Accounting Principles
- SEC – Securities and Exchange Commission
- FINRA – Financial Industry Regulatory Authority
- CFA – Chartered Financial Analyst
- CPA – Certified Public Accountant
- FINTECH – Financial Technology
- ETF – Exchange-Traded Fund
- REIT – Real Estate Investment Trust
- PWM – Private Wealth Management
- HNW – High Net Worth
- D/E Ratio – Debt-to-Equity Ratio
- LIBOR – London Interbank Offered Rate
- S&P – Standard & Poor’s
- IRS – Internal Revenue Service
- FDIC – Federal Deposit Insurance Corporation
- IPO – Initial Public Offering
- SEC – Securities and Exchange Commission
- FINRA – Financial Industry Regulatory Authority
- IRS – Internal Revenue Service
- FINCEN – Financial Crimes Enforcement Network
- AML – Anti-Money Laundering
- KYC – Know Your Customer
by the finance major | Feb 22, 2023 | Career
The hierarchy of investment banking titles typically follows a similar structure across most firms, although the specific titles and responsibilities may vary slightly. Here is a typical hierarchy from lowest to highest:
1. Analyst: This is the entry-level position for investment banking. Analysts are responsible for conducting financial analysis, building financial models, preparing presentations, and assisting with due diligence. Investment banking interns are known as Summer Analysts.
2. Associate: Associates have a few years of experience and are responsible for managing the work of the analyst team, performing financial analysis, and assisting with deal execution.
3. Vice President (VP): VPs typically have several years of experience and are responsible for managing deal teams, building client relationships, and playing a key role in the execution of transactions.
4. Director / Executive Director: Directors or Executive Directors are senior-level professionals who are responsible for managing and overseeing multiple deal teams, leading business development efforts, and providing guidance to more junior team members.
5. Managing Director (MD): Managing Directors are typically the highest-ranking professionals in investment banking. They are responsible for managing the overall business of the investment banking division, including client relationships, deal execution, and strategic planning.
by the finance major | Feb 22, 2023 | Career
When applying to finance internships and jobs, it’s incredibly important to have your resume and cover letter polished. A great cover letter can set you apart in certain cases, but your resume is far more important. It’s the hiring manager’s first impression of you and it’s often referenced (if not centered around) during the interview process. Here is the top resume tip to help you get noticed:
The “Breadcrumb Trail” Technique
Go through your resume and find areas where you can incorporate specific numbers (dollars ($), percentages (%), etc.) to show how you made an impact. This could be in reference to a part-time job in high school, a past internship, a capstone college course, or a club you’re involved in or leading. People in finance like to see numbers so it’s important to show quantifiable metrics throughout your resume. Here are a few simple examples of what I’m talking about:
- Increased Finance Society attendance by 67% SoS (semester-over-semester)
- Decreased store expenses by $755 MoM (month-over-month)
- Achieved 113% quota attainment over a twelve-month period by diversifying lead sources
- Increased annual sales by 297% from $79k in 2016 to $314k in 2017
Don’t over do it, but make sure to have a few metrics mixed into your resume. The key is to integrate them into topics you want to talk about and elaborate on. Specific numbers (especially odd numbers) naturally attract attention. Some interviewers may be genuinely curious, while some will try to call you on your BS and have you explain how you got that specific number/metric. Being able to articulately explain each number in detail will blow your interviewer away!
These tips not only help you get noticed, but they can allow you to better control interviews. You can easily anticipate questions ahead of time and have thoughtful, robust answers on deck.
Check out the Resume + Cover Letter Bundle I created to take your internship/job search to the next level!
by the finance major | Feb 22, 2023 | Career, Education
DCF (Discounted Cash Flow) modeling is a type of financial analysis that is used to estimate the intrinsic value of a company. In simpler terms, it’s a way to figure out how much a company is really worth.
To understand how DCF modeling works, imagine that you’re trying to figure out how much money you would make if you bought a rental property and rented it out for several years. To do this, you would estimate how much money you would receive in rent each year, and then subtract your expenses (like property taxes and maintenance costs). You would also factor in the value of the property itself, both now and in the future. And finally, you would adjust all of these estimates to account for the time value of money, which means that money is worth more now than it is in the future.
DCF modeling works in much the same way. To estimate the intrinsic value of a company, you start by estimating the company’s future cash flows (i.e., the money it will make in the future), and then you discount those cash flows to their present value. This is because money you receive in the future is worth less than money you receive today due to inflation, opportunity cost, and other factors.
To do a DCF analysis, you’ll need to make assumptions about the company’s future growth rate, revenue, and expenses, as well as its capital expenditures, depreciation, and tax rate. You’ll also need to determine the discount rate, which reflects the time value of money and the risk of the investment. The discount rate is typically based on the company’s cost of capital, which is a measure of how much it costs to finance the company’s operations.
Once you’ve estimated the company’s future cash flows and determined the appropriate discount rate, you can use a financial calculator or spreadsheet software to calculate the present value of the cash flows. This gives you an estimate of the intrinsic value of the company.
It’s important to note that DCF modeling is just one way to estimate the value of a company, and it has its limitations. It relies heavily on the accuracy of the assumptions you make, which can be difficult to predict, and it doesn’t take into account factors like market sentiment or the competitive landscape. However, it is a widely used tool in finance and can be helpful in evaluating the potential value of an investment.
When interviewing for finance internships and jobs, it’s important to be familiar with DCF modeling and to be able to explain how it works.
Click here for a detailed guide of a DCF calculation.
by the finance major | Feb 20, 2023 | Career, Education
The largest investment banks with operations in the United States, based on their total assets and global presence, are:
- JPMorgan Chase: With over $3 trillion in assets, JPMorgan Chase is the largest investment bank in the U.S. and offers a range of services including investment banking, asset management, commercial banking, and more.
- Goldman Sachs: Goldman Sachs is a leading global investment bank with over $1 trillion in assets and a reputation for advising on some of the largest and most complex deals in the industry.
- Morgan Stanley: Morgan Stanley is a global investment bank with over $900 billion in assets and a focus on providing financial advice and investment banking services to corporations, governments, institutions, and individuals.
- Bank of America Merrill Lynch: Bank of America Merrill Lynch is a leading investment bank with over $2.5 trillion in assets and a strong presence in the U.S. and international markets.
- Citigroup: Citigroup is a global investment bank with over $1.9 trillion in assets and a presence in more than 160 countries. The bank offers a range of services including investment banking, commercial banking, and wealth management.
- Deutsche Bank: Deutsche Bank is a global investment bank with over $1.7 trillion in assets and a significant presence in the U.S. The bank provides a range of services including investment banking, wealth management, and retail banking.
- Credit Suisse: Credit Suisse is a global investment bank with over $1.1 trillion in assets and a strong focus on providing financial advice and investment banking services to corporations, institutions, and high net worth individuals.
- Barclays: Barclays is a global investment bank with over $1.4 trillion in assets and a presence in over 40 countries. The bank provides a range of services including investment banking, wealth management, and retail banking.
- UBS: UBS is a global investment bank with over $1.1 trillion in assets and a strong presence in the U.S. The bank provides a range of services including investment banking, wealth management, and retail banking.
The rankings and assets of these investment banks obviously fluctuate over time, and there are other important investment banks operating in the U.S. as well.
