Investment Banking summary

The role of investment bankers is very broad and focuses on raising capital or acting as a strategic financial/transaction advisor to companies. Investment bankers do not lend money to, nor invest directly in, the companies they work for. Instead, they can either advise or lead on capital-intensive projects such as debt or equity capital raises, or on strategic transactions such as mergers, acquisitions, or divestitures.

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Primary US City locations

Most opportunities are in NYC, Chicago, and SF, but occasionally opportunities exist elsewhere.

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Unique Factors for Investment Banking

Banks come in many different sizes, and offer a wide range of services to their clients. They generally are classified in the following groups based on how many people they employ, the size of deals they normally do, and the range of industries and services that they cover.

Bulge Bracket

These are the largest global banks in the world and have household name recognition. They offer all services to their clients, have clients in every industry, and generally work on the biggest deals in the industry - usually above $1 billion USD.

Example Firms: JP Morgan, Goldman Sachs, Morgan Stanley, Citi, Credit Suisse, Deutsche Bank

Elite Boutiques

Elite Boutique banks are non-full-service firms which typically have an industry or geographic focus. These banks also typically focus on M&A advising or restructuring, which is a more focused offering list compared to the larger banks. These firms leverage their specialty to advise on deals which are typically as large as the deals the bulge bracket banks work on, over $1 billion USD. Because these firms are typically much more focused and smaller than the bulge bracket banks, they are usually more likely to be interested in non-traditional but qualified applicants (which would be an M.D. or D.O.).

Example Firms: Lazard, Centerview, Evercore, Guggenheim

Middle Market

These firms sit below bulge bracket banks and above regional or boutique banks. They offer a large range of services, similar to bulge bracket banks, but they work on smaller deals. There is no single definition of a "middle market" size, but the average deal is in the range of $50 million to $500 million. These are less prestigious than the previous two groups, but someone could still be completely successful in this range.

Example Firms: Cowen and Company, Piper Jaffray, Jefferies

Industry Specific Boutiques

This group is similar to elite boutique banks because they also offer a limited number of services to their clients. They also typically work on deals which are in a similar range to middle market banks.

Example Firms: KeyBanc, SVB Leerink, Ziegler, Triple Tree

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Summary of The Role

Investment bankers are essentially financial advisors to their clients, who are typically large corporations. They can work on several different types of projects for their clients, all of which have to do with complicated financial techniques. These projects typically fall into 2 buckets: Mergers and acquisitions and raising capital. The types of projects can also differ slightly on whether the bank is representing the seller of a company (the ‘sell side’) or the buyer of a company (the ‘buy side’). Let’s explore each one a little to get a better feeling for how they differ.

Mergers and acquisitions (or M&A) are deals where one company is buying (acquiring) another company, or a branch of a company. To keep things simple, I will use examples where one company is being completely bought by another, but M&As can also occur where one company is selling a division or part of itself (think of Apple selling its cell phone branch). M&A has two sides to each deal. The ‘sell side’ of the deal is the company who is looking to sell itself to another company, and the ‘buy side’ of the deal is the company who is looking to acquire (or buy) the company that is for sale. Investment banks can help companies on either side of the deal. If the seller or buyer have a company in mind to be the other side of the deal, then the role of the investment banker is to help their client ensure that the purchase or sale is for the right price, and execute the deal at the best price possible for their client. If the seller or buyer do not have a company in mind to be on the other side of the deal (called broad deals), then the role of the investment banker has an additional step. For a broad sell side, the bankers need to find a group of buyers who will all be interested in buying their client company. For broad buy side, bankers need to find many different companies that would all be candidates for their client to buy

Raising capital is something that companies need to do on a regular basis. You have likely heard about one form of these in the news, when the headlines discussed a newest company having an Initial Public Offering (IPO) for a huge amount of money. There are several other ways to raise capital other than an IPO, such as equity financing, debt financing, or private sales. These are complicated financial transactions, and if you are interested in learning more there are plenty of resources online. Investment bankers can help companies decide which method for raising capital they want to pursue and then help that company execute the raise.

An entry level investment banker’s job typically involves working on high impact projects with a firm deadline. This combination means that high pressure situations will frequently arise and investment bankers are known for working long hours. The actual work itself involves building or filling out complicated financial models, putting together comprehensive PowerPoint presentations (called decks) that give a very detailed analysis of a company and its finances, finding interested buyers or sellers for a client, and much more.

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Salary

The salary of investment bankers is one of the main draws. The base salary is typically around $150,000, which is relatively similar to other fields. The real weight behind the jaw-dropping compensation of investment bankers lies in the yearly bonus, which can be about 100% of base salary, meaning total compensation is usually between $250,000 and $350,000. The bonus can depend on several things, such as individual merit, how well your specific division does (i.e., the healthcare group of JPMorgan), or how the firm does overall.

As you progress through investment banking you can expect your compensation to increase dramatically. The salary will change somewhat, but the real increase comes in the form of larger and larger bonuses. When you reach the level of Managing Director (below) and are selling work, you typically get a small percentage of these multi-million dollar contracts.

Work / Life Balance

The work/life balance of investment banking is the trade off for the massive salary. Investment bankers are notorious for working long hours (80-100 hours a week) and working very late nights. This is especially true when there is a deadline approaching, and the pressure is turned up. There are some instances where an investment banker will need to work on the weekend, such as right before a big deadline, but this is a situational occurrence more than an industry standard.

Progression and Exit Opportunities

Progression though investment banking followers an Analyst to Associate to Vice President to Managing director path and the change in responsibilities is similar to consulting. Initially it will take the form of increased responsibilities, then leading teams or projects (VP). After a while in the industry, and after you form strong relationships with clients, an investment banker will be responsible for ‘selling work’, typically at the level of managing director. This involves finding companies who could use your services and convincing them that your bank is the best one for them.

Many companies want hard-working and smart people who work well under pressure, which is exactly the expectation of someone coming from investment banking. A large amount of the exit opportunities for investment bankers lie in other financial roles, such as working as investment associates at private equity firms, venture capital firms, hedge funds, or corporate finance divisions (i.e., corporate finance at Nike).

A still relatively large amount of exit opportunities lie outside of the world of finance. Since investment bankers are expected to have a strong set of desirable skills, jobs of all shapes and sizes are likely to be interested. As an interesting example, the outdoor-industry focused E-commerce ‘Backcountry.com’ has many former investment bankers working in non-financial roles, such as managing categories of goods.

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Medical Specialty Analogy

Surgery (maybe orthopedic surgery)

• very prestigious, fun to say at parties
• you won't have time to go to those parties
• eye-grabbing salary
• very long hours
• if you end up doing a $/hr calculation they actually are paid less than most jobs

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