Seeking a Career in Investment Banking? Here's What You Need to Know...

What is Investment Banking?

Investment banking is a special segment of banking operation that helps individuals or organisations raise capital and provide financial consultancy services to them. 

What are Investment Bankers responsible for?

Investment bankers play a role in a number of financial activities undertaken by institutions and governments such as IPO preparation and underwriting, M&A advisory, debt issues, and market research.

As an investment banker, you will mainly be responsible for the following 4 responsibilities:

1. IPO preparation and underwriting: 

Investment bankers advise on famously complex process that is listing on a public exchange. 

This involves the investment bankers arriving at a valuation for the company, which will determine its opening price on its chosen public index, as well as taking care of all compliance issues.

From here, the investment bankers arrange IPO roadshows of investors and put together marketing documents for the listing companies to present to those investors. 

Finally, before the listing itself, the investment bankers often (but not always) underwrite the deal, to ensure that the opening price is guaranteed to hit a certain level.

2. M&A advisory:

This is the biggest source of income for investment banks. Almost every M&A transaction involves at least one team of investment bankers, and the biggest often involve a few different teams. 

The tasks involved include:

• Sell side advisory

• Buy side advisory

• Developing target short/long list

• Assessment of market

• Arranging debt for transaction

• Company valuation

• Deal structuring

• Deal negotiations

3. Debt issues:

When governments and institutions want to issue debt (usually in the form of fixed debt structures such as corporate and government bonds, respectively) they turn to investment banks to issue the debt on the market, as well as helping them to set the terms of the debt (interest, duration, etc.)

4. Market research:

Market research underpins a lot of the work that investment banks do. 

Investment bankers typically use high quality research as a trojan horse (i.e. a pretence for higher value work), outlining where opportunities might exist in the market for the hiring party, whether that be a company, fund, or government.

What roles exist?

Investment Analyst: 

When advising clients, you need experts in the field. This is where the investment analyst comes in - often specialising in one or a select few industries. 

These analysts become subject matter experts (for example, in oil and gas, or telecoms and media) helping to put together the marketing documents and advise throughout the process for clients in these industries.

Associate:

The associate is essentially a position that bridges the investment analyst with senior members of the investment banking team. 

On occasion, they will face clients, but most of their work involves being the senior lead on the work that investment analysts perform - checking marketing documents and valuations to ensure that everything looks good and can be presented to a client (or first, a senior banker...see below).

Senior Bankers:

These individuals - sometimes colloquially referred to as ‘rainmakers’, are the ones pushing sales and closing deals for the investment banks. 

Thus, while junior positions are often largely seen as expendable, these positions are not. 

Investment banks spend a lot of money to ensure that they’ve got the best senior bankers in the industry - usually with bulging client contact lists, and vast experience in closing deals.

Senior bankers are the ones that are ultimately responsible for generating the investment bank’s revenues.

How to boost your chances of securing a role in IBD.

In a field as competitive as investment banking, it pays to have an edge over the field in some way. Anything that can help to give you a few extra points is worthwhile. 

Take stock of these 3 improvements that can give you an edge right now:

Take a course in M&A/financial modelling: Most of these can be done within a short period of time and can easily be found on pages such as Coursera or Udemy, or with other educational institutions.

Close some deals: Wherever you are in your search, it pays to have some deal closing experience behind you. If the last deal you closed was last week, your hand is already strengthened. It doesn’t have to be a mega-deal. It just needs to show your competence.

Leverage LinkedIn: Ensure that there are keywords on your LinkedIn profile that reflect your job search. Make sure you use keywords like “financial modelling,” “investment banking” and “finance,” to ensure your profile climbs up the rankings when HR managers are searching for new hires.