ibankinghandout
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Doing An Investment Banking Job Search
Overview of the Industry
The most obvious functions or divisions of investment banks are corporate finance,
where banks help their client companies raise capital through equity, debt or other typesof offerings, and mergers and acquisitions services, a major source of fees for somebanks. Sales and trading in equities or fixed income, or more exotic products such as
derivatives are other main divisions for most investment banks, and research jobs in these
product areas might be another option.
Equity research is a function open to new associates, if you have a passion for and some
knowledge of a specific industry, though jobs are fewer than in other areas, such ascorporate finance and mergers and acquisitions. You work with clients, traders, M&A
and are involved in valuation, analyzing company fundamentals, very hands-on.
There are also product areas such as equities, fixed income, derivatives, real estate,private equity, and foreign exchange.
Many areas of banks depend on contacts and relationships of bankers with clients --trading, sales, corporate finance. Most functions are somewhat sales-related. "Bankers are
paid for executing transactions in the context of relationships," not for taking vacations,
and having someone else cover for them. (Correctly or not, this was stated by thepanelists in an April, 1998 investment banking presentation at SLS as a difference
between working in a law firm and an investment bank.)
There is certainly the challenge of bringing together the right people, of thinking up new
combinations, new ways to do deals. It's more a business of continual change, a businessof execution, than a business of innovation. It may also be a "narrow, parochial lens on
business", according to Barry Newman, JD/MBA alum, Managing Director at Salomon
Smith Barney. Many more people are heading firms now, who worked early in their
careers for McKinsey, than those who worked in all I-banks combined. He points out thatbankers "are agents and don't principal anything."
Two Major Trends
In all divisions of banking firms, two trends cross-cut most jobs. One is the increasing
globalization of products and services, making having a second language an additional
positive attribute. The other is a trend toward industry specialization within a productarea. So someone who works in M&A may initially have exposure to deals in many
industries, but soon will find that he or she becomes a specialist in telecommunications or
media company mergers.
Categories of Investment Banking FirmsBulge Bracket Banks
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With mergers of all types of banks moving forward so quickly, almost anything saidabout the shape of the industry will soon be wrong, but there are some general categories
to keep in mind. The most visible at the Law School is bulge bracket firms such as
Goldman, Merrill Lynch and Morgan Stanley. These firms all recruit on campus at theBusiness School and sometimes recruit at law schools too. They will all consider law
students and practice in virtually all areas. The next group of firms like Lehman Brothers,and Salomon Smith Barney, have more focused practices.
Major Bracket Firms and Foreign Banks
Many aggressive growth banks today that are not within the bulge bracket are thecommercial bank affiliates that are expanding their investment banking divisions.
Examples include JP Morgan and CS First Boston, as well as more traditional banks like
Bank of America, Chase, and Citigroup. Foreign banks are also expanding in thisbusiness, such as Deutsche Bank, Gleacher/NatWest, UBS and Swiss Bank/SBC
Warburg.
Regional Firms and Investment Banking in Commercial Banks
Most regional firms have merged with commercial banks in recent times, so possibilities
may be very limited. They specialize in a limited number of areas, and do not provide thesame level of training and lateral mobility as the bulge bracket firms. They will generally
handle smaller or niche deals in terms of dollars, international scope and industry
coverage. Examples are Hambrecht & Quist, Nations Bank Montgomery Securities,Robertson, Stephens (Bank of America) in San Francisco, Piper Jaffray in Minneapolis
and San Francisco, and Alex Brown (Bankers Trust) in Baltimore, San Francisco andNew York.
Boutique Banks
A final option is the boutique investment bank. These are firms that focus on particular
industries or products. Some examples are Broadview Associates, which concentrates onhigh tech M&A and has an office in San Mateo, and Wasserstein & Perella, a firm
specializing in the overall M&A business, and Allen & Company, which provides
corporate financing services to media companies. There is a number of other specialty
firms, and they can be identified through trade periodicals, LEXIS or the Web.
Compensation and Advancement
Compensation in most positions is a combination of salaries, which are relativelystandard (and lower or equal to many law firms' offers) for new associates across the
industry, and bonuses, which are partly profit sharing. After the first few years
compensation is mostly performance-based and related to the level of fees brought in orearnings generated. By the time an associate is promoted to vice president, approximately
after four years, compensation varies widely, and salary may be a small part of overallcompensation.
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Necessary Qualifications and Commitment
A great deal of emphasis is placed on having a passion for banking, for being able to
multi-task, and for enjoying the ambiguity of not knowing what will happen each day
when you get up in morning. Banking is a culture that revolves around money and youwill be asked if you are comfortable working in that culture.
Investment banks hire the great majority of their professional level staff at the associate
level from top MBA programs, making the opportunities for law school students verycompetitive. Nevertheless, in the current economy, bankers are looking for very bright,
analytical people with quantitative as well as interpersonal skills, and are looking beyond
the usual sources. Because the recruiting timeframe for MBA summer associates (Januarythrough February) does not coincide with law firms' timeframe (September through
December) for second year summer recruiting, the dilemmas for law students are:
how committed am I to working in banking? much risk is it comfortable for me to take?
How much effort will it be? And will effort be rewarded?
What are the value-added efforts I can make to improve my candidacy?
The question of your commitment to banking will come up again and again, even as itdoes for MBA students. The intense level of work, and the high ratio of travel in most
service and product areas demand a strong commitment. As Paul DiNardo, Vice
president, Investment Banking, Goldman Sachs, pointed out about his job search, "somebanks wanted to know why I didn't have a prenatal desire to be a banker."
Your Experience
Another indicator is what you've done in the past; for example, managing your own
portfolio of stocks or mutual funds, understanding the economic trends in industries inwhich you've invested. If you haven't invested, at least you've followed the fortunes of
certain companies or industries.
if numerical analysis is easy for you,
you enjoy gathering information and putting together presentations under tight
time constraints, your idea of fun is bringing together people with divergent opinions and wresting
agreement in the face of difficult odds under tight deadlines,
and you know from your prior work experiences that you can function well with50% or more travel and less than 8 hours sleep, your commitment is probably
realistic!
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Your Job Search Strategy for Investment BankingFirst Year Students
You need to plan and do research as early as possible. It's ideal to know about or learnabout investment banking and possible career areas of interest to you early in first year. If
you think I- banking might be the career direction for you, it is important to realize thatyou should start your job search plan as a first year, even though banks will not interviewyou for that first summer.
You may know already that you are committed, if you routinely read the New YorkTimes business section or Wall Street Journal; if you also plan to read or have read all the
books and magazines on the list at the end of this overview. You should plan to take an
accounting class in the next year, or over the summer, if you never have. You may alsobe seeking out classes to take at the GSB and figuring out how to improve your chances
of getting into those classes.
Taking Courses, Summer Reading
Bankers often seem unaware of the course work available to you that really gives you
insight into understanding how deals are structured, how financial markets work and howbusiness organizations are set up and run. You need to take the courses, and you need to
make sure that this information is explicit in e-mail communications, on resumes and
later, in interviews.
It is true that the core curriculum does not provide the basic accounting and finance
courses that most MBA students have, so you must decide if you have enough interest inthese courses to take them next year and do well. The Law School course work that you
most need to help you understand banking and other business fields you will not takeuntil your second or third year, so adding to your reading load over the summer is
essential in order to come up to speed.
Finding the Fit
Decide what area of investment banking is the best fit for you. Use the resources
mentioned earlier, and over the summer, find some time to talk with Law School alumniin divisions that interest you, to test the reality of your interest. If you can't find an
alumna/us, ask Susan or Kelly for recommendations.
Stanford Law School alumni may be willing to spend a short time with you to talk aboutwhat they do, and give their advice about career interests you are exploring. It is crucial
to prepare for this type of conversation by researching their firm's website, understanding
a bit about what the alum does in his or her work, and having some idea of what functionor division interests you and why.
For your first summer the possibilities to consider are many, but two are most consistentwith an interest in investment banking:
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working in a business law firm, especially a firm that does M&A or intellectual
property work for reality testing purposes
working in a company to gain some industry experience, if you have skills tooffer
Second Year Students
As a law student, it is very important to have a summer in I-banking, not only to make
yourself attractive for career recruiting in your third year, but to explore the culture of atleast one investment bank, and to test your commitment to the industry. There are
typically more spots available in corporate finance and M&A than in sales & trading or
research in any product areas, but don't let numbers be a determining factor.
Students are hired into banks without prior banking experience, but those hires most often
have knowledge and experience in an industry, or have worked in other professional
services such as management consulting, or have sophisticated quantitative skills thatallow them to work in derivatives or other innovative product areas.
This reality gives you three possible scenarios:
some banks may consider you for a summer associate in the fall of your second
year, before they start their summer associate MBA recruiting season,
you may convince a law firm to hold an offer for you until spring
you may give up offers you have from law firms in order to compete in the
normal recruiting pattern for banks' summer associates slots
Generating Interviews in the Fall
Many top business law firms will not discount a candidate who chooses to explorebanking in his or her second summer, so it may be advantageous to make strong efforts to
be hired early by a bank in the fall of your second year. Some students have been
successful in combining banking interviews with law firm fly-backs, if the firms they areseeking are located in New York. They have persuaded the relationship manager for
Stanford (usually a VP or higher level banker who is often a Stanford MBA or a senior
level SLS alum) to arrange for them to interview early.
It's highly likely that you will have to spend a summer in New York in order to be
considered a serious candidate by an investment bank. It is likely, too, that you will haveto work in New York for the first few years, as training programs are centered there, andthe stars of most corporate finance and mergers and acquisitions work are there.
Campus Interview Program (Fall CIP Program)
A few banks have been successful enough at the Law School to hold fall interviews forsecond years that coincide with law firms' recruiting. If you interview with only these
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"convenient" banks, your candidacy is seriously questioned. You will be asked whatother banks you are talking to, and why those banks. Your reasons should be defensible
and reflect knowledge of the company. If you have taken the time to talk to or meet with
alumni who are at the bank, or followed up their suggestions of what to do to learn moreabout the industry, you will be better prepared than most of your peers.
You will specialize in one of various functions, or groups within an investment bank, soit's important to know what types of work and tasks you prefer. Hopefully, you learn the
area you like most via a rotation experience in different product areas your second
summer. If you work hard, and are fortunate, you will also find a vice president or
managing director who is willing to champion you as a career hire in the fall. So, part ofthe work you will do is to pay attention to the political landscape and make sure you have
visibility.
Planning Ahead for the Career Job Search
If you give your best effort and fail to land a job for the summer, continue your programof taking all the business and quantitative classes you can, talking with OCS advisors,
doing research on firms you have targeted, meeting with bankers in New York in August
(especially with alumni.) You should also try to take advantage of meeting bankers at
summer events they hold for candidates (typically for MBA students, but Susan Robinsonhas requested that firms extend invitations to you.) This is a relationship business, to state
the obvious, and the more people who can say good things about you the better!
Third Year Students
Is it possible to interview both for law firms and for investment banks in the fall of your
third year and survive? Some people have done it, and are eager to help you. Law Schoolalumni who are in banking, both new associates and more experienced VPs and
managing directors may coach you about the people and politics you will meet during therecruiting process, and champion you to the hiring committee if you demonstrate
knowledge of their firm, maturity and real interest.
Preparing for Interviews
Investment banking interviews, for any of the functional or product areas, will be moreunpredictable than the format of management consulting interviews. Banking firms
expect the same level of preparation and knowledge from law school students as they do
from business school students. That said, there are some general strategies from whichyou can benefit.
You should know what's happening on Wall Street that day, this and last week, month
and year. Depending on your functional area of interest (corporate finance, mergers andacquisitions, institutional sales or structured finance to name a few), you should know
such information as:
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what companies they have lead managed in IPOs public information about their advising in mergers or divestitures
where they stand in underwriter rankings
who are their well-known securities analysts
This suggests that you should have more than superficial knowledge, and requires you todo some reading of newspapers and trade publications on-line, in the business careersresources in OCS or in the Law or GSB libraries.
You should know their competitors, how they stack up against other bulge bracket firms,
what are their specializations. You should know who they compare themselves to, and towhom they do not like to be compared.
You should prepare for questions that attempt to determine what you know - questionssuch as:
how would you calculate net present value? what economic forces are contributing to the current state of the securities
markets here, in Europe, in Asia?
how would you advise an individual or a firm to invest and why?
You may also be asked questions about your resume, particularly about your leadership
experiences and academic performance, as firms attempt to judge if you can use your
well-developed intelligence to create tangible outcomes for them.
Finally, but most importantly, remember that this is a relationship business, where youwill work long hours with a small team, and where high client demands in short time
frames are the rule. So not only will your intelligence be assessed, but also your
personality will be scrutinized in these interviews. You may be asked many questionsabout your interests outside of professional life, and you may be challenged at some
points to defend your choices and assertions. How you perform under pressure and how
well you retain your composure are important points for interviewers to determine earlyon.