David Kwan Geoffrey Kwan September 25, 2003 Investment Banking 101: What Is Investment Banking?

tContrary to popular belief, Investment Bankers are NOT stock brokers!  Stock brokers deal with individuals and manage money  Investment Bankers deal primarily with corporations tInvestment Bankers provide financial advice to corporations and assist them with services, some of which include:  Mergers & Acquisitions (M&A)  Financing (Equity and Debt)  Restructurings and Divestitures  General Advisory Services tExamples of Investment Banks:  Canada: RBC Capital Markets, BMO Nesbitt Burns, CIBC World Markets, TD Securities, Scotia Capital  U.S.: Goldman Sachs, Merrill Lynch, Morgan Stanley, CSFB, JP Morgan Chase What Is Investment Banking?

tInvestment Bankers work with the different “product” groups within the broader Investment Bank to service our clients’ needs tOther key resources: Equity and Debt Research, Merchant Bank, Sales & Trading (e.g. Derivative instruments) Services Provided by an Investment Bank Equity Debt - Bonds Debt - Loans M&A, Restructuring, Divestiture Equity Capital Markets (ECM) Debt Capital Markets (DCM) Corporate Bankers M&A Group Investment BankersClient TransactionProduct Group

tThere is no such thing as a typical day tEach “assignment” you work on is either a live deal or a pitch tThings you could be doing on any given day:  Financial modeling and analysis  Developing client presentations  Prospectus / circular drafting  Valuation analysis (DCFs, Comps, Precedents)  Other analytical work  Competitive strategic analysis for companies and industries  Development of marketing materials  Market analysis  Maintaining databases The Day in the Life of an Analyst

tContract terms are typically two years in length but which can be extended for a third year based on performance tAfter the three years, some potential outcomes include:  Promotion to Associate (based on performance)  Transfer to another product group or even a new city  Pursue an MBA or other advanced degree  Leave the industry to pursue other interests tYou can start as a Generalist (work for any industry group) and eventually “funnel” into one specific industry group or immediately be dedicated to a specific industry group (e.g. Real Estate, Power & Utilities, Mining, Technology, etc.)  Royal Bank, Bank of Montréal and Scotiabank have Generalist programs  CIBC and TD have Analysts start in specific industry groups The Typical Term of an Analyst

tExceptional analytical and quantitative skills and attention to detail  Excel and PowerPoint will become your best friend tInterpersonal and communication skills tDemonstrated teamwork and leadership abilities tProven track record of initiative, achievement and success tGood academic record and involvement in extracurricular activities  Focus on Finance and/or Accounting are assets but not necessarily required tExcellent work ethic and time management skills tSolid business acumen tKnowledge of a specific industry is helpful, but not expected Investment Banking Analyst Required Skills

tIncredible learning experience  Develop an exceptional skill set that you can leverage to other positions  Learn many transferable skills in a short period of time  Most banks offer a 1-3 week training course before you start working tExcellent networking opportunities both within the firm and with top executives at major corporations tFast-paced challenging environment with as much responsibility as you can handle  Work hard, play hard tMoney What Is So Great About Investment Banking?

tLong, unpredictable hours  In Canada, expect, on average, 80 hours per week which can easily top 100 hours when busy  Hours in the U.S. are significantly higher, especially at the “bulge bracket” U.S. Investment Banks tExceptional sacrifices  Must keep flexible as frequently required to work late nights and weekends (all-nighters are not unheard of)  Usually non-existent social life tSteep learning curve  You are expected to learn concepts quicker than most other jobs The Downside of Investment Banking

tKeep it clean and simple!!! tCover letters should not be more than one page  3/4 of a page is ideal tHighlight one (or more) relevant skills/achievements that makes you unique versus all the other applicants tRésumés should be no more than 2 pages, ideally 1 page tInclude only relevant info tDouble check your spelling and grammar tEnsure you have the correct company name and contact person Useful Job Application and Résumé Tips

tDON’T LIE!!!!!  If you don’t know the answer to a question, say “I don’t know” but add that you would take the necessary steps to find the answer  Investment Bankers are very good at knowing when you are lying tResearch the firm you are interviewing with  E.g. know transactions that they recently worked/ advised on tKeep answers short and concise tInterviewers are looking for people they can work with so personality fit is a key criteria tAt the end of the interview, ask good and memorable questions demonstrating interest and a desire to work for that firm Job Interview Tips

tYou will be asked the usual behavioural questions tWhat does an investment banker (analyst) do? tWhy do you want to become an investment banker? tWhy do you want to work for us? tHow would you value a company?  Discounted Cash Flow  Comparable Company Analysis  Precedent Transaction Analysis tDiscuss what has recently been going on in the capital markets tOther finance theory-related questions Potential Job Interview “Technical” Questions

tSome things you should consider before accepting an offer  Corporate culture  Meet with as many people as possible from every firm to see if you think you would fit in  Ask yourself “Can I see myself working with these people for 15 hours a day, everyday?”  Deal flow  Typically, the greater the deal flow, the better the learning experience  Location  Branch vs. Head Office  International offices So You Got A Job Offer...Now What?

tCourses related to:  Financial statement analysis  Company and asset valuation  Strategic management  Finance-theory  Accounting (e.g. corporate tax, consolidation) tChartered Financial Analyst (CFA) Program tRead the Business section of the Globe & Mail and/or Financial Post (or other financial publications if available) EVERYDAY! Useful Commerce Courses / Other Suggestions

tPeople who are:  Willing to focus on career first  Willing to work however long it takes to get the job done right  Looking for a great learning experience  Looking for a challenge tYou have to want to be an Investment Banker to be able to survive! Who Should Consider Investment Banking?