Summary Flashcards
How much do you know about what bankers actually do?
While I have not worked in the banking sector specifically I have done financial modelling within my current role and I think that will serve me well here as this is part of the role of a banker.
Investment bankers advise companies on transactions- biting and selling and also raising capital. They are effectively agents that connect companies with buyers, sellers and investors.
As far as I am aware this day to day role manifests in: creating presentations, financial analysis and marketing materials/market research.
What would you do when working with an IPO client?
First you need to gather all of the core financial details, an overview of the industry and information about who their customer is.
We then need to draft an FCA IPO registration form in the case of the uk or S-1 in the case of the US.
Then we spend a few weeks or months presenting the company to potential institutional investors in order to convince them to invest. Once capital is raised from the investors we begin trading the stock on the exchange.
How much do you know about the lifestyle?
I know the hours are going to be intense ranging from 80-100 hours. This is something that I am somewhat familiar with during my time as a medical laboratory assistant for OpenCell my hours were intense as the work was testing for the entire island and you left work when you finished the work. In addition during my current role there are times where client deadlines have been close and lots of additional work is required to meet the deadline.
I also used to do a lot of studying at university often working 10 - 12 hours a day in preparation for my final exams.
Can you talk about a time when you had to work long hours and make sacrifices?
During my current role and my role as a medical laboratory assistant. When deadlines are closing it is vital that I give 100% of my effort to meeting the deadline. This has ranged from long hours for weeks or months.
Can you tell me about the big product and industry groups at a bank?
These vary from bank to bank.
Typical product groups at a bank include: M & A, leveraged Finance and restructuring.
Common industry groups include: healthcare, retail, industrial, energy, naturation resources, financial institutions, gaming, real estate and TMT.
Many large banks do not offer the restructuring.
boutiques and middle market commonly do restructuring and sometimes will only do M & A and sometimes in only specific industries.
What is in a pitch book?
This depends on the type of deal that the bank is pitching but some common examples include:
1. bank credentials - deals of a similar nature that have been done to show expertise and credibility.
2. Summary of a company’s options.
3. valuation and appropriate financial models
4. potential acquisition options - buy side. potential buyers sell side m and a deals.
5. summary and key reccommendations.
How do companies select the bankers that they work with?
This is usually based on relationships - baks develop relationships with companies over the years prior to the company needing anything or through prior deals. When the company needs the service of a bank they will contact multiple banks and ask them to pitch for the business. This is called a bake off and the company selects the winner afterwards.
Walk me through the process of a typical sell-side M&A deal.
A typical sell side M&A deal with many potential buyers would involve the following:
1. meet with the company, create initial marketing materials like the excutive summary and offering memorandum, and decide on potential buyers for the company.
2. Send out ES to potential buyers to gauge interest.
3. Send NDAs to interested buyers along with more detailed information like the OM.
4. respond to any following due diligence requests from the buyers.
5. set a bid deadline and solicit written indications of interest from buyers.
6, select which buyers advance to the next round.
7. continue responding to information requisitions and setting up due diligence meetings between company and the buyers.
7. set a bid deadline to pick the winner.
8. Negotiate terms of the purchase agreement with the winner and announce the deal.
Walk be through the process for a typical buy-side M&A deal.
- Spend lots of time upfront doing research into dozens/hundreds of potential acquisition targets and go through multiple cycles of selection and filtering with the company you are representing.
- Narrow down the list based on the client feedback and decide on which ones to approach.
- Conduct meetings and gauge the receptivity of each potential seller.
- As discussions become serious conduct more in-depth due diligence and figure out your offer price.
- negotiate the price and key terms of the purchase agreement then announce the transaction.
Walk me through a debt issuance deal.
This is similar to the process of the IPO:
1. Meet with the client and gather basic financial, industry and customer information.
2. work closely with DCM / leveraged finance to develop a debt financing or LBO model for the company and figure out what kind of leverage, coverage ratios and covenants might be appropriate.
3. Create an investor memorandum describing all of this.
4. Go out to potential debt investors and win commitment from them to finance the deal.
How are ECM and DCM different from M&A or industry groups?
ECM and DCM are both more markets-based than M&A. In M&A your job is to execute sell side and buy side deals. Whereas ECM/DCM you tasks are related to staying on top of the market following current trends and making recommendations to industry and product groups for clients and pitch books.
What is the difference between DCM and Leveraged Finance?
They are similar by the leveraged finance is more modelling intensive and does more to the deal execution with industry and M&A groups on LBOs and debt financing. DCM, by contrast, is more closely tied to the markets and tracks trends and relevant data.
Explain what a divestiture is.
A divestiture is when a company public or private decides to sell off a specific division rather than the entire business.
This is similar to a sell side M&A process but it tends to be messier as it is harder to asses the value of a single component of a company. Creating a standalone operating model for a particular division is harder.
How would you go about writing a 1 slide company profile?
- put the name of the company as the header of the page.
- split the slide in 4 equal parts.
- top left is the business description, headquarters and key executives.
- top right is a stock chart and the key historical and projected financial metrics and multiples.
- the bottom left is a description of the products and services of the business.
- the bottom right the geographical information usually with a colour coded map.
Let’s say you are hired as a financial advisor for a company. what value could you add for them if they ask you about their suggested growth / M&A strategy?
First you want to establish what their expansion goals are and how they can best achieve these goals. Whether it be: new product launch, partnering with another company, expanding through M & A.
As a banker you could provide the following value:
- introductions with potential M&A targets and partners.
- help with the negotiation strategy.
- help with which companies are most receptive.
- typical price you could expect.
- how to manage the entire process.
