Investment Banking 101: What Is Investment Banking?

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

2. What Is Investment Banking? • Contrary to popular belief, Investment Bankers are NOT stock brokers! • Stock brokers deal with individuals and manage money • Investment Bankers deal primarily with corporations • Investment 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 • Examples 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

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

4. The Day in the Life of an Analyst • There is no such thing as a typical day • Each “assignment” you work on is either a live deal or a pitch • Things 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

5. The Typical Term of an Analyst • Contract terms are typically two years in length but which can be extended for a third year based on performance • After 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 • You 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

6. Investment Banking Analyst Required Skills • Exceptional analytical and quantitative skills and attention to detail • Excel and PowerPoint will become your best friend • Interpersonal and communication skills • Demonstrated teamwork and leadership abilities • Proven track record of initiative, achievement and success • Good academic record and involvement in extracurricular activities • Focus on Finance and/or Accounting are assets but not necessarily required • Excellent work ethic and time management skills • Solid business acumen • Knowledge of a specific industry is helpful, but not expected

7. What Is So Great About Investment Banking? • Incredible 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 • Excellent networking opportunities both within the firm and with top executives at major corporations • Fast-paced challenging environment with as much responsibility as you can handle • Work hard, play hard • Money

8. The Downside of Investment Banking • Long, 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 • Exceptional sacrifices • Must keep flexible as frequently required to work late nights and weekends (all-nighters are not unheard of) • Usually non-existent social life • Steep learning curve • You are expected to learn concepts quicker than most other jobs

9. Useful Job Application and Résumé Tips • Keep it clean and simple!!! • Cover letters should not be more than one page • 3/4 of a page is ideal • Highlight one (or more) relevant skills/achievements that makes you unique versus all the other applicants • Résumés should be no more than 2 pages, ideally 1 page • Include only relevant info • Double check your spelling and grammar • Ensure you have the correct company name and contact person

10. Job Interview Tips • DON’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 • Research the firm you are interviewing with • E.g. know transactions that they recently worked/ advised on • Keep answers short and concise • Interviewers are looking for people they can work with so personality fit is a key criteria • At the end of the interview, ask good and memorable questions demonstrating interest and a desire to work for that firm

11. Potential Job Interview “Technical” Questions • You will be asked the usual behavioural questions • What does an investment banker (analyst) do? • Why do you want to become an investment banker? • Why do you want to work for us? • How would you value a company? • Discounted Cash Flow • Comparable Company Analysis • Precedent Transaction Analysis • Discuss what has recently been going on in the capital markets • Other finance theory-related questions

12. So You Got A Job Offer...Now What? • Some 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

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

14. Who Should Consider Investment Banking? • People 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 • You have to want to be an Investment Banker to be able to survive!