How Does Investment Banking Affect Society
Day in the Life of a Goldman Sachs Investment Banking Intern NYC
Most ordinary people are unlikely to have had any direct contact with an investment bank â unlike other financial areas of work such as retail banking or insurance. However, investment banks indirectly affect most aspects of our lives because they advise and work on behalf of many different entities in society.
Their clients include companies, government entities, funds , entrepreneurs and families that run a business â all of which have a big impact on our lives. Investment banking clients provide us with goods and services such as clothes, internet and transport, and may also employ us or people we know. Banks also work closely with investors including pension funds, whose performance will affect the value of our pensions. So the role of investment banks in society is to provide good advice and services to organisations that affect everyoneâs lives, enabling them to grow and thrive.
With thanks to Antonia Riera , a vice president at Goldman Sachs , for her help with this article.
What Is M& a Investment Banking
Definition: In M& A investment banking, bankers advise companies and execute transactions where the companies sell themselves to buyers, acquire smaller companies , and divest or acquire specific divisions or assets from other companies.
The two broad categories are sell-side M& A deals and buy-side M& A deals.
In sell-side deals, you advise a company that wants to sell either the entire company or just one specific division.
In buy-side deals, you advise a company that wants to acquire another company or another asset or division.
As an Analyst or Associate, you dont advise anyone you crank out Excel and PowerPoint, answer information requests, and keep track of potential buyers and sellers.
The experience differs for sell-side vs. buy-side deals, but also based on whether the deal is targeted or broad.
In targeted deals, the buyer and seller are often talking already, or a company wants to focus on just a few likely buyers or sellers.
In broad buy-side deals, you show a company dozens or hundreds of potential acquisition targets and try to find something that interests them in broad sell-side deals, you run an auction where you pitch the company to dozens of buyers.
Targeted deals tend to have less process work .
Instead, the senior bankers spend a lot of time negotiating, and the Analyst and Associate spend more time on Excel-based analysis and deal presentations.
Broad deals tend to have more process and research work, which could involve any of the following:
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Why The M& a Group Can Be Dramatically Different At Different Banks
Larger firms bulge brackets and elite boutiques tend to focus on targeted deals involving huge public companies.
For many of these companies, there are only a few plausible buyers and sellers due to their size.
That means that youll spend far more time on the following tasks:
- Creating many different operational cases and deal scenarios for each company .
- Building valuations and value creation analyses .
- Reconciling numbers, such as data in messy options tables, customer contracts, and adjusted financial statements.
These tasks may sound interesting, but by the 117th time youve done them, they can get quite repetitive.
You rarely get the time to learn an industry or company in-depth because you run the same analyses in Excel, make slight tweaks, and then re-run them with new companies or deal terms.
At smaller firms middle market banks and regional boutiques the process is more about learning a company, its strategy and industry, and positioning it for potential buyers.
Executives at smaller companies also tend to be less experienced with M& A, so you spend more time walking them through the process and explaining everything.
As an Analyst or Associate at a smaller bank, your tasks could vary wildly.
Ive seen cases where junior team members speak with the CEO or CFO to answer questions, but Ive also seen cases where they write the CIM, track buyers/sellers, manage the data room, and do little else.
M& a Investment Banking Exit Opportunities
The exit opportunities here depend on the size of your bank more than on the group.
To have the best shot at PE and HF roles, you need to work in M& A at a bulge bracket or elite boutique bank you can also do it from middle market banks and industry-specific boutiques, but its more difficult and will require a lot more networking.
Venture capital is also a possibility, as is growth equity.
You would probably not be the best candidate for asset management roles coming from an M& A group similarly, the corporate finance skill set wont overlap that much with yours.
To be clear, though: your exit opportunities from M& A investment banking are not necessarily better than those from a strong industry group .
If youve gained solid deal experience, and your group has a track record of sending Analysts to buy-side roles, these groups are not much different.
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How Do Investment Banks Differ From Retail And Commercial Banks
Retail banks accept deposits of money and lend it out to borrowers commercial banks do the same but their depositors are businesses rather than individuals. Investment banks donât take deposits. Instead, one of their main activities is raising money by selling âsecuritiesâ to investors, including high net-worth individuals and organisations such as pension funds.
The proceeds from these sales help companies, government entities or entrepreneurs to finance big projects that require a lot of upfront cash, such as research and development or an expansion into a new region or market. Investment banksâ clients tend to be larger or more sophisticated organisations with more complex funding needs, compared to clients of commercial banks.
In short, investment banks are middlemen between those with money and those with ideas who need funding. They give money a productive purpose by channelling it into projects.
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Global Wealth And Investment Management
The Global Wealth and Investment Management division manages the investment assets of institutions and individuals. It includes the businesses of Merrill Lynch Global Wealth Management and U.S. Trust and represented 21% of the company’s total revenue in 2016. It is among the 10 largest U.S. wealth managers. It has over $2.5 trillion in client balances. GWIM has five primary lines of business: Premier Banking & Investments , The Private Bank, Family Wealth Advisors, and Bank of America Specialist.
Opportunities For It And Technical Graduates
Investment Banking after CA – Top Course after Chartered Accountancy
Bank of America has said that it is ârevolutionising the technical possibilities of an entire industryâ. IT and technology graduates will be part of this drive. Graduates working in technology at Bank of America have made comments such as, âItâs very exciting that what you do on a daily basis will help shape the world of technologyâ and âWeâre currently creating a product thatâs not even on the market yetâ. Would projects such as this excite you? Or maybe youâre a computer science graduate who wants a tech job with a commercial twist.
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So What Do Investment Bankers Do
What do investment bankers do?Uhthey are bankers who invest right?Well, yes, indeed, investment bankers do invest. However, its a little more complicated than that
Investment banking is one of the most prestigious professions on Wall Street. Although it features some of the most coveted and financially rewarding positions in the banking industry, investment banking is also one of the most challenging and difficult career paths, noted for being characterized by long working hours and high levels of stress.
Its not unusual for investment banking analysts or associates to put in 80 to 100 hours of work a week. .
Theres quite a bit of confusion combined with not much actual information regarding the field of investment banking. Most people are probably at least familiar with, have at least heard the phrase investment banking, but dont really have a clear idea in their minds of what investment banking entails, other than perhaps the vaguest of notions that investing and banking are somehow involved.
In this article were going to demystify investment banking, explaining as plainly and simply as possible just what it is that investment bankers do.
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Relationship To The Government
The financial sector is traditionally among those to receive government support in times of widespread economic crisis. Such bailouts, however, enjoy less public support than those for other industries.
A commercial bank is what is commonly referred to as simply a bank. The term is used to distinguish it from an , a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of or .
The primary operations of commercial banks include:
The United States is the largest location for commercial banking services.
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Its Not All About The Money
More compensation may not be enough for lots of young workers, for whom the pandemic only highlighted the less palatable aspects of investment banking even as other careers dangled more appealing work-from-home policies.
Armen Panossian, a rising senior at Rutgers University, is interning in the logistics division of the energy company BP and hoping to land a similar full-time role after college. He said the pandemic was part of his motivation for pursuing a more 9-to-5 job rooted in finance.
I think a lot of people rediscovered the importance of mental health, Mr. Panossian, 21, said.
Eden Luvishis, a 20-year-old student of finance, computer science and math at the Stevens Institute of Technology in Hoboken, N.J., wants to work in fintech but would consider becoming an engineer at a major bank a career that could marry her interest in finance with a more predictable way of working.
I was never so interested in traditional banking jobs, she said. For me it was always more of the quant side, meaning roles involving quantitative analysis. I really love math.
Before graduating from Mount Holyoke College in 2016, Areeba Kamal worked for a summer as a trading intern handling complex bond products at Bank of Americas Midtown Manhattan tower. She arrived around 8:30 a.m. and often stayed until 10:30 p.m., trying to learn the intricacies of her product. She sent money to her family in Pakistan.
Vast Product And Service Range At Bank Of America
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Get into investment banking (WITHOUT) experience
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Core Investment Banking Activities
Investment banking is split into front office, middle office, and back office activities. While large service investment banks offer all lines of business, both “sell side” and “buy side”, smaller sell-side investment firms such as boutique investment banks and small broker-dealers focus on investment banking and sales/trading/research, respectively.
Investment banks offer services to both corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their securities on the open market, an activity very important to an investment bank’s reputation. Therefore, investment bankers play a very important role in issuing new security offerings.
Front office
Front office is generally described as a revenue-generating role. There are two main areas within front office: investment banking and markets.
- Investment banking involves advising organizations on mergers and acquisitions, as well as a wide array of capital raising strategies.
Transactions in which capital is raised for the corporation include:
- Raising and restructuring private corporate debt, or debt funds.
Sales and trading
On behalf of the bank and its clients, a large investment bank’s primary function is buying and selling products.
Middle office
Back office
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As an enthusiast and expert in the field of investment banking, I can provide comprehensive insights into the concepts and activities discussed in the article "How Does Investment Banking Affect Society Day in the Life of a Goldman Sachs Investment Banking Intern NYC."
Investment Banking's Impact on Society: The article rightly emphasizes that while most people may not directly interact with investment banks, their influence is pervasive in various aspects of our lives. Investment banks act as advisors to a diverse range of entities, including companies, government entities, funds, entrepreneurs, and families. These clients, in turn, play a significant role in providing goods and services, creating job opportunities, and impacting the economy at large. Investment banks contribute by providing advice and services that enable these organizations to grow and thrive.
M&A Investment Banking: The article introduces the concept of M&A (Mergers and Acquisitions) investment banking, outlining its two broad categories: sell-side deals and buy-side deals. In sell-side deals, the investment bank advises a company looking to sell, while in buy-side deals, they assist a company in acquiring another business or specific assets. The distinction between targeted and broad deals is also explained, highlighting the different approaches in negotiations and analysis involved in each type.
Compliance and Legal Considerations: The article touches upon the importance of compliance with laws and indemnity in the context of using investment banking services. It emphasizes the need for clients to adhere to local, state, national, and international laws, including export control laws. The restrictions on accessing and using investment banking services in certain countries due to sanctions are also highlighted.
Differentiation Among Investment Banks: The article mentions that larger firms, known as bulge brackets and elite boutiques, often focus on targeted deals involving huge public companies. This leads to analysts and associates spending more time on operational cases, valuations, and reconciling complex financial data. In contrast, middle-market banks and regional boutiques may prioritize learning about a company in-depth, considering the smaller size and less experienced executives involved in M&A.
Exit Opportunities in M&A Investment Banking: The article provides insights into exit opportunities for professionals in M&A investment banking. It suggests that working in M&A at a bulge bracket or elite boutique bank provides the best chance for roles in private equity (PE) and hedge funds (HF). While exit opportunities also exist in middle-market banks and industry-specific boutiques, networking becomes crucial.
Differences from Retail and Commercial Banks: The article distinguishes investment banks from retail and commercial banks. Unlike retail banks that accept deposits and lend to individuals or commercial banks that cater to businesses, investment banks do not take deposits. Instead, they raise money by selling securities to investors, supporting companies, government entities, or entrepreneurs in funding major projects.
Global Wealth and Investment Management: The article briefly mentions Bank of America's Global Wealth and Investment Management division, emphasizing its role in managing the investment assets of institutions and individuals. It outlines the primary lines of business within this division, including Premier Banking & Investments, The Private Bank, Family Wealth Advisors, and Bank of America Specialist.
Career Opportunities and Technical Innovation: The article delves into career opportunities within Bank of America, particularly for IT and technology graduates. It highlights the bank's focus on revolutionizing the technical landscape and the excitement of contributing to innovative projects.
Investment Banking Demystified: The article seeks to demystify investment banking by explaining its complexity and challenging nature. It describes the long working hours and stress associated with investment banking roles, dispelling common misconceptions and providing a clearer understanding of the profession.
Government Support and Commercial Banking: The article touches on the traditional role of the financial sector, including commercial banks, in receiving government support during economic crises. It briefly distinguishes commercial banks as entities that lend money directly to businesses.
RRSP and Investment Options: The article briefly introduces RRSP (Registered Retirement Savings Plan) and mentions CIBC's RRSP Daily Interest Savings Account as an option for starting an RRSP with a low initial amount. It outlines the features of the account and the diversified investment options available through CIBC.
Considerations Beyond Financial Compensation: The article highlights that for young workers, especially in the wake of the pandemic, factors beyond financial compensation play a crucial role in their career choices. Mental health considerations and a desire for a better work-life balance are influencing career decisions, particularly in comparison to other industries offering more appealing work-from-home policies.
In summary, the concepts covered in the article range from the impact of investment banking on society to the intricacies of M&A transactions, compliance considerations, differences among investment banks, career opportunities, and the evolving landscape of the financial sector. The information provided aims to offer a comprehensive understanding of the multifaceted world of investment banking.
