Investment Banking basically refers to that stream of banking, which primarily focuses on capital financing for every type of organization out there. Then may it be a global or a local business, any private individual run firm as well as governments. This field is said to cater to a number of diversified financial requirements, like equity or debt, bonds, mergers and acquisitions, portfolio management and so on. This field is considered to be one of the most dignified and challenging fields to make a career out of. This is exactly the reason why so many finance aspirants have their heart, set on becoming an investment banking professional. To achieve their goal, many individuals try to get an edge for themselves by taking up various esteemed certification courses that are offered by the sterling institute, Imarticus Learning.
Every Investment Banker as well as any aspiring professional wishes to work in one of the top Investment Banks all over the world. While there are a number of criteria, which put an Investment Bank in the coveted big league. Various factors like the revenue numbers, global reach, employee headcount, income etc prove to be most decisive when it comes to determining whether a bank fits in as one of the Top Investment Banks.
Here’s a list of the top 6 full-service investment banks on the global scale.
1. Goldman Sachs
Apart from being one of the oldest banking firms, founded in 1869, this prestigious bank, offers a wide range of services, which are spread across four divisions, which include investment banking, institutional client services, investing and investment management. It also has a reported revenue of around $34.210 billion, which probably could be more today.
2.JP Morgan Chase
It is said to be one of the largest, investment banks and has reported net revenues, up to around $96,606 million. This organization has branches in around 60 countries and has about 260,000 employees working under them, offering a varied set of services.
This UK based bank was founded in around 1896 in London and has recorded earnings, of around 28,444 million Euros. This banking organization has a strong presence in retail and commercial banking, in addition to being a key player in the field of investment banking.
4. Bank Of America Merrill Lynch
This entity recently took over the erstwhile Merrill Lynch, following the economic crisis in America. It offers a wide array of services which include, investment banking, mortgage, trading, brokerage as well as card services.
5. Morgan Stanley
Since its inception in the year 1935, this global firm has employed about 55,794 employees, spread across multiple countries. Apart from offering the usual services,
it is also known to offer diversified services like prime brokerage, custodian, settlement and clearing and so on.
This erstwhile organization has reported revenue of around, EUR 31,915 million and is also known to be one of the largest financial services firms in Europe. This bank is very well known for its global presence and ongoing operations in around 71 countries as well as its omnipresence on the international trade and finance market.
In our last post we looked at why companies use investment bankers to sell or buy assets. In this post we try and understand what happens once a company decides to use an Investment Banker. What happens next?
Well they first need to look for a banker. So let’s go back to our earlier example taking the government’s stake sale in its Stuuti companies. Before they decided to shortlist Citibank, ICICI and HDFC, they hold a beauty parade where every banker worth their salt ‘parades’ their wares and offerings during a ‘pitch.’
Quite often you’ll find Investment Banking analyst friends working late on Saturday evening. When you ask them why, it’s quite likely they’ll utter the dreaded words, ‘pitch document’. The Pitch Document is the bread of Investment Banking, it’s the pizza base of that great Margerita. Without a great pitch document, all you are left with are handful of deals you managed to wing through your bosses contacts and even then you’re going to have to pitch for the deal. So what is a pitch document? It is a meeting backed up by a document where a banker convinces you, the client, why they are the best team to sell your asset. How do they do it?
The easiest way to explain this is to liken it to selling a pencil. If I have to sell you a pencil, what would I say? I need to tell you why this pencil is better than all the other pencils out there. I also need to tell you why this pencil costs as much as it does. For that I need to know what goes inside the pencil, how much those cost etc. If I need to sell the pencil on your behalf because you are my ‘client’ I need to know everything YOU know about the pencil. The price I sell the pencil at is the ‘value’ of the pencil. I have to explain to you what that value is and how I arrived at that value. I need to convince you I know everything there is to know about pencils, pencil making, the pencil industry, competing pencils so I can sell this pencil better than anyone else out there. So a usual Pitch Document consists of five elements.
1. Establishing my credentials – how many pencils have I sold before and to whom. Whose pencils have I sold and my expertise in selling these pencils. Perhaps I have someone who used to work in pencil manufacturing, Steadler maybe or Apsara, and knows the nuances of pencil making, has the inside track if you will.
2. Company Overview– I tell you a little bit about your company to show you that I know about your pencils. It’s a little counterintuitive I know but it shows I’ve done my homework and know what makes your pencils tick. I might also use this opportunity to tell you any risks I foresee with selling this pencil. Perhaps the pencil has an eraser that’s of an older technology or uses too much wood etc
3. Industry Overview– Here I showcase how much I know about pencils in general, trends in pencil making, what drives pencils usage, opportunities and risks in pencils which will help me forecast the market for pencils and therefore my clients potential market which will flow down to profitability and cashflows
4. Valuation– Once I have cashflows and industry numbers I put together the pencil’s valuation using both cashflows (DCF) as well as the value multiples of other pencils (Comparable PE and EV/EBITDA, EV/Sales multiples )in the market along with the value of what other pencils have been sold at in the past (Transaction multiples)
5. Potential Buyers of your pencil. Using my considerable industry knowledge I tell you who would be most interested in buying your pencil.
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So you’ve seen Wall Street, you’ve read Liar’s poker and you’re all set to do your Diploma in Corporate Finance from Imarticus Learning, one of the best courses to help you become an Investment Banker, but do you know what an Investment Banking analyst actually does?
The Investment Banking Analyst is usually a fresh graduate from a well-known college. More often than not, they have little or no knowledge of finance and have gotten through on the back of their academic performance so far as well as their ability to showcase their analytical and quantitative skills, usually examined via aptitude tests. These days however, many of them take short training courses in Investment Banking from Imarticus Learning to gain an edge in the extremely competitive Interview rounds.
An Investment Banking Analyst’s role comprises the following activities :
- Pitch Books – Creating pitch books is what the analyst does day in and day out. A pitch book is a marking document used when an Investment Bank pitches a client to mandate the bank to either buy or sell their asset on their behalf. It usually showcases the firm’s track record as well as provides detailed analysis on why the investment bank will be the best advisor for the job. This will include brief industry and company analysis to showcase their skills as well as a section on valuation to communicate how much they can sell or buy the asset for. Analysts often work on many books at a time for various teams. Pitch books require research and analytical skills as well as presentation and story boarding skills. It’s no surprise that by the time Analysts become Associates, storyboarding and content design become a significant value add.
- Financial Models– Creating Financial Models is another key part of an analyst’s job and usually accompany an Information Memorandum prepared by them for a deal. Financial models are multi sheet financial statements with detailed assumption sheets, which model multiple variables. They require a strong understanding of Financial Analysis, business models and revenue and cost drivers as well as the ability to forecast both Industry and company metrics
- Research and Analysis– The Analyst is expected to read and research intensively to undertake both company and industry analysis. This means keeping abreast of news and trends rather than just focusing on secondary information.
All of the above require a keen understanding of Corporate Finance, Valuation, Accounting, Economics as well as proficiency in Excel and PowerPoint. This is one of the reasons training courses in Investment Banking like Financial Modelling Valuation Courses and Diploma in Corporate Finance ensure students put the best foot forward while preparing for their careers in Investment Banking.