Interview Preparation Presentation

Interview Preparation
I BI
The Investment Banking Institute
Table of Contents
I. Investment Banking Overview
II. Ideal Investment Banking Candidates and Recruiting Season
III. Resume Tips
IV. Common Qualitative Interview Questions
V. Common Technical Interview Questions
VI. Interview Preparation and Tips
I B II 2
Investment Banking Overview
Full-Service Investment Banks (Bulge Bracket Banks)
Citigroup, Goldman Sachs, HSBC, DB, Lehman, Merrill Lynch, UBS,
Morgan Stanley, Credit Suisse
Major IB groups within full-service investment banks
Leveraged Finance provides debt package for LBOs
9 Ideal for moving on to LBO shops and hedge funds
Financial Sponsor dedicated financial sponsor community coverage
9 Ideal for moving on to LBO shops
Industry Groups Telecommunications, Industrial, Financial
Institutions, Food & Consumer, Retail, Automotive, Technology, etc.
M&A Groups Executes all the M&A assignments, include mergers,
sell-side, buy-side, etc.
9 Ideal for moving on to LBO shops and hedge funds
Financial Restructuring some bulge bracket banks are beginning to
establish these groups, although often there are conflicts
9 Good for moving to hedge funds
Capital Markets Debt and equity capital markets (IPOs, secondary
equity offering, High Yield issues, convertible debt issues)
I B II 3
Investment Banking Overview (contd)
Boutiques
Refers to small investment banks with limited number of services
M&A - Lazard, Greenhill, Centerview, Blackstone, Evercore
Restructuring - Miller Buckfire, Houlihan Lokey, Chanin,
Blackstone, Lazard, Rothschild
Industry Focus Focused on one industry
Allen & Company (media), Petrie Parkman (oil and gas)
Middle Market
Refers to smaller deals below $500 million in enterprise value
Houlihan Lokey, Chanin, William Blair, Edward Jones, Duff &
Phelps, Raymond James, Goldsmith Agio and many more
I B II 4
Investment Banking Overview (contd)
Typical Hierarchy at Investment Banks
Managing Director (MD)
Markets banks services and brings in clients; big picture banker
Director (2 years and up)
Similar to Managing Director and is training to be an MD, but does more actual
execution than MD
Vice President (3 to 4 years)
Responsible for execution of all aspects of transactions and pitches
Primary contact for clients and other professional intermediaries
Oversees junior financial staff (Associates and Analysts) and serves as the
intermediary between the MD / Director and junior financial staff
Controls and plans the projects
Associate (3 to 4 years)
Entry level position from MBA and there are also direct promotes from analyst
programs
Oversees and guides the analysts, checks work product, builds the more
complicated models and financial analysis
Analyst (2 to 3 years)
Typical Analyst Program is two years, with some analysts being offered a third
year (which often means a promotion to associate is implicit)
Responsible for most of the financial analyses and presentations
Administrative responsibilities (i.e. grunt work)
I B II 5
Table of Contents
III. Resume Tips
I B II 6
The Ideal Investment Banking Analyst
Recent undergraduates will enroll into the investment banks
analyst program
Analyst programs are usually for two-years with the top
performers being offered a third year, usually implying a
promotion to associate after completing the third year.
Important traits of a good analyst
Good attitude
Hard worker / endurance
Energy
Attention to detail
Do not necessarily need a finance / accounting undergraduate degree,
but good grades and intelligence highly valued during interview
Typical responsibilities will include the following:
Pitch books and presentations
Valuations (Trading, Precedent, DCF)
Excel Models (LBO, Merger)
Administrative such as Faxing and Delivery
I B II 7
The Ideal Investment Banking Associate
Recent MBA graduates and Analyst Promotes will enroll into
the investment banks Associate program
After 3 to 4 years, Associates can be promoted to Vice President
Important traits of a good Associate
Knowledge of finance and transaction processes
Strong understanding of finance concepts, strong technical / modeling
skills, strong writing skills
Good manager (calm under pressure)
Good teacher / patience with analyst
Client interaction skills (Presence)
Attention to detail
Good knowledge of excel, powerpoint, word
Typical responsibilities will include the following:
Explain/oversee assignments to analysts
Pitch books and Presentations
Complicated financial modeling (merger models, LBO models,
valuation models, refinancing, etc.)
I B II 8
Lateral Analyst and Associate Hires
Bulge bracket and boutique investment banks will consider hiring
analysts or associates that either have at least one year of
experience as an analyst/associate at another bank, or have some
other professional experience where skills are transferable to
investment banking
Other professional experience with transferable skills could be
commercial banking, research (equity, debt, credit), corporate
development at a corporation, experience in the insurance
industry, accounting, etc.
The important factor here is that the lateral analyst or associate
can demonstrate that he / she has developed the skills necessary
to be a good investment banker
I B II 9
Recruiting Season at Investment Banks
New Analyst and Associate Hires
All of the bulge bracket banks and many boutique investment
banks have entire recruiting departments focused on hiring new
analysts and associates
The primary recruiting source are universities / undergraduate
programs for analysts and MBA programs for associates
Many investment banks have a target list of schools, which
typically number about 20, and usually include the ivy-leagues
and other high-ranking universities
The banks work closely with the universities job placement
services to arrange off-campus and on-campus recruiting events
and interviewing schedules
If your undergraduate institution / MBA program is not on the
target list, you have to work a little bit harder, but you can
still get interviews
I B II 10
If your school is not on the target list, you should;
Network, network, network: call everyone you know that works in
investment banks (analysts, associates, vice presidents, etc.) and
send them your resume and try to get informational interviews
Contact the investment banks recruiting department directly
find the name of the person that is in charge of analyst or
associate recruiting
Find the names / email addresses / phone numbers of analysts,
associates and vice presidents that work in the bank / group
where you want to work (website information); send them an
email with short introduction of yourself and what you want (i.e.
a job) and attach your resume; follow up the following week with
a phone call
Start early: dont wait until the recruiting season is already
underway
I B II 11
The investment banking recruiting season for full-time analyst and
associate class starts in September of the year prior to the start date
for the new class
The typical start date of the new analyst and associate classes is the
August or September following graduation
Therefore, the interview season for this start date is the prior September
(i.e. when analyst candidates start their senior year and associate
candidates start their second year of MBA program)
However, many investment banks fill their full-time analyst and
associate needs through their summer internship programs
Many analyst and associate candidates attain summer internships at
investment banks for the summer between their junior and senior year /
summer between first and second year of MBA program
Investment banks recruiting season for summer interns starts in January of
the same year of the summer internships
Often following the summer internships, the summer analysts and
associates receive full-time offers to start the following fall, once they
finish school
I B II 12
Lateral analyst and associate hires occur all year long, and are
more linked to current needs at the group or bank level
Interested lateral analyst and associate candidates can learn of
opportunities by contacting the investment banks recruiting
group or the investment bankers / group directly
Often, investment banks hire headhunters to find lateral
analyst and associate candidates (see next page)
I B II 13
Table of Contents
III. Resume Tips
I B II 14
Resume Overview and Tips
Besides having good academic credentials and work
experience, structure and formatting of the resume are very
important
Most bankers (interviewers) will glance at the following
important sections and will not read the whole resume
Previous work experience (internships for undergrads) and any
relevant transactions
School, major, GPA, standardized test scores (GMAT, SAT)
Outside activities
Common resume mistakes
Formatting (think of it as an art piece)
Should not be longer than one page
No typos and grammatical mistakes (double check everything!)
Make sure you are familiar with your resume and can discuss
every point
Do not embellish your roles on any previous financial transactions
I B II 15
Resume Example
Review resume sample
I B II 16
Table of Contents
III. Resume Tips
VI. Common Technical Interview Questions
VII. Interview Preparation and Tips
I B II 17
Common Qualitative Questions?
Please walk me through your resume and tell me a little bit of
yourself
Candidates should take this opportunity to go through their
academic and professional history quickly, and emphasize any
academic or professional experience that make them good
candidates
Academic Example: - I majored in accounting and finance, and earned
A's in all of the accounting and finance classes; my overall GPA was
3.9 and my SAT scores were 1500; I was the president of my schools
finance club as well as the editor for the school newspaper
Professional Example: During my time at Company XYZ, I spent a lot
of time building pitch books and buyers lists, spreading comparable
companies and building models such as DCF, Merger and LBO
Outside Activities: show ability to multi-task and still be successful:
9 Eg: While I know that any spare personal time would be limited while
working here, during school, I was captain of the rowing team which took
about 25 hours a week, at the same time that I maintained a 3.8 GPA
9 Eg: I worked 30 hours a week to put myself through school, at the same time
as I did a double-major where I maintained a 4.0 in my major courses
I B II 18
Common Qualitative Questions? (contd)
Why do you want to be an investment banker?
I think Investment Banking provides the best opportunity to
develop my financial skills such as financial modeling and
company valuation skills as well as honing my client interaction
skills.
I want to be challenged, I know that investment bankers work
under difficult work environments but I want to be challenged
mentally and physically
I love the financial markets and follow them closely
I would like to read about transactions that I have worked on in
the Wall Street Journal and other financial magazines
Investment Banks have a positive influence on the economy. For
example, the concept of 1 + 1 = 3 is derived from synergies
extracted from merging two companies
I B II 19
What are your strengths?
The following are nice strengths such as:
9 (a) attention to detail
9 (b) endurance
9 (c) good attitude
9 (d) excel skills
9 (e) understanding financial concepts (i.e., valuation, modeling, etc.)
9 (f) ability to learn quickly
9 (g) ability to multi-task (i.e., history of holding jobs while in school, being
on sports teams, etc.)
9 (h) good communication and writing skills
9 (i) intellectually curious
The strategy to answer this question is to work into the answer
these skills and how the you already have them, by giving quick
examples for each skill
I B II 20
What are you weaknesses?
This is a TRICK question. You should not actually tell them your
weaknesses, but spin it. For example:
(a) too anal
(b) work too hard
(c) perfectionist
(d) check work product too often
(e) dont sleep enough
You can also take this opportunity to address some obvious
weakness in your resume and buff it up. For example:
If you have no academic financial / accounting background, you can
say, Well, from my resume you probably noticed that I didn't major
in accounting or finance, but I do learn quickly as you can see from my
high GPA and SAT scores. I work very hard to get up to speed, as you
can see from my success at my prior firm
I B II 21
Why do you want to work at our bank?
Candidate should fully understand the bank in terms of banks
size, culture, target market, and industry focus. It helps to do
prior research
Is it a boutique or a full-size bank?
If it is a boutique, you may say, I know that the junior staff receives
more responsibilities and there are more opportunities to step-up
on transactions
If it is a full-size bank, you may say, This bank has the global
resources to serve the fortune 500 clients and I want to be involved in
the high profile deals that this bank has been involved with recently.
(Make sure this statement is true, so you need to do the research)
Another universal line can be I have heard that this bank is based
on meritocracy and you are given more responsibilities as long
as you are able to handle it or "this group really values and
encourages junior bankers to "step up" on transactions
I B II 22
Where do you see yourself in 5 years?
Currently, I definitely want to stay in the financial services
sector, and would love to be an Associate (VP or Director
depending on entry position) in this group
You do not want to mention that you are using Investment
Banking as a stepping stone to another job. You want to be an
investment banker for LIFE! (even if you dont)
What was your favorite class in school? And why?

Math was my favorite class in school. Numbers came very easy
to me and I enjoy solving complex math problems as well as
puzzles.
I love to write so English was my favorite class. I also read a lot
in my spare time.
I B II 23
Table of Contents
III. Resume Tips
I B II 24
Common Technical Questions
What is total enterprise value?
It is the total value of the company which can be attributed to all the
financial stakeholders (equity, debt and preferred holders)
How do you calculate total enterprise value?
Equity Value + Debt + Preferred Equity + Minority Interest Cash
What is the difference between total enterprise value and equity
value?
TEV represents value of whole enterprise, and is calculated as equity
value + debt + preferred equity + minority interest cash
Equity value represents only the equity value of the company, and is
calculated as current share price * shares outstanding, or TEV debt
preferred equity minority interest + cash
What is minority interest?
If you own more than 80% but less than 100% of another entity, you are
required to consolidate 100% of the asset and income in the companys
financial statements. Minority interest represents the portion that your
company does not own it is a liability
I B II 25
Common Technical Questions
How do you calculate equity value?
Stock Price x Shares Outstanding
What is the difference between basic shares outstanding and
fully-diluted shares outstanding
Basic shares outstanding represent the current number of shares
that are currently issued and outstanding; you can find this
number on the cover of the most recent 10-K or 10-Q, Bloomberg,
Yahoo finance, etc.
Fully-diluted shares represent the current number of shares
outstanding plus the dilutive impact that any in-the-money
options, preferred convertible stock, convertible debt and other
convertible-to-equity securities that exist
Should you use basic shares outstanding or fully-diluted shares
outstanding to calculate the equity value of a company?
What is the treasury stock method?
It is used to calculate the dilutive shares from employee stock
options and outstanding warrants
I B II 26
Common Technical Questions (contd)
Please name a few line items from the current assets and current liabilities
section of the balance sheet?
Assets:
Current assets: cash, inventory, accounts receivable, other current assets, prepaid accounts
Gross PP&E, cumulative depreciation, Net PP&E
Other long term assets, intangibles, goodwill
Liabilities and Shareholders Equity
Current liabilities: accounts payable, other current liabilities, revolving credit facility
Long Term liabilities: debt, other long term liabilities, pension plan liabilities
Shareholders Equity: retained earnings, other
Total Assets = Total Liabilities + Shareholders Equity
Tell me how the cash flow statement is structured and state how they are
different from one another
It is separated between cash flow from Operations, Investments and Financing
Operations represents the cash that is generated from the companys operations.
Net Income + Depreciation & amortization +/- other non-cash expenses / income + /
- changes in working capital + / - changes in other assets / liabilities
Investments related to capital expenditures and business acquisitions and proceeds
from disposition of assets
Financing related to raising new equity and debt financing as well as paying down
debt
I B II 27
How is depreciation expense integrated within the three
financial statements?
Depreciation expense is expensed in the income statement.
However, it is added back in the cash flow statement because it
does not represent actual cash that is going out of the
company.
Depreciation expense is also reflected in the balance sheet since
the net P,P&E is decreased by the depreciation expense for that
period
What are the typical valuation multiple metrics?
TEV/Revenues, TEV/EBIT/ TEV/EBITDA, P/E
Can you use TEV/Earnings ratio for valuations?
No. TEV represents a value to all the stakeholders (debt and
equity) and earnings are only attributed to the equity holders -
interest expense is already subtracted from the earnings figure
I B II 28
If a company with a high P/E ratio acquires a company with a
low P/E ratio in a stock transaction, assuming everything else
stays constant, will the transaction be accretive or dilutive to
the acquiring company?
Accretive assuming that the earnings of the combined company
will still trade at the higher P/E ratio
How do you value a company?
There are three main valuation methodologies that you will use:
Discounted Cash Flow
Trading Multiples
Precedent Transaction Multiple
I B II 29
Briefly describe the three valuation methodologies
DCF projects the cash flow in the future and it discounts it back
to calculate Net Present Value (NPV)
Trading Multiples Uses the stock prices of publicly traded
companies to calculate valuation metrics such as TEV/EBITDA
Precedent Transactions Uses the actual offer price from an
acquisition to calculate valuation metrics such as TEV / EBITDA
What is the main valuation principle difference between
trading and precedent multiples?
Precedent multiple should be higher because it includes a control
premium
I B II 30
Please describe the DCF model in laymans terms
DCF projects the free cash flows generated by the company and
discounts these cash flows using a WACC, which considers the risk
of the projected cash flows (Net Present Value of Free Cash
Flows)
DCF then calculates the terminal value of the company using
either the EBITDA terminal method or the Perpetuity Terminal
Method
The DCF value of the Company is the NPV of free cash flows +
terminal value
How do you calculate free cash flow?
FCF = EBIT
less: Taxes
Increase/decrease in working capital (WC)
Capital expenditures (CapEx)
plus: Depreciation and Amortization
I B II 31
How do you calculate the terminal value from using the
perpetuity growth method / Gordon Growth method?
Terminal Value = FCF(5) x (1+g)
(d g)
g = Terminal Annual Growth Rate d = WACC Rate
How do you calculate the terminal value from using the
terminal multiple approach?
EBITDA multiple * terminal EBITDA / (1+d)^n
How do you determine the discount rate to be used in the DCF?

WACC
I B II 32
What is WACC and how do you calculate it?
WACC represents the discount rate that you will use in the DCF to
calculate NPV
WACC = [Ke x (E/(E+D)] + [(Kd x (D/(E+D)) x (1-T)]
Ke = cost of equity
Kd = cost of debt
E = MVE of subject company
D = FMV of debt (same as face value unless distressed) of subject
company
T = tax rate
How do you calculate cost of equity?
Use the Capital Asset Pricing Model (CAPM)
CAPM = Rf + Beta x (RM Rf)
Rf = risk-free rate
RM = market rate
RM Rf = market premium
I B II 33
Please explain the concept of beta in laymans terms
Beta measures the sensitivity of the stock relative to the market
as a whole (systematic risk risk that can by diversified away)
For example, if the company has a beta of 2, that means that if
the market moves up by 2%, then the companys stock moves up
by 4%
Which one is more expensive, equity or debt?
Equity is more expensive because it has the lowest seniority in the
capital structure, thus higher risk and higher required return
There are no obligations for dividends to be paid, and equity is
the last group to be paid out in a liquidation scenario
Which of the following will have the lowest interest rate:
secured bank debt, subordinated debt, preferred equity and
equity?
Bank debt. It sits on top of the capital structure and the debt is
collateralized with the assets of the company. It gets paid first in
a liquidation scenario
I B II 34
What does it mean when a note has a PIK structure?
PIK stands for Pay In Kind. The borrower does not pay cash
interest to the lenders, rather the interest is added on top of the
note balance and the next periods interest expense is accrued
from the new balance
Period 0 - $1,000 Balance and 10% Interest Rate per Annum
Period 1 - $100 Interest Payment but is added to the old balance of
$1,000 which results in a new balance of $1,100
Period 2 - $110 Interest Payment is added to the old balance of $1,100
which results in a new balance of $1,121
I B II 35
Explain how a company purchasing raw material from a vendor
works its way through the income statement and balance sheet
Company purchases $100 of raw material from vendor
Inventory balance on b/s increases by $100
Accounts payable balance on b/s increases by $100
Company converts the raw material into a final product for sale
Inventory balance on b/s increases by the value-added of $50 of the
conversion to the final product: labor, other inputs, etc.
Company sells the final product to customer for $200
Sales of $200 recorded in income statement
COGS of $150 recorded in income statement
Reduction of inventory by $150
Reduction of accounts payable by $100 (company pays vendor)
Increase of retained earnings by $50 (profit on the finished good)
I B II 36
Table of Contents
III. Resume Tips
I B II 37
Interview Preparation
It is very important to prepare for all of your interviews in the
following areas:
Financial Markets Stay abreast of financial news and be able to
talk about the major events (WSJ, Bloomberg, Reuters, Yahoo
Finance, etc.)
Company and Industry Specific Information - www.vault.com
and www.wetfeet.com are great sources for industry and
company specific information
Common Financial Technical Questions This course will help.
www.vault.com also sells an interview preparation book
Common Qualitative Questions e.g., Why do you want to be an
Investment Banker?
I B II 38
Interview Tips
You have a very limited amount of time to make a good
impression with the interviewers. Please be mindful of the
main things below:
Composure You want to be in control of your voice, emotions
and body. Dont show that you are nervous and speak in a calm
tone with a steady rhythm. Do not shake your legs or any part of
your body
Confidence You want to exude confidence but do not be
arrogant. Dont ever tell the interviewer that you are the best or
that they are wrong
Dress Invest in a decent suit, shirt, tie and shoes. Make sure
that there are no wrinkles and that you look neat. The style
should be conservative
I B II 39
Questions to Ask During Interviews
How many transactions are you on at one time?
What % of your time is dedicated to live transactions
compared to marketing activities?
How many active engaged deals are there currently within the
group?
How many people are on the transaction teams and how are
they staffed?
How big are your target clients?
Why did you join this firm from all the other wall street firms?
How would you describe the culture at this firm?
What are the main responsibilities of an analyst / associate on
your deal team?
I B II 40
Following Up with Your Interviews
It may not have a bearing on you getting a job with the firm,
but thank you e-mails are nice to get
If you choose to send a Thank You email make sure you
double-check / triple-check spelling (firm, name of person,
etc.) and that it is the right firm / position
Thank You e-mails also show your interest in the firm and
the position
It is better to somewhat customize each letter since that
shows more effort and the interviewers may compare letters in
their down time
Your goal is to get an offer from the firm even if you are not
interested in working there it is nice to have the option
If you have not heard back from the firm in a while, it is
recommended that you call the contact to just inquire the
timing and drop your interest (use these calls wisely since
overcalling can be annoying)
I B II 41
Important Considerations
Even within the same firm, group dynamics can be very
different
FIT - When considering which group/firm to work at, it is
important that you feel that the people at the firm share the
same moral values
Hours Certain groups work more than other groups within
the same firm. It is widely known that leverage finance
groups, M&A groups and financial restructuring groups work
very hard
Reputation Even within the same firm, certain groups will
have better reputation on the street than the other groups
# of Deals It is always nice to have live, engaged
transactions on your resume when you are interviewing again.
Marketing pitches are not very marketable, unfortunately
I B II 42

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What are the different types of investment banks mentioned?

What are the different types of investment banks mentioned?

What are some factors to consider when choosing between investment banking groups or firms?

What are some factors to consider when choosing between investment banking groups or firms?

Interview Preparation

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

V. Common Technical Interview Questions

VI. Interview Preparation and Tips

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

V. Common Technical Interview Questions

VI. Interview Preparation and Tips

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

V. Common Technical Interview Questions

VI. Interview Preparation and Tips

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

VI. Common Technical Interview Questions

VII. Interview Preparation and Tips

What was your favorite class in school? And why?

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

VI. Common Technical Interview Questions

VII. Interview Preparation and Tips

How do you determine the discount rate to be used in the DCF?

I. Investment Banking Overview

II. Ideal Investment Banking Candidates and Recruiting Season

III. Resume Tips

IV. Common Qualitative Interview Questions

VI. Common Technical Interview Questions

VII. Interview Preparation and Tips

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