Meeting 7

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Meeting 7

• Winter Term
• Week 9 19th November 2008

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• Seminar is going to be presented by........
• ME, unfortunately!!
• Seminar What is an Investment Bank??

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What is an Investment Bank??

• Unravelling the complex world of IB

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What is an IB?

• No precise definition of an IB!
• Generally speaking, an investment bank is ...
• However the bigger firms have endeavoured into
  other areas.

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Sectors within IBD

• Split into either product groups or industry
  groups
• 3 Product groups
• Industry groups for example Financial
  Institutions Group, Healthcare, Natural
  Resources, Real Estate etc.

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MA or MDA

• MA work involves finding the right companies for
  a corporate client.
• MA projects fall into two main stages. The first
  is pitching, marketing and origination.

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Leverage Finance

• Leveraged finance is funding a company or
  business unit with more debt than would be
  considered normal for that company or industry.
• As a result, levered finance is commonly employed
  to achieve a specific, often temporary,
  objective to make an acquisition, to effect a
  buy-out etc.

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Restructuring

• Restructuring
• act of partially dismantling
• reorganizing a company
• In order to make it more efficient and therefore
  more profitable.

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Other possible sectors within an IB

• Finance
• Compliance
• Human resources
• Investment management
• Legal and management controls
• Private banking
• Private equity
• Operations
• Securities Trading
• Technology
• Information Risk Management

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Front Office

• The term front office refers to staff who are
  client facing. They are usually also the 'fee
  earning' staff of the firm.
• Front office staff will be the investment
  bankers!

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Middle Office

• Middle office roles generally comprise of risk
  management positions.
• This can be seen as more cost cutting roles, as
  middle office positions involve analysing and
  evaluating the risk taken by front office
  employees.
• This can be done by setting limits on the amount
  of money available to trade with, for example.

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Back Office

• Are support staff who help the business run
  smoothly and carry out its work. They support the
  front office staff mainly. Examples include
• IT support
• Design and production
• Secretarial roles
• Technology - maintain the companies
  infrastructure
• Human resources

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Typical hierarchy within an IB
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Role of an Analyst

• Analysts are the bottom rung on the investment
  banking ladder, they do the bulk of the work. 
• 3 types of work that Analysts do
• Presentations
• Analysis
• Administrative tasks
• Analysts can be promoted after three years to the
  Associate level. 

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Role of an Associate

• Associates role is to check the work of the
  Analyst!!!
• Associate will often help write the text for the
  presentations as well as do much of the modelling
  work. 
• Associate will likely have significant
  interaction with the client and with the opposing
  investment bank.
• Associates usually have to wait three and a half
  years before they are promoted to Vice President.

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Role of Vice President (VP)

• The primary role of the VP is to be the project
  manager, whether for marketing activities or on
  a transaction.
• On live engagements, the VP is typically the
  banker running the deal.
• The VP must
• manage the client
• manage the senior bankers and manage the
  Analysts and Associates that are actually doing
  the work. 
• It is often at the VP level that bankers begin to
  form valuable relationships with clients. 
• Depending on the individual and also the bank,
  some VPs will start to play a role in client
  development and marketing. 

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• N.B. Also a role called Senior Vice President in
  IBs. Engages new clients as well as performing
  the VP role.

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Role of Managing Director (MD)

• Role of the MD is mostly one of client
  development.
• The MD will likely be the one with the senior
  level company relationships and is typically
  responsible for spearheading marketing efforts. 
• On a live transaction, the MD often plays only a
  minor role, getting involved when difficulties
  arise in the deal and during high level
  negotiations.

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What is a bulge bracket firm?

• Refers to the large investment banks that cover
  most or all industries and offer most or all of
  the various types of investment banking
  services.  People consider those below to be
  them
• Goldman Sachs Morgan StanleyLehman Brothers
  (ceased) Credit SuisseCitigroup UBSML (owned
  by BofA) JP MorganDeutsche Bank Bank of
  America

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What is a boutique bank?

• All banks that are not considered bulge bracket
  are usually referred to as being boutiques. 
• Boutiques, while ranging in size from a few
  professionals to hundreds or even thousands of
  professionals, can generally be categorized into
  three types 
• (1) those that specialize in one or more
  products,
• (2) those that specialize in one or more
  industries
• (3) those that specialize in small or mid-sized
  deals and small or mid-sized clients (generally
  less than 500 million). 

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• These slides are available on the website
• www.surhul.co.uk/investment

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Whats too hot for Wall Street

• Lloyds and HBOS merger vote
• Spain and Japan slide into recession
• House sales rise as prices fall
• Woolworths to sell!
• Global liquidity crisis is over
• Pirates seize another ship!

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Obamanomics

• Obamanomics is the study of
  the Barack Obama effect on the global economy.
• US equities up by 4.1 on polling day
• Although they have since slipped more 6 since
  Tuesday!!
• The dollar was slightly weaker. Bonds traded
  sideways.
• WHY??

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VTG Update
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BENEDIXs page!!

• Upcoming Benedix Workshops
• City Professional Workshop
• Dates are 29th November and 6th December 2008
• Professional Trader Workshop
• Dates to be confirmed

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Whats coming up next week

• VTG update
• More Financial News
• Speaker is coming

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• SEE YOU ALL NEXT WEEK!!