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Fuqua2Duke Investment Banking / Corporate Finance Overview Questions? Contact Chris Vadnais at [email protected] or Rachel Luther at [email protected] What is Investment Banking? Investment Banking Division (IB) Sales & Trading (S&T) Research Other non-core activities Merchant Banking

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Fuqua2Duke

Investment Banking / Corporate Finance Overview

Questions? Contact Chris Vadnais at [email protected] or Rachel Luther at [email protected]

What is Investment Banking?

  • Investment Banking Division (IB)

  • Sales & Trading (S&T)

  • Research

  • Other non-core activities

    • Merchant Banking

    • Private Equity

    • Asset Management

      Investment Banking Divisions within an Investment Bank assist corporations in

      two primary ways:

  • Underwriting

    • Private Placements

    • Public Offerings

      • Debt (Fixed Income)

      • Equity (Stock Issuance)

  • Advisory Services

    • Merger & Acquisition

    • Leveraged Buyouts (LBO)

    • Other

      A basic distinction between Sales & Trading:

  • Sales

    • Intermediary between an Investment Bank and institutional investors.

    • Establish relationships with institutional investors and act on their behalf.

  • Trading

    • Set price of transactions for Sales as they deal with institutions.

    • Communicate with sales force to determine what issues should be moved.

    • Trade blocks of securities using company holdings to improve financial position of firm (proprietary trading).


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Research

  • Equity research analysts develop recommendations on specific companies based on their business potential and price attractiveness.

  • Buy side (Institutional Investor)

    • A buy side analyst’s objective is to provide investment recommendations to Institutional Investor portfolio managers. These recommendations are typically achieved through conversing with various sell side analysts and reading various sell-side research material. High accountability for performance of investment recommendations.

  • Sell side (Investment Bank)

    • A sell side analyst’s objective is to provide recommendations (e.g. Strong Buy, Buy, Hold) to their clients (buy side analysts / portfolio managers) based on “covered” companies in their sector (e.g., Health Care – Pharmaceuticals). Large emphasis on sales, interpersonal, and analytical skills.

      Sample Investment Banking Firms

  • There are numerous investment banks, although not all of them perform all the functions that have been discussed here.

    • Traditional investment houses

      • Merrill Lynch, Morgan Stanley Dean Witter, Goldman Sachs, Lehman Brothers, Bear Stearns, Donaldson Lufkin & Jenrette (DLJ), JP Morgan, UBS Warburg /Paine Webber, CS First Boston

    • Large commercial banks

      • Chase, Citicorp, Bank of America, Wachovia, First Union

    • Boutiques and regional banks

      • Thomas Wiesel, Legg Mason, Raymond James, Allen & Company, Lazard Freres

        Corporate Finance

  • Corporate finance roles can include a plethora of financial advisory roles. These positions are internal to a particular corporation.

Example of Internal Corporate Finance Activities

  • Collection and analysis of internal financial data

  • Capital budgeting

  • Cash management

Example of External Corporate Finance Activities

  • Stock buy-backs

  • Debt issuances

  • Mergers and acquisitions

  • Foreign exchange hedges


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