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Fuqua2Duke Investment Banking / Corporate Finance Overview Questions? Contact Chris Vadnais at ctv@duke.edu or Rachel Luther at rgl@duke.edu 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 ctv@duke.edu or Rachel Luther at rgl@duke.edu

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