Fuqua2Duke Investment Banking / Corporate Finance Overview Questions? Contact Chris Vadnais at email@example.com or Rachel Luther at firstname.lastname@example.org 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).
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