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Wake Forest University

4.62. 4.34 - logo. 0.15. 0.15. 4.62. Do Not Distribute - For Wake Forest University Students Only. 2.31. 1.65. Wake Forest University. The World of Financial Services. David R. Hanson ('05) September 2013. 1.94. 2.96. 3.36. Agenda (Approximate Times).

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Wake Forest University

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  1. 4.62 4.34 - logo 0.15 0.15 4.62 Do Not Distribute - For Wake Forest University Students Only 2.31 1.65 Wake Forest University The World of Financial Services • David R. Hanson ('05) • September 2013 1.94 2.96 3.36

  2. Agenda (Approximate Times) • 8:00 – 8:45pm What Is Finance? Dave Hanson • 8:45 – 8:50pm What it takes Dr. Sherry Jarrell • 9:00 – 9:45pm Panel Discussion Class of 2014 • 9:45 – 10:00pm Finance Club Club Leaders Do Not Distribute - For Wake Forest University Students Only

  3. Background Path To Finance / Investment Banking Current Role Wake On Wall Street Who Are You And Why Are You Here? Do Not Distribute - For Wake Forest University Students Only

  4. Wake On Wall Street (WOWS) • WOWS was started in 2009 by WF alumni in finance roles • Mission: To increase the awareness and brand value of Wake Forest’s students in the world of Finance / Business and beyond • Over 3,000+ Wake alumni, parents, and friends • Goals: • Job Placement (undergraduates / MS / MSA / MBA / and alumni) • Networking • Education (Mentoring, Student Visits, Faculty Visits, Panels) • How to connect to WOWS: • http://www.wakeonwallst.com • Facebook.com/WakeOnWallStreet • LinkedIn.com/in/WakeOnWallStreet Do Not Distribute - For Wake Forest University Students Only

  5. Section 1 What Is Finance? Do Not Distribute - For Wake Forest University Students Only

  6. Finance is a very broad term related to: 1) How capital is acquired, and 2) How capital is managed Matching those who have capital with those who need capital Generally, Finance encompasses the capital activities of: Personal Finance (individuals) Corporate Finance (businesses) Public Finance (government entities) What Is Finance? Do Not Distribute - For Wake Forest University Students Only

  7. Areas of Finance Accounting Audit Transaction Services Corporate Finance FP&A Corporate Development Investment Banking Coverage Research Sales & Trading Investment Management Asset Management Alternative Investments Wealth Management Brokerage Private Banking Do Not Distribute - For Wake Forest University Students Only

  8. Technical Accounting Generally entry level positions as an audit background is not required Reading transaction documents Structuring transactions based on accounting rules so that the client gets desired accounting treatment Due Diligence Typically buy-side M&A deal environment Assess quality/sustainability of financial metrics, identify significant financial items related to valuation, assist with purchase agreement negotiation issues Travel is required Internships in public acctg./finance or experience in business/finance Coursework in accounting required Finance coursework encouraged and may help differentiate you, but not required Strong excel skills are important in due diligence Accounting Job Description Qualifications Do Not Distribute - For Wake Forest University Students Only

  9. Technical Accounting Monday – Friday 9am – 7pm Due Diligence Hours & workdays unpredictable Deal deadline may require 55-90 hrs., sometimes including weekends When not staffed or when deal work is slower (for example when waiting for information), work commitment is less (40 hours in a week) Undergraduate hire (Associate) Base salary mid $60K Bonuses of 5-15% of base Sr. Associate MBAs / 2-3 years relevant experience Base mid $80-90K Bonuses of 5-15% of base Annual review of qualitative performance and base / bonus Good performance normally is rewarded with marginal base salary increases every year Accounting Hours Compensation & Review Do Not Distribute - For Wake Forest University Students Only

  10. Associate to Sr Associate 2yrs Sr Associate to Manager 3 years Firms will not promote someone to a Manager without professional designation (CFA/CPA) Many leave at Sr Associate / Manager to do due diligence at PE Partners have 12-15 years at a firm Accounting Career Progression Firms with WF Alumni Do Not Distribute - For Wake Forest University Students Only

  11. Applying efforts to a company in order to manage the money for carrying out the business, enhance the dealings with external relationships (customers, suppliers, etc), project for its future finance and handle monetary activities Opportunities for career progression can be in Treasury, Financial Planning and Analysis, Financial Reporting, Operations Accounting, etc. Bachelors in Business, Accounting, Economics or Finance MBA or CPA designation preferred at higher levels Internships within industry are extremely beneficial Corporate Finance Job Description Qualifications Do Not Distribute - For Wake Forest University Students Only

  12. Mon. – Fri. 8am – ~5:30-7:30pm Weekend and longer hours are needed depending upon time of year and project load Analyst Base salary ~$30-70K depending upon industry, firm, geographic location and your experience Associate or Senior Analyst $60-100K plus bonus potential (tied to corporate performance) Annual review of performance and base / bonus and semi-annual review of performance Raises annual or semi-annual depending upon economic conditions and performance Often performance is reviewed both personally and relevant to peers in similar role (ranking system Corporate Finance Hours Compensation & Review Do Not Distribute - For Wake Forest University Students Only

  13. Start as Analyst, progress to Senior Analyst or Associate, Manager Senior roles: Director, Vice President, Senior Vice President, Controller, Treasurer, CFO Corporate Finance Career Progression Firms with WF Alumni Do Not Distribute - For Wake Forest University Students Only

  14. Investment banking is the process of assisting entities via: Coverage Raising capital (equity, debt, hybrids, etc.) M&A (acquiring, selling or splitting companies/pieces of companies) Other advisory assignments (takeover defense, fairness opinions, etc.) Research Analyze companies, securities (equities, fixed income, other), sectors Publish recommendations Sales & Trading Make markets in securities Connect buyers and sellers of securities Investment Banking Investment Banking Coverage Research Sales & Trading Do Not Distribute - For Wake Forest University Students Only

  15. Often referred to as / separated into: Sell side: bankers who create and sell securities (e.g., IPOs) and Buy side: people who invest in securities (insurance companies, hedge funds, private equity funds, pension funds) Investment Banking Investment Banking Coverage Research Sales & Trading Do Not Distribute - For Wake Forest University Students Only

  16. Investment Banking: Titles and Roles CEO Head of Investment Banking More Client Interaction Group Head MD MDMDMD D DDDDDDD More Analysis VP VPVPVPVPVP VP VPVPVPVPVP AS ASASASASASASASAS AS ASASASASASASASAS AN ANANANANANANANANANANAN AN ANANANANANANANANANANAN Do Not Distribute - For Wake Forest University Students Only

  17. Who Are The Investment Banks? Bulge Bracket Full Service / Regional / Boutique Do Not Distribute - For Wake Forest University Students Only

  18. Investment Banking (Coverage) - Structure Do Not Distribute - For Wake Forest University Students Only

  19. Generate ideas Strategic alternatives Capital raising Risk management Solve problems Produce client pitches/materials Quantitative analysis Qualitative analysis Initiate/maintain contact w / Clients Due diligence Documentation SEC merger and offering documents Purchase and sale, Other agreements Financial analysis (valuation, accounting impact) Presentations for Board meetings Financial analysis Strategic rationale Market receptivity/reaction Internal committee materials Identify potential investors and develop investor marketing materials Negotiation/structuring Client management Investment Bankers (Coverage) Originate Business Execute Business Credit: ML GM&IB Do Not Distribute - For Wake Forest University Students Only

  20. Financial analysis Industry and company-specific research Developing client presentations (pitches) Valuation (financial modeling) Marketing materials, management presentations and road show involvement 12 – 18 hour days (every day) Very high stress Multi-tasking Menial grunt work and micromanagement Meetings and conference calls throughout the day/night Sacrifice your personal life (and health?) for this career 1-3 meals/day at work Canceling vacations and missing holidays/birthdays when needs arise What Does An Analyst Do All Day? Analyst responsibilities What you should expect Credit: Jeff Smith Do Not Distribute - For Wake Forest University Students Only

  21. Entry level position is typically a “Research Assistant” or “Research Associate” depending on the firm Will work with a Senior Analyst to cover a specific industry sector Typical responsibilities include fundamental company analysis proprietary research generation report writing interacting w institutional sales force and investment management clients Sell-side research is the sell-side complement to traditional investment management Depends largely on Sr Analyst/firm Plan for minimum of ~60 hrs during the week, 7AM – 7PM Some weekends Some late nights finishing reports for morning distribution Typically join as Junior Associate for 1-2 years Associate Analyst for another 1-2 years, with promotion to Senior Analyst based on availability and aptitude after ~4 years Investment Banking (Research) Job Description Hours Career Progression Do Not Distribute - For Wake Forest University Students Only

  22. S&T is the participation in the execution flow of a transaction involving equities, fixed income, currencies, or commodities Product knowledge, risk management and the ability to translate a plethora of information quickly are core competencies Pricing, market news, trading flows being executed on your firm‟s floor and “away” from you in the market Entry level positions often in Operations or as Jr Analysts in “front-office” Direct desk placement or sales/trader support Significant amount of time “shadowing” a senior salesman or trader, or in an operational support role, for several years of development Thereafter granted responsibility of trading on behalf of the firm or managing client relationships Investment Banking (Sales & Trading) Job Description Do Not Distribute - For Wake Forest University Students Only

  23. Varies dependent on asset class and job function 7am-6pm is common for Jr position Crucial: added hours out of office digesting themes Many use out-of-office hours to study markets, news, trends to predict implications for markets Added responsibilities come with demonstrated performance, character, eagerness Progression towards junior trading or junior sales role in 2 years Not uncommon for individuals in mid-to-late 20s to be primary sales coverage / primary trader for firm Buy-side of the business often lures top-tier traders away after solid performance records S/T Analysts or Trainees will often pursue CFA charter to broaden skill set Investment Banking (Sales & Trading) Hours Career Progression Do Not Distribute - For Wake Forest University Students Only

  24. Investment Banking (Sales & Trading) Do Not Distribute - For Wake Forest University Students Only

  25. Base salary + varying bonus structures Larger institutions will have a bonus structure roughly 20%-40% of base Smaller trading firms pay on production basis that is correlated with the firm’s overall performance Competitive base salary ~$70k Bonus ~50-125% base Annual review of qualitative performance and base/bonus in Dec-Feb. timeframe Annual base salary increases of ~15%. Bonus “bands” increase every year but actual performance bonus is based almost entirely on individual performance Bonuses move with strength/weakness of markets Depends on geography, typically modest base (i.e. lower than coverage / S&T) Discretionary bonus 0-50% of base Investment Banking Compensation Coverage S&T Research Do Not Distribute - For Wake Forest University Students Only

  26. Investment Management is the management of capital for institutional investors Distinct due to focus outside of ‘retail’ investors Institutional investors generally include: Corporate pension plans (e.g., IBM) Government pension plans (e.g., CalPERS) Endowments (e.g., Wake Forest Endowment) Foundations (e.g., Bill & Melinda Gates Foundation) Sovereign Wealth Funds (e.g., ADIA) Some ultra-high-net-worth clients (e.g., George Soros) Investment Management Investment Management Asset Management Alternative Investments Do Not Distribute - For Wake Forest University Students Only

  27. Asset management and Alternative investments overlap Asset management is often called ‘Traditional’, focusing on: Equities Fixed income Whereas Alternatives focus on: Private Equity Hedge Funds Real Estate Other (Timber, etc.) Investment Management Investment Management Asset Management Alternative Investments Do Not Distribute - For Wake Forest University Students Only

  28. Entry level positions include Junior Analyst positions in Operations, Research, Marketing, etc. Operations could include trade reconciliation, security pricing and performance report generation Research focuses on stock or bond fundamental analysis including company and industry research, financial statement analysis, modeling and valuation, management meetings and new idea screening and generation Marketing entails client prospecting, database updating, client performance and asset allocation analysis Relevant internships or experience in business / finance Finance & accounting coursework helpful but not required Passion for the markets Computer skills helpful (Bloomberg, Factset, Capital IQ) Asset Management Job Description Qualifications Do Not Distribute - For Wake Forest University Students Only

  29. Monday – Friday 8am – 6pm Read WSJ before work Weekend reading on markets and securities helpful What you put in, is what you'll get out of it” Often start as in Junior Analyst role in Operations, Marketing or Research Goal is to teach fundamentals of investment management operations and business; some rotational & training programs at larger firms Progression towards Senior Analyst after 2-4 years CFA or MBA recommended at this point to reach Portfolio Manager Associate Portfolio Managers jobs attainable at age 30-35 Asset Management Hours Career Progression Do Not Distribute - For Wake Forest University Students Only

  30. Modest / average base salary as Junior Analyst Bonus at roughly 20-50% of base Annual review of qualitative performance and base / bonus Good performance normally rewarded with marginal salary and bonus increases every 1-2 years Asset Management Compensation Firms with WF Alumni Do Not Distribute - For Wake Forest University Students Only

  31. Almost always only post-two years of investment banking / corporate finance experience / MBA Why? Buyside equivalent to sellside research Focuses on stock or bond fundamental analysis including company and industry research, financial statement analysis, modeling and valuation Management meetings and new idea screening and generation Alternative Asset Management (HF & PE) Job Description Firms with WF Alumni Do Not Distribute - For Wake Forest University Students Only

  32. Wealth Management is the management of capital for individual investors Often called ‘retail’ investors Brokerage customers Discount (e.g., E-Trade) Full service (e.g., Merrill Lynch) Private Banking customers High net worth (HNW): $1mm+ investable assets UHNW: definition varies ~$10mm+ Wealth Management Wealth Management Brokerage Private Banking Do Not Distribute - For Wake Forest University Students Only

  33. Teams: Analysts support bankers Responsible for bringing in new business, servicing current clients with customized financial strategies, explaining strategy and products to clients, and managing relationships Analysts can also work on an Investment Solutions Teams working on market strategy, alternative investments, fixed income, and equity groups Conduct research and analysis, monitor macroeconomic developments, conceptualize how the model portfolios will implement the team's views, assist with product development and respond to inquiries from clients and professionals Inquisitive, analytical and focused Demonstrate passion for private banking, desire to be a team player Be able to use both qualitative and quantitative tools to analyze complex financial situations Excellent communication skills, as well as the initiative, energy and confidence to complete projects with limited supervision Judgment & discretion in working with highly confidential information For placement on a U.S.-based Latin American team, fluent language skills and cultural knowledge are essential Minimum GPA of 3.2 is valued Wealth Management Job Description Qualifications Do Not Distribute - For Wake Forest University Students Only

  34. Monday – Friday 7:30am – 8pm Morning calls daily at 8am Average starting base salary - $70K Bonus at roughly 20-50% of base Ongoing performance reviews with your manager Strong performance is normally rewarded with marginal base salary and bonus increases every year Wealth Management Hours Compensation & Review Do Not Distribute - For Wake Forest University Students Only

  35. 3 year Analyst program Thereafter, strong Analysts may be promoted to Associate Many Analysts who complete the program go on to Business School or pursue other positions Wealth Management Career Progression Firms with WF Alumni Do Not Distribute - For Wake Forest University Students Only

  36. Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Accounting Audit Transaction Services Corporate Finance FP&A Corporate Development Investment Banking Coverage Research Sales & Trading Investment Management Asset Management Alternative Investments Wealth Management Brokerage Private Banking Do Not Distribute - For Wake Forest University Students Only

  37. IB Equity Research analyst publishes a note on Safeway (SWY) Safeway trading below peer valuation levels Analyze management’s options and potential impact on stock Spin-off of Blackhawk would unlock $1bn of enterprise value trapped in SWY Most tax efficient alternative Recommends asset managers buy SWY stock on future value creation Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Investment Banking Coverage Research Sales & Trading Do Not Distribute - For Wake Forest University Students Only

  38. Institutional investors buy SWY as it is undervalued vs. peers Hedge funds / activist investors (e.g., Pershing Square) approach management, frustrated with underperformance Suggest pursuing strategic alternatives: sale of whole company to PE / spin of Blackhawk Threaten a proxy fight or a boardroom battle if issues not addressed Asset Managers / passive investors (e.g., Sasco Capital) patiently wait for a catalyst Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Investment Management Asset Management Alternative Investments Do Not Distribute - For Wake Forest University Students Only

  39. IB Coverage banker (GS) meets with Safeway Safeway trading below peer valuation levels Bankers recommend SWY spin-off or sell Blackhawk to unlock value Safeway engages GS to dual-track an IPO / sale process Coverage bankers: IPO: Prepare S-1 filings Recommend valuation ($1.2bn) and price range ($20 to $22) Sale: Contact potential buyers including strategics (e.g., Harris Teeter) and financials (e.g., KKR) Coordinate due diligence by potential buyers Gather bids from potential buyers Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Investment Banking Coverage Research Sales & Trading Do Not Distribute - For Wake Forest University Students Only

  40. SWY engages Deloitte team in San Francisco Audit Perform audit Prepare financial statements Test internal controls Transaction Services Read transaction documents Analyze potential sale to minimize tax Analyze potential IPO to minimize tax Advise company on different avenues / structures Assess quality/sustainability of financial metrics, identify significant financial items related to valuation (e.g., drivers) Assist with purchase agreement negotiation issues Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Accounting Audit Transaction Services Do Not Distribute - For Wake Forest University Students Only

  41. SWY internal CF team works with: Various internal departments to forecast future revenue & financials Coverage IB to prepare financial statements Audit team to perform audit, prepare financial statements, test internal controls Transaction Services to analyze potential structures M&A lawyers to prepare transaction documents Potential buyers to conduct due diligence Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Corporate Finance FP&A Corporate Development Do Not Distribute - For Wake Forest University Students Only

  42. KKR, Blackstone, Cerberus, other PE shops look at SWY Buy the whole company then optimize (LBO / Take private) Cerberus roll-up strategy New management team Restructure and shield from public scrutiny by taking private Ultimately, PE shops can’t bid enough for a take private to make sense Buy whole co and split into pieces to sell to other strategics Sell certain regions to geographically-interested strategics (e.g., Harris Teeter) Tax inefficient (Transaction Services) Buy Blackhawk only Tax inefficient (Transaction Services) Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Investment Management Asset Management Alternative Investments Do Not Distribute - For Wake Forest University Students Only

  43. IB Coverage (now GS, BAC, C, DB ) advises SWY spin-off Blackhawk IB S&T gauge investor support for Blackhawk IPO: Brokerage / Private Bank clients Asset managers, hedge funds, other investors IB S&T executes IPO and distributes new shares Recommends final pricing level ($23) and deal structure for syndicate Prices IPO (HAWK on Nasdaq) 10 million shares at $23 each Distributes shares to asset managers and other investors Supports shares in aftermarket (shares must go up!) Makes markets in shares for buyers/sellers Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Investment Banking Coverage Research Sales & Trading Do Not Distribute - For Wake Forest University Students Only

  44. Strategists at GS, BAC, C, DB analyze client needs for those seeking growth stocks in the financial and/or technology spaces Prepare recommendations for clients to buy shares of HAWK in the IPO Explain why the move towards prepaid cards will benefit HAWK over time Clients agree and purchase shares for their accounts Clients who purchase shares see +13% to $26.01 at the close Bringing It All Together: Example Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Wealth Management Brokerage Private Banking Do Not Distribute - For Wake Forest University Students Only

  45. Everyone wins! Safeway (NYSE: SWY) Publicly Traded; $6bn Market Cap. Accounting Paid fees for Audit and TS Corporate Finance SWY stock went up; management and shareholders happy Investment Banking Paid IB fee, IPO fee, S&T commissions Investment Management HFs and Asset managers make money on SWY shares Wealth Management Brokerage and PB clients make money on HAWK shares Do Not Distribute - For Wake Forest University Students Only

  46. Section 2 How Do I Get In? Do Not Distribute - For Wake Forest University Students Only

  47. Develop a world-class skill set Significant learning opportunities Corporate finance fundamentals Career trajectory Significant impact early in your career 2 – 3 years at 80 – 100 hours/week = 5+ years experience Give yourself long-term career options Compensation Don’t do it for this – you’ll never last! Entrepreneurial culture rewards hard work Dynamic and exciting environment Culture of teamwork and partnership with motivated, best-in-class team Challenging, fast-paced Do You Want a Career in Finance? Do Not Distribute - For Wake Forest University Students Only

  48. Competitive Environment • Getting in is tough – no matter where you’re trying to go • Nature of the business • Compensation levels • Status/prestige • Using banking to get to a future career • Unless you really, sincerely want this – you will not get in Do Not Distribute - For Wake Forest University Students Only

  49. The Situation • The bad news: Many firms recruit analysts exclusively from “Ivy League” schools/“core” schools • After all, almost none of them has an undergraduate finance/business major • You’re fighting an uphill battle • The good news: Wake Forest cranks out top notch candidates • There are WF alums across Wall Street • Undergraduate finance program is the best in the United States • If you can get in the door for an interview, you have a good shot • You can do it and others have • Fantastic recent momentum (2010-Now) Do Not Distribute - For Wake Forest University Students Only

  50. What Will You Need? • You will take these and weave together your story: • Why you really want to be in X field (e.g., IB) • Why your background and experience are relevant • Why you’re a perfect fit for THIS firm Do Not Distribute - For Wake Forest University Students Only

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