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How To Become An Investment Banking Analyst

One of the top jobs offers to have for business and finance major graduates is from an investment bank as an analyst. Students are drawn to the position for several reasons including the fast pace lifestyle, high income and for those who are successful the prestige. But before the glitter of high bonuses and a driven career entice you into making that decision make sure you truly know what it entails. And also keep in mind that there are more students and applicants than positions so only some of you can succeed in your goal. After all there can only be so many mergers, leveraged buyouts or IPOs a year, and the market certainly has its ups and downs. But despite these facts the business school’s career office will always have its analyst position box full of resumes. Therefore here is some information on the position and what prospective employers are looking for.


Job description and duties

So what do Investment banking Analysts do to earn such an attractive wage? Well expect to work hard for long hours firstly. A typical day can start around 8am and you might not get home until 2am, if you get home at all as projects come with strict deadlines. Plus weekends are often spent working too so adding it all up a typical working week can be 80 to 100 hours for an analyst in New York or other big cities, or 60 to 80 hours in smaller places elsewhere.

In corporate finance there is something called the deal cycle and knowing how that works is key to understanding clearly what investment banking analysts do. A deal cycle begins with the investment bankers, MD and VP or Managing Directors and Vice Presidents, who are approached by a company or themselves approach a company with a transaction such as a merger, IPO, acquisition, private placement or follow on offering. If a meeting is set up this is called the pitch where the side presenting the transaction offer analysis and present its feasibility. A pitch book is presented which usually takes the form of a PowerPoint presentation.

If the company wants to work with the firm and like the deal they will hire them. Because the timing of such a transaction can vary from a few months to several years depending on what it is, bankers can be working on several deals at once. Working for the bankers, the analysts work on the pitch books as part of a team. If the senior banker has confidence in your ability, or you have experience and have proved your ability, you may also assist with the actual pitch itself and help with part of executing the deal.

While it may come across as a simple job in fact it is not. There are a variety of methods of research an analyst will have to undertake. Comps for example or comparable companies analysis, a method of valuation where the analyst takes companies that are comparable or similar to the company being dealt with and then extrapolates a value from them.  Comps offer a way to better understand the details in financial statements as well as how value is created in certain markets or industries. While they are a valuable and important part of the role, an analyst has to do so many this can get quite repetitive.

Other key forms of analysis include DCFs (Discounted Cash Flow) which involves putting financial projections together for the pitch book, working out the WACC (Weighted Average Cost of Capital) and so on. LBOs (Leveraged Buyout) and precedent transactions are others. With all this research and analysis your position also demands that you triple check you work as errors would be unacceptable and could lead to failed pitches.

Requirements and what employers look for

Obviously corporate finance as a whole looks for minds that are bright, and people who have a clear insight into business and are able to articulate it well. When looking at your education they will want a finance or business background and graduates in relevant degrees like business administration, finance, math, economics, accounting or engineering. Other qualities they want include;

  • Ambition
  • Discipline
  • Able to work with a team
  • Wanting that win
  • An internship or other relevant work experience is useful
  • Able to demonstrate a knowledge of financial analysis and modeling

If your resume is good enough to attract their attention and you get to the interview stage be prepared for it or them to be very tough. Be sure to do plenty of prep work for them and look through some interview books to get some ideas on what to expect. Bankers doing the interview will be making sure that you are as good as you have sold yourself on your resume. There will be a mix of brain teasers, questions to throw you off balance, exercises in financial analysis. They will be looking at how you react to the pressure just as much as listening to how you respond.

The interview process itself usually actually consists of several rounds, some on campus, at the firm or even off site somewhere like a hotel. When the numbers of been trimmed to the top candidates the whole process can often end with what they call super Saturday. This round is where candidates meet all the bankers at the form and socialize with them in some kind of event, possibly sporting. This last round means the firm can judge which of their favorite’s best fit culturally with the other bankers. Then an offer is made to the favorite with a signing bonus and you begin your career as an investment banking analyst. Learn more about other jobs in the investment industry.

Income and career progression

So we have established quite clearly the job is hard work, there will be crazy hours and high levels of stress. So why would anyone work in this role? Well some of us thrive on just such working conditions, you for sure will never be without something to do as an analyst. And there are the earnings. This is a very well paid job and on top of a nice salary you get great bonuses too. The starting salary can vary from firm to firm and from region to region but averages at $60,000 to $90,000. Add on the bonuses that can be over 50% of your wage and you are looking at an annual sum ranging from $100k to $140k.

On top of that there are work perks that add up to a nice sum too. For analysts that work past 7pm (most analysts most of the time) they offer free dinner plus free cab rides for getting home late at night.  Your cell or blackberry bills are often paid for you too and when big deals are completed the firms are known to reward all the workers with some lavish closing dinners. Also a fair point to realize too is with all those hours you are working, with some bills and food being paid for, the fact is your chances at spending are less than you might think, so you could potentially save a lot of money quite quickly if you were so inclined.

As for your career opportunities after three years or thereabouts you have some options to choose from. You could go back to school and get an MBA, or if the long hours and working conditions are still okay with you, you could take an associate position. Recent MBA graduates usually enter the firm as an associate but some analysts can be promoted to the position without an MBA after a certain amount of experience. If you decide you want to leave investment banking your experience in this position can still open up job opportunities in other areas. In fact it is the boost the job can give to your career that some people are attracted by when they choose to enter as an analyst.

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Categories: Investment Jobs

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