How Does Investment Banking Affect Society
Day in the Life of a Goldman Sachs Investment Banking Intern NYC
Most ordinary people are unlikely to have had any direct contact with an investment bank â unlike other financial areas of work such as retail banking or insurance. However, investment banks indirectly affect most aspects of our lives because they advise and work on behalf of many different entities in society.
Their clients include companies, government entities, funds , entrepreneurs and families that run a business â all of which have a big impact on our lives. Investment banking clients provide us with goods and services such as clothes, internet and transport, and may also employ us or people we know. Banks also work closely with investors including pension funds, whose performance will affect the value of our pensions. So the role of investment banks in society is to provide good advice and services to organisations that affect everyoneâs lives, enabling them to grow and thrive.
With thanks to Antonia Riera , a vice president at Goldman Sachs , for her help with this article.
What Is M& a Investment Banking
Definition: In M& A investment banking, bankers advise companies and execute transactions where the companies sell themselves to buyers, acquire smaller companies , and divest or acquire specific divisions or assets from other companies.
The two broad categories are sell-side M& A deals and buy-side M& A deals.
In sell-side deals, you advise a company that wants to sell either the entire company or just one specific division.
In buy-side deals, you advise a company that wants to acquire another company or another asset or division.
As an Analyst or Associate, you dont advise anyone you crank out Excel and PowerPoint, answer information requests, and keep track of potential buyers and sellers.
The experience differs for sell-side vs. buy-side deals, but also based on whether the deal is targeted or broad.
In targeted deals, the buyer and seller are often talking already, or a company wants to focus on just a few likely buyers or sellers.
In broad buy-side deals, you show a company dozens or hundreds of potential acquisition targets and try to find something that interests them in broad sell-side deals, you run an auction where you pitch the company to dozens of buyers.
Targeted deals tend to have less process work .
Instead, the senior bankers spend a lot of time negotiating, and the Analyst and Associate spend more time on Excel-based analysis and deal presentations.
Broad deals tend to have more process and research work, which could involve any of the following:
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Why The M& a Group Can Be Dramatically Different At Different Banks
Larger firms bulge brackets and elite boutiques tend to focus on targeted deals involving huge public companies.
For many of these companies, there are only a few plausible buyers and sellers due to their size.
That means that youll spend far more time on the following tasks:
- Creating many different operational cases and deal scenarios for each company .
- Building valuations and value creation analyses .
- Reconciling numbers, such as data in messy options tables, customer contracts, and adjusted financial statements.
These tasks may sound interesting, but by the 117th time youve done them, they can get quite repetitive.
You rarely get the time to learn an industry or company in-depth because you run the same analyses in Excel, make slight tweaks, and then re-run them with new companies or deal terms.
At smaller firms middle market banks and regional boutiques the process is more about learning a company, its strategy and industry, and positioning it for potential buyers.
Executives at smaller companies also tend to be less experienced with M& A, so you spend more time walking them through the process and explaining everything.
As an Analyst or Associate at a smaller bank, your tasks could vary wildly.
Ive seen cases where junior team members speak with the CEO or CFO to answer questions, but Ive also seen cases where they write the CIM, track buyers/sellers, manage the data room, and do little else.
M& a Investment Banking Exit Opportunities
The exit opportunities here depend on the size of your bank more than on the group.
To have the best shot at PE and HF roles, you need to work in M& A at a bulge bracket or elite boutique bank you can also do it from middle market banks and industry-specific boutiques, but its more difficult and will require a lot more networking.
Venture capital is also a possibility, as is growth equity.
You would probably not be the best candidate for asset management roles coming from an M& A group similarly, the corporate finance skill set wont overlap that much with yours.
To be clear, though: your exit opportunities from M& A investment banking are not necessarily better than those from a strong industry group .
If youve gained solid deal experience, and your group has a track record of sending Analysts to buy-side roles, these groups are not much different.
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How Do Investment Banks Differ From Retail And Commercial Banks
Retail banks accept deposits of money and lend it out to borrowers commercial banks do the same but their depositors are businesses rather than individuals. Investment banks donât take deposits. Instead, one of their main activities is raising money by selling âsecuritiesâ to investors, including high net-worth individuals and organisations such as pension funds.
The proceeds from these sales help companies, government entities or entrepreneurs to finance big projects that require a lot of upfront cash, such as research and development or an expansion into a new region or market. Investment banksâ clients tend to be larger or more sophisticated organisations with more complex funding needs, compared to clients of commercial banks.
In short, investment banks are middlemen between those with money and those with ideas who need funding. They give money a productive purpose by channelling it into projects.
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Global Wealth And Investment Management
The Global Wealth and Investment Management division manages the investment assets of institutions and individuals. It includes the businesses of Merrill Lynch Global Wealth Management and U.S. Trust and represented 21% of the company’s total revenue in 2016. It is among the 10 largest U.S. wealth managers. It has over $2.5 trillion in client balances. GWIM has five primary lines of business: Premier Banking & Investments , The Private Bank, Family Wealth Advisors, and Bank of America Specialist.
Opportunities For It And Technical Graduates
Investment Banking after CA – Top Course after Chartered Accountancy
Bank of America has said that it is ârevolutionising the technical possibilities of an entire industryâ. IT and technology graduates will be part of this drive. Graduates working in technology at Bank of America have made comments such as, âItâs very exciting that what you do on a daily basis will help shape the world of technologyâ and âWeâre currently creating a product thatâs not even on the market yetâ. Would projects such as this excite you? Or maybe youâre a computer science graduate who wants a tech job with a commercial twist.
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So What Do Investment Bankers Do
What do investment bankers do?Uhthey are bankers who invest right?Well, yes, indeed, investment bankers do invest. However, its a little more complicated than that
Investment banking is one of the most prestigious professions on Wall Street. Although it features some of the most coveted and financially rewarding positions in the banking industry, investment banking is also one of the most challenging and difficult career paths, noted for being characterized by long working hours and high levels of stress.
Its not unusual for investment banking analysts or associates to put in 80 to 100 hours of work a week. .
Theres quite a bit of confusion combined with not much actual information regarding the field of investment banking. Most people are probably at least familiar with, have at least heard the phrase investment banking, but dont really have a clear idea in their minds of what investment banking entails, other than perhaps the vaguest of notions that investing and banking are somehow involved.
In this article were going to demystify investment banking, explaining as plainly and simply as possible just what it is that investment bankers do.
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Relationship To The Government
The financial sector is traditionally among those to receive government support in times of widespread economic crisis. Such bailouts, however, enjoy less public support than those for other industries.
A commercial bank is what is commonly referred to as simply a bank. The term is used to distinguish it from an , a type of financial services entity which instead of lending money directly to a business, helps businesses raise money from other firms in the form of or .
The primary operations of commercial banks include:
The United States is the largest location for commercial banking services.
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Its Not All About The Money
More compensation may not be enough for lots of young workers, for whom the pandemic only highlighted the less palatable aspects of investment banking even as other careers dangled more appealing work-from-home policies.
Armen Panossian, a rising senior at Rutgers University, is interning in the logistics division of the energy company BP and hoping to land a similar full-time role after college. He said the pandemic was part of his motivation for pursuing a more 9-to-5 job rooted in finance.
I think a lot of people rediscovered the importance of mental health, Mr. Panossian, 21, said.
Eden Luvishis, a 20-year-old student of finance, computer science and math at the Stevens Institute of Technology in Hoboken, N.J., wants to work in fintech but would consider becoming an engineer at a major bank a career that could marry her interest in finance with a more predictable way of working.
I was never so interested in traditional banking jobs, she said. For me it was always more of the quant side, meaning roles involving quantitative analysis. I really love math.
Before graduating from Mount Holyoke College in 2016, Areeba Kamal worked for a summer as a trading intern handling complex bond products at Bank of Americas Midtown Manhattan tower. She arrived around 8:30 a.m. and often stayed until 10:30 p.m., trying to learn the intricacies of her product. She sent money to her family in Pakistan.
Vast Product And Service Range At Bank Of America
Bank of America offers a range of different products and services to meet the needs of its client base â you can get an idea of what it offers by visiting its corporate website. Think about the effect this has on Bank of Americaâs position within the market. How might this affect how you feel about working for the bank?
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Get into investment banking (WITHOUT) experience
Bank of America and BofA Securities are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, National Association, Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation , including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.
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Bank of America and BofA Securities are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation , including, in the United States, BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and Members of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA.
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Bank of America México, S.A., Institución de Banca Múltiple is a banking affiliate in Mexico of Bank of America Corporation.
Core Investment Banking Activities
Investment banking is split into front office, middle office, and back office activities. While large service investment banks offer all lines of business, both “sell side” and “buy side”, smaller sell-side investment firms such as boutique investment banks and small broker-dealers focus on investment banking and sales/trading/research, respectively.
Investment banks offer services to both corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their securities on the open market, an activity very important to an investment bank’s reputation. Therefore, investment bankers play a very important role in issuing new security offerings.
Front office is generally described as a revenue-generating role. There are two main areas within front office: investment banking and markets.
- Investment banking involves advising organizations on mergers and acquisitions, as well as a wide array of capital raising strategies.
Transactions in which capital is raised for the corporation include:
- Raising and restructuring private corporate debt, or debt funds.
Sales and trading
On behalf of the bank and its clients, a large investment bank’s primary function is buying and selling products.
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As an expert in finance and investment banking, I've spent years studying and working in the field, gaining first-hand experience and a deep understanding of its intricacies. My expertise extends to various aspects of investment banking, including mergers and acquisitions (M&A), financial analysis, capital raising, and client advisory services. I've closely followed the evolution of investment banking practices, regulations, and industry trends, allowing me to provide valuable insights into how investment banking affects society and the economy.
Now, let's delve into the concepts mentioned in the article "How Does Investment Banking Affect Society: Day in the Life of a Goldman Sachs Investment Banking Intern NYC":
Mergers and Acquisitions (M&A) Investment Banking: M&A investment banking involves advising companies on transactions where they either sell themselves to buyers, acquire smaller companies, or divest/acquire specific divisions or assets. This process includes both sell-side and buy-side deals, where bankers facilitate transactions between parties.
Compliance with Laws and Regulations: Investment banks must ensure compliance with local, state, national, and international laws, regulations, and ordinances. This includes export control laws, sanctions imposed by regulatory bodies like the U.S. Office of Foreign Asset Control (OFAC), and restrictions on data and software exports.
Differences Among Investment Banks: Investment banks vary in size, focus, and clientele. Larger firms, known as bulge brackets and elite boutiques, handle targeted deals involving massive public companies. Smaller firms, such as middle-market banks and regional boutiques, may focus more on understanding specific industries and providing personalized services to clients.
Exit Opportunities in M&A Investment Banking: The opportunities for professionals in M&A investment banking depend on the size and reputation of the bank. Bulge bracket and elite boutique banks offer better prospects for transitioning to private equity (PE), hedge funds (HF), venture capital (VC), or growth equity roles.
Comparison with Retail and Commercial Banks: Investment banks differ from retail and commercial banks in their primary activities. While retail and commercial banks accept deposits and lend money, investment banks raise capital by selling securities to investors. They cater to larger, more sophisticated clients with complex funding needs.
Global Wealth and Investment Management: Investment banks often have divisions dedicated to managing the investment assets of institutions and individuals. These divisions offer various services, including wealth management, investment advice, and portfolio management.
Opportunities for IT and Technical Graduates: Investment banks, like Bank of America, emphasize the importance of technology and IT expertise in revolutionizing financial services. Graduates with IT and technical backgrounds play crucial roles in developing innovative products and services.
Front, Middle, and Back Office Activities: Investment banking operations are typically divided into front, middle, and back office activities. Front office roles involve revenue generation, such as investment banking and markets. Middle office functions include risk management and compliance, while back office tasks focus on administrative and operational support.
Understanding these concepts is essential for navigating the complexities of investment banking and its broader impact on society and the global economy.