QUICK BANKING OVERVIEW
Many of you are already familiar with the various areas within finance. For those of you who aren't, a brief description of different career paths follows. Please take note of the word "brief." To really understand these different industries, it is essential that you do the research: talk to alums and second years; investigate different companies; and take a look at the Resources section in this guide.
INVESTMENT BANKING
Investment banking typically refers to the Corporate Finance function within an Investment Bank. Here, the bank advises clients with respect to capital structure, financing alternatives and merger & acquisition opportunities. Essentially, the bank is an intermediary between those who have money (investors) and those who need it (clients/corporations). Large-scale investment banks typically organize their corporate finance functions along product lines (M&A, High Yield, etc.) and industry groups (Healthcare, Industrials, Real Estate, Telecommunications, Media & Entertainment, Retail, Technology, etc.). Smaller-scale and boutique banks may focus in on particular products or industries. Examples include Lazard and it's M&A prowess, Thomas Weisel and their technology focus.
The investment banking function is linked to the Equity Research and Capital Markets functions. In a simplified example Equity Research will provide coverage of industries and companies. If a company wants to go public it will want coverage by the equity analysts. The investment bankers will work on the valuation and facilitate the registration and IPO process. This relationship has changed, however, in recent years due to Eliot Spitzer's investigations and the SEC's actions, which distinctly separated the nvestment banking and research functions. The capital markets groups will price the security, "make a market" for the security, and support the company stock trading during and after the IPO.
Work at an Investment Bank, especially at the Associate level focuses on the "pitch" and the "deal". The pitch: the Bank generates a solution (solicited or unsolicited) to address a financing need of the company. They then meet with the company to explain the current market environment and effectively sell the bank's services. Once the client has engaged the bank, the project moves from pitch to deal as the bank works to execute the deal (whether it be an acquisition, IPO, debt offering, restructuring, etc.)
Things to consider:
CAPITAL MARKETS
Capital Markets works as the conduit betwen the Investment Banking and Sales & Trading groups to originate and sell debt or equity instruments for companies. Deals within Debt Capital Markets include the origination, structuring, and marketing of public and private debt issuance, derivative instruments, and structured products. Deals within Equity Capital Markets include the origination, structuring, and marketing of initial and secondary public offerings, private placements, and derivative instruments. A typical day in Capital Markets includes performing comparable analysis of prior deals, structuring a current deal, analyzing potential deals, participating in client road shows and meetings, and advising investment bankers pricing a debt or equity offering. Generally, Capital Markets professionals do not focus on a particular industry, unless the group is fairly large. The key difference between Investment Bankers and Capital Markets professionals is that the latter focuses primarily on a particular product (either debt or equity) and has more of a market focus. The hours tend to be tied to the market in most offices. Equity Capital Markets professionals typically work from 7:00 am - 7:00 pm, while Debt Capital Markets professionals arrive a bit later and work from 7:30 pm - 7:30 pm. In addition, professionals in either group typically attend client meetings and organize road shows that may occur throughout the day (sometimes after work).
Work in a Capital Markets group, especially at the Associate level, is particularly varied. Professionals may help with a pitch by researching comparable deals and providing detailed information about the markets to Investment Bankers. In addition, Associates may help with a deal by analyzing the price and size of an offering. Finally, Capital Markets professionals help clients develop a road show presentation and coordinate with the sales people, traders, and researchers during an offering.
Things to consider: