Finance Club
The following information is courtesy of WetFeet, Inc. For more insider information about jobs on Wall Street, take a look at the WetFeet insider guides, which are available to Tuck students through TuckStreams.
The corporate finance group serves the sellers of securities. These may be either Fortune 1000 companies looking to raise cash to fund growth or, frequently, private companies wanting to go public. Think of investment bankers as financial consultants to corporations. This is where CEOs and CFOs turn when they're trying to figure out how to finance their operations, how to structure their balance sheets, or how best to move ahead with plans to sell or acquire a company.
The activities of the CorpFin department can range from providing pure financial advice to leading a company through its first equity issue (or IPO). As a result, industry or product knowledge is key, and many investment banks divide their corporate finance departments into industry subgroups, such as technology, financial institutions, health care, communications, entertainment, utilities, and insurance, or into product groups like high-yield, private equity, and investment-grade debt.
The corporate finance group
underwrites equity and fixed income offerings;
helps firms analyze their needs and implement financial strategies; and
determines valuations for offerings.
The mergers and acquisitions group traditionally falls under the CorpFin umbrella, but we've separated the two in this write-up. M&A provides advice to companies that are buying another company or are themselves being acquired. M&A work can seem very glamorous and high-profile. At the same time, the work leading up to the headline-grabbing multibillion-dollar acquisition can involve a herculean effort to crunch all the numbers, perform the necessary due diligence, and work out the complicated structure of the deal. Often, the M&A team will also work with a CorpFin industry group to arrange the appropriate financing for the transaction (usually a debt or equity offering). In many cases, all this happens on a very tight timeline and under extreme secrecy. M&A can be one of the most demanding groups to work for.
M&A groups
advise firms on merger and acquisition strategies;
determine target company valuations;
help the target of a hostile acquisition arrange a defensive strategy;
conduct due diligence on a target or acquiring company;
negotiate price, terms, and conditions of an acquisition or merger; and
work with the other company's advisory team and the lawyers to structure the deal.
Public finance is similar to CorpFin except that instead of dealing with corporations, it works with public entities such as city and state governments and agencies, bridge and airport authorities, housing authorities, hospitals, and the like. Although the basic services and the financial tools are similar to those used for private-sector clients, numerous political and regulatory considerations must be assessed in the structuring of each deal. A key issue involves how to get and maintain tax-exempt status for the financial instruments the client will use.
The public finance group
advises public entities on capital-raising strategies;
advises public entities on portfolio management;
arranges project finance;
helps municipal entities restructure their debt;
determines a valuation for a debt/bond offering; and
underwrites tax-exempt notes, bonds, derivatives, and other municipal securities.
Think of sales and trading as being similar to the sales force of any corporation. This group is responsible for selling all the financial products sponsored by the investment banking department
Sales: Sales professionals typically have a list of institutional clients to whom they pitch new offerings, offer portfolio management advice, and sell securities. The sales department may be divided by account size, security type, geography, or product line. The department is typically divided into large institutional, middle market, and retail (or private-client services) sections. Groups may be further divided based on the complexity of a bank's financial products, such as government securities, corporate securities, asset-backed securities, futures, options, foreign exchange, derivatives, and others.
Salespeople typically
develop strong relationships with institutional investors;
meet with economic and equity research departments to discuss economic and industry trends and their impact on the markets;
work with the investment banking department to market new debt and equity issues;
assist and advise clients in developing and executing investment strategies;
watch company/industry/economic/political news and market activity, and advise clients about the likely impact on their portfolios;
attend company presentations and research conferences, typically with clients; and
arrange meetings between clients, research analysts, and company management.
Traders: Traders are responsible for taking positions in the market through purchases and sales of equities, debt, and other securities. Trading functions are typically divided by the product lines offered by the investment bank. Traders must juggle several phone lines, scan computer screens flashing headlines and quotes, and respond to orders from salespeople--all while executing trades with precision timing.
Traders typically
develop a solid knowledge of market, company, and industry information;
evaluate market activity and supply/demand indications from salespeople and clients;
maintain a position the firm has underwritten, quote bid and ask prices, and buy and sell at those prices;
advise salespeople, clients, and research analysts on market activity and pricing for different stock and equity issues;
put major trades together by negotiating with salespeople/clients and other dealers;
perform valuation analysis of derivatives, convertibles, or baskets of stocks; and
manage the firm's investment risk.
Research departments are generally divided into two main groups: fixed-income research and equity research. Both types of research can incorporate several different efforts, including quantitative research (corporate-financing strategies, specific product development, and pricing models), economic research (economic analysis and forecasts of U.S. and international economic trends, interest rates, and currency movement), and individual company research. These are "sell-side" analysts, rather than the "buy-side" analysts who work for the institutional investors themselves. An equity research analyst will become an expert on a particular group of companies in software, semiconductors, health care, oil and gas, or some other industry group.
The research analyst position involves:
meeting with company management and analyzing the financial statements and operations;
providing written and oral updates on market trends and company performance to sales & trading as quickly as possible;
attending or organizing industry conferences;
speaking with the sales force, traders, and investment bankers about company or industry trends, and recommending positions on stocks;
developing proprietary pricing models for financial products;
making presentations to clients on relevant market trends and economic data, and offering investment recommendations and forecasts; and
staying on top of emerging new companies in the industry.advise firms on merger and acquisition strategies.