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Learn about the world of investment banking Our goal is to make the intriguing world of investment banking accessible to everyone. By offering in-depth analyses of key areas such as valuation, mergers and acquisitions, and capital markets, we break down sophisticated concepts and equip you with the practical skills necessary to excel in this highly competitive market. Learn More Robert G. Allen "How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." RECOMMENDED PAGES Private Equity Learn about how private equity works Learn More Career Progression Learn about the hierarchy in an investment bank Learn More OUR AIM At the Academy of Investing, our mission is to demystify the world of investment banking, making it accessible to all. We strive to break down the complexities of this lucrative and high-powered industry, providing clear, comprehensive education and guidance. Our goal is to empower individuals with the knowledge and skills needed to pursue successful careers in investment banking, offering insight into both its opportunities and challenges in an ever-evolving financial landscape.

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Want to learn more about the world of Investment Banking? Investment Banks Learn about the different types of investment banks and what they do Structure Learn about the internal structure within investment banks Career Learn about the different career paths within an investment bank Roles on the Floor Learn about the various roles on the trading floor Bid offer Learn about what a bid-offer is and how to calculate it Roles in the Investment Banking Division Learn about the various services provided by the investment banking division Mergers & Acquisitions Learn about the different types of mergers and acquisitions Valuation Learn the different metrics used to value a company Equity Capital Markets Learn about the various functions of the equity capital markets division Private Equity Learn more about the private equity industry Future of Finance Learn about what the future of finance holds Boutique Banks Learn about what boutique banks are and do Trading Learn how to make daily trades using various strategies Entry into Investment Banking Learn about how to land a job at an investment bank FinTech Learn about what FinTech is and what its future holds Asset Management Learn strategies used to manage assets in a portfolio Environmental, Social and Governance Principle (ESG) Learn about the aspects of ESG investing

Boutique Banks A boutique bank is a type of investment bank that specialises in a specific sector of investment banking Differences... A boutique bank offers more personalised and specialised services compared to the major investment banks. This is mainly due to them being smaller in size and only operating to fewer clients. Some key characteristics of a boutique bank are listed below. Specialised They often specialise in specific areas of finance, such as mergers and acquisitions (M&A) or corporate finance. This allows them to provide highly tailored services to their clients. Personalised As well as specialisation, they focus on personalisation, typically working with a smaller number of clients and provide customised financial solutions to meet their unique needs. Client Relationship Their personalised approach leads to a requirement for stronger client relationships because it can lead to a deeper understanding of the client's financial goals and more effective financial solutions. Niche Market These banks often work in specific industries such as the technology, healthcare, or real estate sectors. Culture Boutique banks tend to have a more entrepreneurial and collaborative culture compared to larger banks. This is optimal for professionals who prefer working in smaller teams and taking on more responsibility. Examples of Boutique Banks Listed below are four boutique banks with their specialisations, employee count and revenue Evercore M&A advisory services, restructuring, and capital raising. 2245 employees $3.29 billion (revenue) Lazard M&A advisory, restructuring, and asset management services. 3402 employees $2.86 billion (revenue) Greenhill & Co. M&A advisory and restructuring services, with a focus on providing independent advice to clients 364 employees $258 million (revenue) Houlihan Lokey M&A advisory, financial restructuring, and valuations 2610 employees $1.81 billion (revenue) Back to Learn Next Page

Roles on the Trading Floor There are three main roles on the trading floor: Sales, Trading and Research Effective communication... All three roles have different and unique jobs. However, their works feeds into one another and it requires effective communication. Sales Salespeople have to convince their clients to trade, (either "buy" or "sell" a product), using the data and information provided by the traders and equity researchers. They offer solutions and different ideas to their client to keep them with the bank. The job involves being able to communicate and maintain strong relationships with clients of the bank. Better salespeople will perhaps build stronger relationships through arranging dinners or being more empathetic. Trading Traders provide the prices to the client and execute orders, managing risk at the same time. They are the market-makers. Some traders also operate on behalf of the bank, trading with the bank's assets. Research Equity research analysts conduct research into public companies and format their findings into reports which the bank may sell to investors or use as guidance for their own clients. The analysts relay information onto the traders and salespeople on whether their clients should consider buying, selling or holding a stock. Back to Learn Next Page

Private Equity Private equity refers to a type of investment in which investors provide capital to private companies. Private equity firms raise funds from these investors and then use that capital to acquire, invest in, or provide financing for privately held businesses. Examples Some examples of private equity firms include: The Blackstone Group Founded in 1985 by Stephen A. Schwarzman and Peter G. Peterson Headquarters: New York City, USA Expertise in real estate investing Assets Under Management (AUM): US$880.9 billion Kohlberg Kravis Roberts (KKR) Founded in 1976 by Henry Kravis, George Roberts, and Jerome Kohlberg Jr. Headquarters: New York City, USA. Pioneer of the leveraged buyout (LBO) industry Assets Under Management (AUM): US$503.9 billion The Carlyle Group Founded in 1987 by David Rubenstein, William E. Conway Jr., and Daniel A. D'Aniello Headquarters: Washington, D.C., USA Focus on buyouts, growth capital, and distressed asset investments. Assets Under Management (AUM): US$385billion EQT Partners Founded in 1994 in Sweden. Headquarters: Stockholm, Sweden. Strong presence in the Nordic and European markets. Assets Under Management (AUM): US$239 billion What is Private Equity? Private equity companies, such as KKR, acquire businesses so that they can sell these businesses for a profit. To acquire them, they raise funding from high-value investors and the firm then manages these funds. Typically, this funding is complemented by borrowing. Due to its relative novelty, this sector has experienced significant growth. As expected the popularity for investment in companies is greatest when the market is bullish - stock prices are high. It is up to the private equity firms to manage the companies well to ensure that it grows in value and prominence in the market. Otherwise, the company could be left in much debt from the borrowing. Deeper dive... Typically, private equity firms invest into more developed companies. Within this, the funds can be invested in a specific and targeted manner. For example, the fund could be towards rebuilding struggling companies, expanding those that have just exited the start-up phase or it could be directed towards a certain industry, such as healthcare. Quick-fire Characteristics Private Ownership The companies that are invested in are privately held Active Ownership Private equity firms often take an active role in the management and improvement of the companies Bigger Picture The investment tends to last a few years in order to improve the company and to ensure a flip-side profit Illiquidity The investment tends to be less liquid, so investors need to commit their capital until profits start coming in High Risk-Reward Ratio The investments carry both a high potential return and a high risk, so the private equity firms have to ensure that they make a return on the investment Diverse Portfolio Private equity firms tend to invest in various industries to diversify their portfolios and spread risk. Types of Deals Leveraged Buyout (LBO) This is where a private equity firm acquires a company using a significant amount of debt to meet the cost of the acquisition Venture Capital Venture capitalists provide capital in exchange for equity stakes in high potential start-ups Growth Capital These deals involve mature companies that are looking to expand, invest or look to new markets Distressed Debt The firms invest in the debt of companies that are struggling financially Mezzanine Financing This involves providing both the debt and equity components of capital Secondary Buyout A private equity firm buys a portfolio company from another private equity firm Carve-out Where a parent company separates one of its divisions and sells it to a private equity firm What happens next? After the deal has been made, the private equity firm typically takes managerial control of the company. They either remove the existing team and manage the company themselves or bring in a new team, or work with the existing team. The firm will already have a plan of what they aim to do whether it be restructuring the company or expanding it into new markets. All of this with the aim of selling the company for a profit later on. Back to Learn Next Page

Entry into an Investment Bank A guide on how to get into an Investment Bank Your path... If becoming an investment banker is your dream or if it just another career path that you are interested in, then we have some tips and advice to help you. Below are things that you could and should be doing to help you realise your goal, from extracurriculars in school all the way up to the interview. At school If you are already considering investment banking as a potential career path, then there are many things that you could be doing to help realise that. Do some research: Go online and find out more about the world of investment banking or look at the other resources on our website Visit company pages and understand the ethos and what they do Read: Read newspapers like The Economist or The Financial Times Sign up for online newsletters and briefings from AmplifyMe and the New York Times to keep up to date Read books like The Intelligent Investor or Principles Clubs : See if your school offers an investing or financial society If they don't, then try and start your own one, you could invite speakers and hold talks - this shows great initiative Start a weekly briefing or a school newspaper that discusses what is currently happening in the markets Summer Courses: Sign up for InvestIN's Young Investment Banker Summer Experience to learn more about the details of investment banking and network with professionals in the industry Go online and find introductory courses to investment banking with organisations like edX Work Experience/Shadowing: Find work experience programs at investment banks JP Morgan offer a week placement in their offices in the summer for children 14-17 This is a good website that shows programs for children in the UK https://www.studentladder.co.uk/year-12/work-experience-opportunities/banking/ Contact professionals in the industry on LinkedIn or that you have met and ask them if you could shadow them for a day - we will discuss how to go about this later University + College These next steps will be crucial to landing a job at an investment bank - remember networking is key. Degree: Although your choice of degree does not actually impact your chances of getting into an investment bank, we recommend a degree in economics, finance or business However, it is not essential to do one of the three above as they are looking for people with certain skillsets that would allow them to more easily adapt to the different world of investment banking Major school: The big investment banks tend to do a lot of on-campus recruiting and this mainly occurs at the top-tier universities and colleges. In the UK, this would be at the Russell Group universities and in the USA, they would be looking at the Ivy League colleges as well as the other prestigious colleges such as Stanford and MIT Whilst attending one of these top-tier universities will boost your chances it is not necessary. However, networking and your other related activities will need to be very important Internship: An internship is the best way to get yourself affiliated with a company or industry Preferably, find an investment bank that you line with the core values of or that you like the culture of Apply for an internship over the summer where you will doing some tasks around the bank and be given the opportunity to learn more It is vital to stand out throughout the duration of your internship so that they are more likely to offer you a full-time job after you finish university Also, make sure to network whilst you are there, it makes yourself better known and can allow you to integrate into the community a lot faster Apprenticeship If you would rather opt for an apprenticeship than going to university or college, then there are plenty of options in the investment banking world. The first thing to decide is whether an apprenticeship is right for you. Below are aspects that you should expect of an apprenticeship and hopefully you can tell whether or not it suits you. Duration: They can vary in duration but typically span from 1 - 3 years. Longer-term apprenticeships may be combined with formal education, such as earning a finance-related degree. Structured Learning: They often include a structured curriculum that covers fundamental concepts in finance, investment banking, financial modelling, valuation, and other relevant topics. This curriculum may be delivered through in-house training sessions, online courses, or formal educational institutions. On-the-Job Training: The core of an investment banking apprenticeship is the hands-on experience. Apprentices work closely with experienced professionals on real-world projects, such as financial analysis, due diligence, M&A transactions, and capital raising. They may rotate through different departments as well. Mentorship: Apprentices often receive mentorship from senior bankers who provide guidance, answer questions, and help apprentices navigate the complexities of investment banking. Networking Opportunities: As we have said, networking is key, and apprenticeships are a great way to achieve this due to you working with the professionals. Responsibilities: They also give you a lot of responsibilities including conducting financial analysis, creating pitch materials, attending client meetings, and participating in due diligence efforts. Exams and Certification: Some apprenticeships may require individuals to pass exams or obtain certifications related to finance and investment banking, such as the Chartered Financial Analyst (CFA) or Chartered Investment Banking Analyst (CIBA) designation. Potential Full-Time Offer: Successful completion of an investment banking apprenticeship can lead to a full-time position as an analyst or associate within the same firm. It can also lead to full-time positions at other firms since the apprenticeship, in itself, is a qualification. If you are very keen on investment banking then an apprenticeship is a great way to dive straight into the industry. However, make sure that you are comfortable with the decision you have made as there are many factors to consider, for example, an apprenticeship can hinder your chances of working in different industries as it is a specific course in a specific sector. The Interview The first step in this process is to land an interview. This will be the other route getting into an investment bank if you have not been offered a full-time job already from either an internship or apprenticeship. To do this, you can either apply to the banks that you are interested in or try and land an interview through networking. To achieve the latter, you can contact someone working in the company you are interested in via email or LinkedIn. Choose somebody that either you know or that went to the same school as you. This builds an initial connection. Ask them if you could meet up for a coffee or you could ask about any job opportunities. Make sure you come across as respectful and qualified. Then see what their response is. You might have to talk to a few people before you succeed. Once you have landed an interview, you must prepare. Firstly, you should already know a good amount about the industry and how an investment bank works. Keep up to date with current affairs in the markets by reading newspapers. It is always good to know the prices of certain major stocks and indices the day of your interview, this shows a genuine interest. Hopefully, you have an idea of which division in the investment bank you want to work in. Before you go in, you should know more about this division and what the work entails. Research the company's core values and ethos and try and tailor your personal responses to show that you align with them. Remember, treat each interview individually, you must show a genuine interest in the company and by referencing their ethos it shows that you have conducted your research and are a good fit for them. Don't forget to practise the basic interview questions such as Why should we hire you?, What will you bring to the company?, What three words would your friends describe you as? . They may also ask questions like Why is teamwork so important? or How would you deal with a difficult client? Obviously, since it is an investment banking interview, they are going to ask more specific questions about topics like accounting, valuations, M&As and the markets. To make sure that you are prepared for them, read through the other pages on the website. On the day of the interview, make sure you are prepared for the weather and traffic. You have to turn up on time and presentable. Wearing smart clothes is key as it shows professionalism and that you are taking this job offer seriously. Some companies do an initial screening process where the receptionist tells the interviewer their initial impressions of the candidate. They observe the time you arrive, the state you arrive in, your manners and what you do in the waiting room. Don't fidget or go on your phone, prepare questions in your head or read a newspaper. In the interview itself, maintain eye contact, a friendly demeanour and don't fidget. Try and make the interview more personal and memorable. Find a connection with your interviewer or some common ground and work with it. If you treat it more like a conversation whilst proving that you are more than qualified, you have a much better chance of success. Back to Learn Next Page

Asset Management Asset management involves the management of investments on behalf of clients in order to achieve their specific financial goals. Key aspects Financial institutions such as hedge funds provide this service to manage their clients' portfolios of various assets. These assets include stocks, bonds, property among other investments. Clients come to them usually to increase their wealth and asset managers need to manage risk effectively and generate income. The roles of asset managers are listed below. Portfolio Management They need to create and manage an investment portfolio that it is suitable for their client's risk tolerance, investment goals, and time horizon. This involves diversifying the portfolio and making vital decisions on which assets to invest in and how much they should invest in an asset. Investment Strategy They also need to develop an investment strategy based on their analysis of the market and current/future economic conditions as wells as their client's preferences. Active management involves frequently buying and selling assets to outperform the market - this seeks high returns but has higher risk. Passive management aims to match the market's performance, often through index funds. Risk Management This involves identifying and addressing associated risks with the investments. Common mitigation techniques involve diversifying their portfolio, hedging and portfolio rebalancing. Hedging is an investment strategy that mitigates risk by taking an opposite position in a related asset in case there are unexpected price changes. Client Relationship Understanding the financial needs and goals of the client is very important in developing an appropriate investment strategy. Providing the client with regular updates and reports on the portfolio's performance, the market conditions and advice is also required to maintain a strong relationship. Complying to Regulations Asset managers also must ensure all their investment activities comply with regulatory requirements and industry standards. Back to Learn Next Page

Valuation In an M&A deal, the seller will always try to sell for the highest price and the buyers will always wish to buy the company at the lowest price. Thus each company values the target company differently. However, there are definitive measurements for the value of a company that can be used to help out in the process Types of Valuation The measurement used will often depend on the circumstances and the type of deal or required analysis. Below are listed some valuation methods used in an investment bank. Discounted Cash Flow Discounted Cash Flow (DCF) is a valuation method that estimates the value of a company based on its expected future cash flows. The underlying principle that backs this method is that the value of money today is worth more than the same amount of money in the future, this is due to the time value of money and potential risks or crises. First, you have to calculate the present and expected cash flows of the compnay. Cash flow is the amount of money that flows in and out of the company in a given time period, usually a year. This is done through calculating expected revenues, expenses and taxes as well as any other relevant factors. Then, you find the discount rate, which the the rate of interest provided by the central bank. This rate represents the return an investor would expect from an investment with similar risk and characteristics. It takes into account the rate of inflation, interest rates and risk profile of the invesment. Finally, you use the above information to calculate the discounted cash flow which brings the value of the company back to its present value. This involves dividing each future cash flow by (1 + discount rate) to the power of the respective time period. Once you sum up all the present values of the future cash flows you get the net present value (NPV). This is the equation for calculating the DCF where: PV = Present Value of Cash Flows CF = Cash in that time period r = Discount Rate n = Number of time periods into the future P/E Ratio The price-to-earnings ratio is a simple, commonly used calculation to value companies and then compare them. It takes the market price of a company's shares and compares it to its earnings per share (EPS). P/E Ratio = Market Price per Share / Earnings per Share (EPS) Market Price per Share = Current market price of one share of the company's stock Earnings per Share (EPS) = EPS is the company's net income divided by the number of outstanding shares of its stock (EPS = Net income/Number of Outstanding Shares) EBITDA The EBITDA multiple is a valuation metric that compares the enterprise value of a company to its EBITDA. EBITDA Multiple = Enterprise Value / EBITDA Enterprise Value = Total value of a company, including its equity value, debt, and cash equivalents (Enterprise Value = Market Capitalisation + Total Debt - Cash and Cash Equivalents) EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortisation Further breaking down EBITDA: Earnings = C ompany's net income Before: EBITDA is a measure of profitability "before" taking into account certain expenses. Interest: Interest expenses are the costs associated with borrowing money Taxes: Income taxes, both federal and state are excluded because they are considered financial expenses Depreciation: Depreciation is a non-cash accounting expense that reflects the gradual decrease in the value of tangible assets over time. Amortisation: Amortisation is similar to depreciation but pertains to intangible assets Back to Learn Next Page

FinTech The use of technology and innovation to provide and improve financial services What is it? The word itself is a mash-up of the words, "financial" and "technology". The term encompasses a wide range of activities focussed on improving financial services for companies and consumers. Some of these activities are listed below. Payments Some FinTech companies offer solutions for online payments, money transfers, and digital wallets. Some examples are PayPal, Square, and Venmo. Lending Some platforms allow borrowing and lending between individuals and companies without traditional financial intermediaries, such as LendingClub and Prosper. Online Banking A major market that has taken over is online banking which includes checking and savings accounts, loans, and investment options. Banks like Ally Bank and FinTech companies like Chime offer such services. Digital Currencies It has also played a major role in the rise of digital currencies and blockchain technology. Advising Investing is made more accessible with the development of AI and data analysis which can provide automated investing advice. This is a small industry with large potential growth, companies that offer these robo-advisory services include Betterment and Wealthfront. Crowdfunding It has led to the development of crowdfunding platforms that raise capital, such as Kickstarter. Data analysis Fintech firms use data analytics to provide insights into personal finance, investment, and budgeting. Examples include Mint and Personal Capital. Future of FinTech Most analysts in the industry predict FinTech to be key to the future of finance and expect it to transform the industry. This would include expansion of the fields it currently operates as mentioned above. Additionally, many companies are adopting digital services such as Goldman Sachs who aim to make around $750 million from its FinTech department by 2024. Through this progression to a more digitalised world of banking it also brings side benefits to the technological industry. For example, with an increasing number of online transactions taking place, FinTech companies have had to develop digital verification systems to improve their security. This technology can be easily adapted into other industries as well, making it multi-faceted. This brings about an overall improvement in the digital space. A big player in the future of FinTech is machine learning and AI. With its ability to analyse vast amounts of data and observe complex patterns that humans would struggle to notice, machine learning enables more accurate credit scoring, risk assessment, and fraud detection. As well as this it can use predictive analysis to improve investment strategies with more accurate and data-driven advice for investors. Chatbots and virtual assistants powered by machine learning can improve customer service and streamline inquiries whilst also cutting costs for firms. Additionally, machine learning can optimise financial operations, from automating routine tasks to predicting market trends. Since the very nature of AI is to evolve and adapt, it will prove to be very useful in the financial technology realm which is very fast-paced. Back to Learn Next Page

Bid Offer A bid-offer is a commonly used concept in financial markets used to describe the difference between the bid and offer for a particular security or asset. What are they? Bid This is the highest price a buyer is willing to pay for a particular security or asset Offer This is the lowest price a seller is willing to sell a particular security or asset for Looking at a financial instrument such as a stock or currency pair, usually you will see two listed prices: the bid price and the ask price (offer). A stock listed with a bid price of $20 and an ask price of $20.15, tells us that buyers are willing to buy the stock at a maximum price of $20 and sellers are willing to sell it at a minimum price of $20.15. The bid-offer spread is the difference between the bid and ask prices. Thus, the spread above $0.15. The spread represents the transaction cost or the profit margin for the market maker or broker facilitating the trade. Back to Learn Next Page

Mergers & Acquisitions Mergers & Acquisitions, commonly abbreviated to M&A, refers to the consolidation of companies or assets through financial transactions including merging companies, acquiring a company, taking over companies, consolidations or making tender offers. Subtle differences... Whilst the two terms are commonly used together to describe the same transaction, they do in fact have slightly different meanings Merger A merger occurs when two companies combine their assets to form a new entity, which typically comes with a new name and alteration of the ownership. It is a process founded on mutual agreement and the aim of it all is to create synergies and increase the new company's competitiveness by utilising the existing strengths of both prior companies. Acquisitions An acquisition occurs when one company purchases the assets or stocks of another company and gains control of that company. This can either be undertaken in a friendly or hostile manner. This depends on whether the target company has consented to the acquisition or not, in which case it is a takeover. The overarching aim being for the acquiring company to gain an advantage in the market through increasing market share or acquiring new resources and technologies. Types of M&As As mentioned above, there are various types of transactions that fall under the term M&A. Below are a few examples Merger Two companies coming together and agreeing to combine assets. Usually agreed upon by the companies' boards of directors and the approval of shareholders Acquisitions Acquiring company controls most of the assets of the target company Consolidation Combination of two or more companies, (usually of equal size), to become a new single entity. A new single entity created through transformative process with different corporate structure. Different to merger, as a new company is created rather than one surviving company. Tender offer Acquiring company makes offer to shareholders of company to purchase outstanding stock at a given price Relationship There are more specific types of M&A based upon the relationship between the buyer and seller Horizontal Involves two companies working in the same market and business Vertical Target company is in a different position in the supply chain Conglomerate Involves two companies that are in unrelated industries Congeneric Involves two companies that have the same customers but sell different products or services What does an M&A professional do? 01 Finding a deal M&A professionals often begin by identifying potential deal opportunities. This involves researching industry trends, monitoring news and building relationships with potential target companies. 03 Valuation They use financial modelling and valuation metrics to calculate the market value of the target company. The methods they use are discussed on the Valuation page. 05 Structure the deal M&A bankers assist in structuring the deal, which involves determining the buy price, payment terms, and negotiating the legal and contractual aspects of the transaction. 07 Documentation They also have to work with the legal teams to ensure all agreements are in compliance with relevant regulations. The work would involve legal documents, such as letters of intent, acquisition agreements, and disclosure schedules. 02 Working with clients They have to work closely with their clients seeking to engage in M&A transactions and have to understand their situation and goals. 04 Financial Analysis Conducting detailed financial analysis, including pro forma financial statements, to understand how the combined entity would perform post-transaction. This is important as it aids in the decision-making process. 06 Negotiation Negotiating the terms of the transaction with the target company, including the price, financing, and any post-transaction arrangements. 08 Post-deal integration After the deal is completed, M&A professionals can also assist in the post-merger integration process, ensuring that the two companies combine their operations efficiently and effectively. Back to Learn Next Page