Hi guys!
I thought I would post a guide to Investment Banking 101 - what it is, and roughly how investment banks are organized.
Feel free to comment and ask more questions, happy to discuss them here!
The unique role of investment banks is to connect the supply and demand of capital in its various forms, serving as intermediaries between those who have capital (such as investors or depositors) and those who need capital (like corporations or governments).
Recap: Investment banking connects supply and demand of capital
Category | Supply of Capital | Intermediary | Demand of Capital |
Typical players | Pension funds Sovereign wealth funds | Investment banks | Corporations Governments |
Such information often includes critical and confidential elements that are key in assessing the potential and value of a business, such as the business plan for a new plant that a large electric vehicles manufacturer would like to finance, the results of a clinical study showing that a promising new drug is working much better than expected, etc.
This particularly sensitive form of information that investment banks most often deal with is called Material Nonpublic Information (MNPI):
Therefore, all Investment banks have adopted a structure clearly articulated around an “Information Wall”, with a "public side" who has no access to MNPI, and a "private side" who regularly has access to MNPI. This division is an important practice to prevent conflicts of interest and maintain regulatory compliance.
Category | “Private” Side | Information Wall | “Public” Side |
MNPI access? | Yes | No | |
Trade or interact with financial markets? | No | Yes | |
Teams | Mergers and Acquisitions Restructuring Equity Capital Markets Debt Capital Markets Leverage Finance | Legal and Compliance | Sales and Trading Equity Research |
On the public side:
The generalist or full-service investment banks offer multiple products. They also typically leverage their balance sheet to lend money to their clients. These include:
A career in investment banking often begins as an Analyst, usually a role held by recent university graduates. With good performance and typically after two to three years, an Analyst may be promoted to an Associate position.
Associates take on more responsibilities, overseeing the work of Analysts and directly handling client relationships.
Further progression leads to Vice President (VP), Director (or Senior VP), and finally Managing Director (MD), who takes on significant client management and revenue generation responsibilities.
Recap: Investment banking career path and roles
Category | Years in Role to be promoted | Role and Responsibilities |
Analyst | 2 – 3 years | Perform market research, data mining, draft reports and presentation for clients, assist more senior members of the team with any requests. |
Associate | 3 – 4 years | Review work perform by Analysts, assist in the most complex tasks and train Analysts. |
Vice President (VP) | 3 – 4 years | Liaise between junior (Analysts and Associates) and senior (VPs and above). |
Director (D) | 3 – 4 years | Handle day-to-day interactions with the clients, start originating their own deals. |
Managing Director (MD) | As long as necessary | Handle strategic client relationships, generate new deals, develop and refine the bank’s coverage of leading companies in their industry focus. |
As one progresses to the Associate level, the base salary typically rises to between £80,000 to £120,000, again with the potential for an equivalent or greater amount in bonus.
As one moves up to Vice President (VP) and Director levels, total compensation (base salary and bonus) can range from £250,000 to over £500,000.
Finally, at the Managing Director (MD) level, the base salary typically starts at around £250,000, but the bonus component can be multiple times the base, leading to total compensation easily exceeding £1 million.
The first kind is a Spring Week Internship (also known as a Spring Insight Program), which typically takes place between March to May. These are short programs (about one to two weeks long) where students get an overview of the various divisions within an investment bank. These programs are mostly learning-oriented and include workshops, presentations, and networking events.
The next type is the Summer Internship, often between penultimate and final year of study. This is a more in-depth experience, usually lasting 8-12 weeks. Summer interns often work in a specific group, such as M&A, sales and trading, or research, and are given substantial responsibilities. They're also considered for full-time positions upon graduation.
Finally, there are Off-Cycle Internships. These internships are less structured and are usually available in the spring or fall, outside of the typical summer internship period. They can range from a few weeks to six months and can provide the opportunity to gain experience in a specific division of an investment bank. Off-Cycle internships are popular in Europe and are typically used by graduate students or by those who wish to gain experience in investment banking after having interned in a different industry. These internships can also lead to full-time job offers.
Recap: Investment banking internship formats
Internship Type | Duration | Objectives |
Spring Internship | 1 – 2 weeks | Discover the various groups and network with professionals. Usually, no formal work required from the interns, occasionally some group case studies presented to a panel of professionals. |
Summer Internship | 2 months | Perform actual Analyst work over a set period to convert into a full-time position. Common in London. |
Off-Cycle Internship | 3 – 6 months | Perform actual Analyst work over a set period to convert into a full-time position. Common in Continental Europe, less common in London. |
We will cover recruiting processes, preparation tips and application deadlines for the Spring and Summer internships in a separate article.
One popular exit path, particularly for Analysts and Associates, is to move into Private Equity (PE). The financial modelling skills, transaction experience, and deal-sourcing networks formed in investment banking transition well to PE, where the focus shifts from advising on deals to owning and managing companies.
Another common route is Venture Capital (VC). Investment bankers who have worked with high-growth sectors, like technology or biotech, may be well-suited to venture capital roles, where they will be involved in funding startups and other early-stage companies.
A move into Hedge Funds is also an option. Hedge funds value the financial modeling, valuation, and market understanding that investment bankers can bring to the table. However, the type of role and fund can vary significantly, from long-short equity funds that may resemble public-market PE roles, to global macro funds, where the skillset changes dramatically.
Corporate Development is a choice for those looking to work within a company, focusing on strategic acquisitions, joint ventures, and internal initiatives. In these roles, bankers use their deal-making skills to help drive growth and strategic initiatives within the company.
Transitioning into management consulting or strategy roles can also be a good fit, given that the problem-solving, project management, and client advisory skills acquired in banking align well with consulting needs.
Many investment bankers leverage their experience and network to start their own business. The comprehensive understanding of what drives a business, how to fundraise, and what potential buyers look for, can be invaluable for an entrepreneur.
Emma's day begins at 9 AM. Sitting at her desk, she checks the emails that came overnight, and begins refining a financial model for a client's potential acquisition target, adjusting for the latest earnings release. Her goal is to value the target company accurately and model different deal scenarios.
At 10 AM, Emma attends a meeting with her deal team, where they discuss the latest updates on their ongoing M&A transactions. Emma presents her findings from the financial model she's been working on.
Post the meeting at 11 AM, she starts drafting a section of a Confidential Information Memorandum (CIM) for a different deal after receiving some observations from the Vice President in the deal team. She works with the company's management to understand their business model and growth strategy, translating these into a compelling narrative for potential investors.
A quick lunch at her desk at 1 PM is followed by a conference call with a client in the United States at 1:30 PM, discussing the timelines for due diligence.
After the call, around 2:30 PM, she reviews a due diligence report for an ongoing sell-side mandate, identifying any red flags or potential negotiation points that could impact the transaction.
At 4 PM, she listens into a call with a potential buyer for another transaction, while the Director in the team is running the buyer’s team through the investment highlights and answering any preliminary questions they have about the business.
By 5:30 PM, she is back to her financial model, incorporating feedback from the morning meeting. She also begins creating a presentation for another client meeting scheduled for the next day.
Dinner is at her desk at 7:30 PM, while she discusses the day's developments with her fellow analysts.
Post dinner, around 8 PM, she takes some time to provide feedback to an intern who is assisting her with industry research.
She spends the remainder of her evening, from 9 PM to 11 PM, working on various tasks: updating deal logs, finalizing client presentations, and preparing for the next day's meetings.
Her day officially ends at around 11 PM, although there might be days when she must stay back longer to prepare for an important client meeting or work on an urgent deal.
Even though the hours are long and the job is demanding, Emma finds her role intellectually stimulating and enjoys the thrill of working on significant transactions that reshape industries.
Hi guys!
I thought I would post a guide to Investment Banking 101 - what it is, and roughly how investment banks are organized.
Feel free to comment and ask more questions, happy to discuss them here!
The unique role of investment banks is to connect the supply and demand of capital in its various forms, serving as intermediaries between those who have capital (such as investors or depositors) and those who need capital (like corporations or governments).
Recap: Investment banking connects supply and demand of capital
Category | Supply of Capital | Intermediary | Demand of Capital |
Typical players | Pension funds Sovereign wealth funds | Investment banks | Corporations Governments |
Such information often includes critical and confidential elements that are key in assessing the potential and value of a business, such as the business plan for a new plant that a large electric vehicles manufacturer would like to finance, the results of a clinical study showing that a promising new drug is working much better than expected, etc.
This particularly sensitive form of information that investment banks most often deal with is called Material Nonpublic Information (MNPI):
Therefore, all Investment banks have adopted a structure clearly articulated around an “Information Wall”, with a "public side" who has no access to MNPI, and a "private side" who regularly has access to MNPI. This division is an important practice to prevent conflicts of interest and maintain regulatory compliance.
Category | “Private” Side | Information Wall | “Public” Side |
MNPI access? | Yes | No | |
Trade or interact with financial markets? | No | Yes | |
Teams | Mergers and Acquisitions Restructuring Equity Capital Markets Debt Capital Markets Leverage Finance | Legal and Compliance | Sales and Trading Equity Research |
On the public side:
The generalist or full-service investment banks offer multiple products. They also typically leverage their balance sheet to lend money to their clients. These include:
A career in investment banking often begins as an Analyst, usually a role held by recent university graduates. With good performance and typically after two to three years, an Analyst may be promoted to an Associate position.
Associates take on more responsibilities, overseeing the work of Analysts and directly handling client relationships.
Further progression leads to Vice President (VP), Director (or Senior VP), and finally Managing Director (MD), who takes on significant client management and revenue generation responsibilities.
Recap: Investment banking career path and roles
Category | Years in Role to be promoted | Role and Responsibilities |
Analyst | 2 – 3 years | Perform market research, data mining, draft reports and presentation for clients, assist more senior members of the team with any requests. |
Associate | 3 – 4 years | Review work perform by Analysts, assist in the most complex tasks and train Analysts. |
Vice President (VP) | 3 – 4 years | Liaise between junior (Analysts and Associates) and senior (VPs and above). |
Director (D) | 3 – 4 years | Handle day-to-day interactions with the clients, start originating their own deals. |
Managing Director (MD) | As long as necessary | Handle strategic client relationships, generate new deals, develop and refine the bank’s coverage of leading companies in their industry focus. |
As one progresses to the Associate level, the base salary typically rises to between £80,000 to £120,000, again with the potential for an equivalent or greater amount in bonus.
As one moves up to Vice President (VP) and Director levels, total compensation (base salary and bonus) can range from £250,000 to over £500,000.
Finally, at the Managing Director (MD) level, the base salary typically starts at around £250,000, but the bonus component can be multiple times the base, leading to total compensation easily exceeding £1 million.
The first kind is a Spring Week Internship (also known as a Spring Insight Program), which typically takes place between March to May. These are short programs (about one to two weeks long) where students get an overview of the various divisions within an investment bank. These programs are mostly learning-oriented and include workshops, presentations, and networking events.
The next type is the Summer Internship, often between penultimate and final year of study. This is a more in-depth experience, usually lasting 8-12 weeks. Summer interns often work in a specific group, such as M&A, sales and trading, or research, and are given substantial responsibilities. They're also considered for full-time positions upon graduation.
Finally, there are Off-Cycle Internships. These internships are less structured and are usually available in the spring or fall, outside of the typical summer internship period. They can range from a few weeks to six months and can provide the opportunity to gain experience in a specific division of an investment bank. Off-Cycle internships are popular in Europe and are typically used by graduate students or by those who wish to gain experience in investment banking after having interned in a different industry. These internships can also lead to full-time job offers.
Recap: Investment banking internship formats
Internship Type | Duration | Objectives |
Spring Internship | 1 – 2 weeks | Discover the various groups and network with professionals. Usually, no formal work required from the interns, occasionally some group case studies presented to a panel of professionals. |
Summer Internship | 2 months | Perform actual Analyst work over a set period to convert into a full-time position. Common in London. |
Off-Cycle Internship | 3 – 6 months | Perform actual Analyst work over a set period to convert into a full-time position. Common in Continental Europe, less common in London. |
We will cover recruiting processes, preparation tips and application deadlines for the Spring and Summer internships in a separate article.
One popular exit path, particularly for Analysts and Associates, is to move into Private Equity (PE). The financial modelling skills, transaction experience, and deal-sourcing networks formed in investment banking transition well to PE, where the focus shifts from advising on deals to owning and managing companies.
Another common route is Venture Capital (VC). Investment bankers who have worked with high-growth sectors, like technology or biotech, may be well-suited to venture capital roles, where they will be involved in funding startups and other early-stage companies.
A move into Hedge Funds is also an option. Hedge funds value the financial modeling, valuation, and market understanding that investment bankers can bring to the table. However, the type of role and fund can vary significantly, from long-short equity funds that may resemble public-market PE roles, to global macro funds, where the skillset changes dramatically.
Corporate Development is a choice for those looking to work within a company, focusing on strategic acquisitions, joint ventures, and internal initiatives. In these roles, bankers use their deal-making skills to help drive growth and strategic initiatives within the company.
Transitioning into management consulting or strategy roles can also be a good fit, given that the problem-solving, project management, and client advisory skills acquired in banking align well with consulting needs.
Many investment bankers leverage their experience and network to start their own business. The comprehensive understanding of what drives a business, how to fundraise, and what potential buyers look for, can be invaluable for an entrepreneur.
Emma's day begins at 9 AM. Sitting at her desk, she checks the emails that came overnight, and begins refining a financial model for a client's potential acquisition target, adjusting for the latest earnings release. Her goal is to value the target company accurately and model different deal scenarios.
At 10 AM, Emma attends a meeting with her deal team, where they discuss the latest updates on their ongoing M&A transactions. Emma presents her findings from the financial model she's been working on.
Post the meeting at 11 AM, she starts drafting a section of a Confidential Information Memorandum (CIM) for a different deal after receiving some observations from the Vice President in the deal team. She works with the company's management to understand their business model and growth strategy, translating these into a compelling narrative for potential investors.
A quick lunch at her desk at 1 PM is followed by a conference call with a client in the United States at 1:30 PM, discussing the timelines for due diligence.
After the call, around 2:30 PM, she reviews a due diligence report for an ongoing sell-side mandate, identifying any red flags or potential negotiation points that could impact the transaction.
At 4 PM, she listens into a call with a potential buyer for another transaction, while the Director in the team is running the buyer’s team through the investment highlights and answering any preliminary questions they have about the business.
By 5:30 PM, she is back to her financial model, incorporating feedback from the morning meeting. She also begins creating a presentation for another client meeting scheduled for the next day.
Dinner is at her desk at 7:30 PM, while she discusses the day's developments with her fellow analysts.
Post dinner, around 8 PM, she takes some time to provide feedback to an intern who is assisting her with industry research.
She spends the remainder of her evening, from 9 PM to 11 PM, working on various tasks: updating deal logs, finalizing client presentations, and preparing for the next day's meetings.
Her day officially ends at around 11 PM, although there might be days when she must stay back longer to prepare for an important client meeting or work on an urgent deal.
Even though the hours are long and the job is demanding, Emma finds her role intellectually stimulating and enjoys the thrill of working on significant transactions that reshape industries.