InvestmentBanking

PresentationattheUMassBostonCollegeofManagement

March25,2009

OrganizationofaTypicalFinancialServicesCompany

StanleyMorgan,Inc.

InvestmentBanking

SalesandTrading

PrincipalInvesting

Wealth/AssetManagement

3/24/09 1UMassBostonCollegeofManagement

Presentation

InvestmentBanking

StanleyMorgan,Inc.

InvestmentBanking

CorporateFinance

M&A

EquityCapitalMarkets

DebtCapitalMarkets

SalesandTrading

PrincipalInvesting

Wealth/AssetManagement

3/24/09 2UMassBostonCollegeofManagement

Presentation

PrincipalInvesting

StanleyMorgan,Inc.

InvestmentBanking

SalesandTrading

PrincipalInvesting

VentureCapital

LBOFundWealth/AssetManagement

3/24/09 3UMassBostonCollegeofManagement

Presentation

Wealth/AssetManagement

StanleyMorgan,Inc.

InvestmentBanking

SalesandTrading

PrincipalInvesting

Wealth/AssetManagement

PrivateClientServices

MutualFunds

Research

3/24/09 4UMassBostonCollegeofManagement

Presentation

WhatDoInvestmentBanksDo?

•  Helpcorporateclientsto:①  Raisecapital②  Considerandexecutemergers,acquisitionsor

sales

3/24/09 5UMassBostonCollegeofManagement

Presentation

InvestmentBankingServices

CorporateClient

InstitutionalInvestors

M&ATargets/Buyers;

JVPartners

M&A

ECMSDCMS

“Execution”Groups

CorporateFinance

InvestmentBank

3/24/09 6UMassBostonCollegeofManagement

Presentation

RaisingCapital

•  Firmsoftenneed/wanttoraiselargeamountsofcapitalbyissuingdebtorequity– Toacquireanothercompany– Toundertakeanewinvestmentproject– Tochangetheircapitalstructure

•  The“CapitalMarketsServices”departmentofaninvestmentbankprovidesthisservice

3/24/09 7UMassBostonCollegeofManagement

Presentation

RaisingCapital:CapitalMarketsServices

•  EquityCapitalMarketsServiceshelpscompaniesissuenewequity(commonstock,preferredstock)

•  DebtCapitalMarketsServiceshelpscompaniesissuenewdebtproducts(bonds,notes,debentures,convertiblebonds…)

3/24/09 8UMassBostonCollegeofManagement

Presentation

RaisingCapital:Underwriting

•  Whatisunderwriting?– Purchasinganentirenewissuefromaclientwiththeintentofsellingittoinvestors(foraprofit)

•  Whatarethebenefits?– Takesriskofftheclient’shands– Promoteswidedistributionoftheissue– Resultsinaprofitforthebankifdonewell

3/24/09 9UMassBostonCollegeofManagement

Presentation

AdvisoryServices:M&A

•  Apurchase,sale,mergerorjointventureisoftenaverycomplicatedprocess

•  Investmentbanksadvisecorporateclientsonallstepsofthisprocess:–  Thedecisionthatapurchase,sale,mergerorJVisdesirable

–  Theidentificationofatarget/buyer/partner– Analysisofthefinancial,legalandaccountingaspectsofthedeal

–  Raisingofcapital(ifnecessary)–  Executionofthedeal

3/24/09 10UMassBostonCollegeofManagement

Presentation

AdvisoryServices:CorporateFinance

•  CorporateFinanceistheliaisonbetweenthebankandthecorporateclient

•  Typically,firstcontactsandexploratorymeetingsoccurwithCorporateFinance

•  Iftheclientwantstoexploreaspecifictransaction,CorporateFinanceshepherdstheprocessthrough– GetpeoplefromM&AorCMSinvolved– Coordinatetheanalysisandexecutionofthedeal

3/24/09 11UMassBostonCollegeofManagement

Presentation

InvestmentBankingServices

CorporateClient

InstitutionalInvestors

M&ATargets/Buyers;

JVPartners

M&A

ECMSDCMS

“Execution”Groups

CorporateFinance

InvestmentBank

3/24/09 12UMassBostonCollegeofManagement

Presentation

WhatWouldYouDOatanInvestmentBank?

•  Entrylevelpeopleare“Analysts”

•  Jobdiffersfromdepartmenttodepartmentbuttherearesimilarities

3/24/09 13UMassBostonCollegeofManagement

Presentation

CorporateFinanceAnalyst

•  Conduct“comparablecompanyanalyses”– Determinehowwellyourclientisdoingrelativetoitscompetitors

–  Involvesmakingaspreadsheetofstatisticsusinginformationfromcompanies’financialstatements

– Alsoinvolvesmakingexhibits(graphs/charts)summarizingimportantinformation

– Theseareusedtolookforwaysthecompanycouldimproveitsstanding

3/24/09 14UMassBostonCollegeofManagement

Presentation

CorporateFinanceAnalyst

•  Conducthypotheticaldealanalyses– E.g.potentialmerger/acquisition•  Createamodel(spreadsheet)thatprojectstheclient’sfinancialstatementsforthenext10yearsundervariousmerger/acquisitionscenarios•  Typically,yourbosseswouldhelpyoutodeveloptheassumptionsthatyoubaseyourprojectionsonandyoucrunchallthenumbers.

– E.g.potentialequityoffering•  Createamodelthatshowswhatthecompany’sfinancialswouldlooklikeifitundertooktheoffering

3/24/09 15UMassBostonCollegeofManagement

Presentation

CorporateFinanceAnalyst

•  Meetingsandroadshows– Often,analystsareinvitedalongtothemeetingsinwhichvariousdealideasarepitchedtoclients

–  Ifaclientdecidestoissuenewequity,theytypicallytravelaroundtryingtoconvinceinvestorstoinvest.Analyststypicallygoalongonthese.

3/24/09 16UMassBostonCollegeofManagement

Presentation

M&AAnalyst

•  Spendalmostallofyourtimebuildingextremelydetailedmodelsprojectingacompany’sfinancialsintothefutureundervariousM&Ascenarios.

•  ThisinvolvesextensiveworkonExcel,andtheneedtodevelopafamiliaritywithfinancialaccounting—bothingeneralandspecificallywithrespecttoM&Alaw.

3/24/09 17UMassBostonCollegeofManagement

Presentation

CMSAnalyst

•  Youspendmostofyourtimeontwothings:– Workingonmodelstotrytodeterminewhatpricethebankshouldpurchasetheofferat

– WorkingonhelpingtofigureoutwhichInstitutionalInvestorswillwanttobepartofthegroupthatpurchasestheissue,andwhatpricetosetforthatsale

•  ECMSanalystsoftengoonEquityroadshowsaswell

3/24/09 18UMassBostonCollegeofManagement

Presentation

WhyDoAnalystsWork100HourWeeks?

•  Muchofthecompetitiveadvantageofinvestmentbankscomesfrominterpretinginformationwell

•  Thisrequirescollectingandprocessinglotsofinformation

•  Analystsaretheonesthatdomostofthis•  And,sinceyou’resalaried,itdoesn’tcostyourbossanyextratoaskyoutorun10ratherthan2scenarios…

3/24/09 19UMassBostonCollegeofManagement

Presentation

InvestmentBanking:SomePros&Cons

•  SomePros:•  Goodeducationinthefinancialsideofbusiness•  Goodspringboardforotherfinancialjobs•  Helpspresentationskills•  Intenseworkenvironment—goodexperience

•  SomeCons:•  Intenseworkenvironment—longhours•  Dangerofbeingusedasadrone•  Involvesonlythefinancialsideofbusiness•  Fairlyrigidhierarchicalstructure

3/24/09UMassBostonCollegeofManagement

Presentation 20

Q&A

3/24/09UMassBostonCollegeofManagement

Presentation 21

InvestmentBanking:SomeCons

•  Intenseworkenvironment—longhours•  Involvesonlythefinancialsideofbusiness

3/24/09UMassBostonCollegeofManagement

Presentation 22