Can I Move From Back Office to Front Office at an Investment Bank?

I read this article from the Wall Street Journal today titled 'Breaking Into the Finance Field' by Elizabeth Garone (http://online.wsj.com/article/SB10001424052702304023804575566080808274148.html?mod=WSJ_Careers_CareerJournal_4) and I thought it was a great reminder about the difficulty candidates face in trying to make the jump from back office to front office work at an investment bank. It also should be a great reminder to start planning your career path now. This is extremely important at investment banks because of the polarized stigma of back office versus front office work.

A KEY TO REMEMBER: If you want to do M&A, LBOs, etc....do not take a job in IT, Compliance, or any other department at the investment bank because you think that is how you are going to get your foot in the door.

It just does not work that way at an investment bank, whether you agree with it or not or it does not seem to make sense, it's just the way it is. It is not as simple as other industries in many respects because it is extremely competitive and investment banks are looking for the cream of the crop. If a candidate accepts a position in back office, MDs, VPs, Associates and HR interprets this to mean that the candidate is indeed not the cream of the crop and it will hurt the candidates chances. Instead plan on going in directly as an analyst or an associate to an investment bank. This is how you start off in an investment bank.

The key is to get a job as an analyst right after undergrad or as an associate after an MBA. Remember that as an undergrad the process starts in the sophomore and junior years depending on which college and region you are living in and it starts the first week of graduate school as an MBA.

REMEMBER THE 7 P's:

1. Prior
2. Proper
3. Planning
4. Prevents
5. Piss
6. Poor
7. Performance

Happy Holidays!

The Sell Side

So it has been a while since I have written a post. It is good to be back and add another update to the blog. Today I want to write about the 'Buy Side'. During many investment banking interviews, especially as a college junior looking for a summer internship, expect to be asked if you want to work on the 'buy side' or the 'sell side'. This is considered a very basic question and one that if you get wrong will demolish your chances of getting an internship. It will show that you are not prepared and do not understand the fundamentals of what an investment bankers spend a 100+ hours a week doing. The answer to the question is you want to work on the 'sell side'!

Let's take a look at why investment banking is considered to be on the sell side. The job of an investment banker can easily be compared to that of a real estate agent with a major difference in one aspect being that investment bankers are brokering the buying and selling of businesses and real estate agents are brokering the buying and selling of homes. Businesses and companies around the world are constantly looking to buy and sell other businesses and want a market 'expert(s)' to help them know how much to pay for the company, if they are buying, or how much they should sell for if they are selling.

Just as home owners need a list of potential buyers to come 'walk through' the home and place bids on the property, so do companies need potential buyers to 'tour' their business. Investment bankers help to bring both parties together. To be as effective and efficient as possible, bankers specialize in many different areas. Thus bankers with a big book of contacts that specialize in different areas are constantly being recruited by other banks and are regularly on the move from bank to bank over the course of their career.

The bulge bracket investment banks typically specialize in many different industries, regions, and products. The following information is taken from Morgan Stanley's website (http://www.morganstanley.com/institutional/invest_bank/index.html)

Industry Coverage

• Basic Materials
• Consumer Goods
• Communications
• Energy
• Financial Institutions
• Financial Sponsors
• Healthcare
• Industrials
• Power and Utilities
• Real Estate
• Retail
• Technology
• Transportation

Products

• Mergers and Acquisitions (Includes acquisitions, divestitures, mergers, joint ventures, corporate restructurings, recapitalizations, spin-offs, exchange offers, leveraged buyouts and takeover defenses as well as shareholder relations)
  
• Global Capital Markets (Includes IPOs, debt offering, leveraged buyout; originate, structure and execute public and private placement of a variety of securities: equities, investment-grade and non-investment-grade debt and related products)
  
• Securitized Products Group (Includes structuring, underwriting, and trading collateralized securities across the globe)
  

Regional Coverage

• The Americas
• Asia Pacific
• Europe
• Africa

As you can see by the many different industries, products, and regions, it is very easy for investment banking teams to begin to specialize in any number of specific areas. As an incoming analyst you will not be expected to know what you want to do in life, but you should have areas of interest. For example, you should know and have a reason for being more interested in healthcare versus power and utilities or if you are more interested in M&A versus leveraged buyouts. This could be because your dad or grandpa was a surgeon and your grew up around healthcare or you have always been interested in science and physics and find utilities to be fascinating.

Here is a link to a pdf of four case studies on RBC Bank's website (The link works when you copy and paste it in a new window): www.rbcbankusa.com/corporate/file-156518.pdf

These case studies should give you a good idea of how an investment bank tries to sell their services to potential CEOs and management teams. A key to note here is that even though investment banking is considered to be the 'buy side' from a high level, within the buy side bankers represent both buyers and sellers, thus creating buy side and sell side relationships depending on their client's objectives. Don't let this confuse you.

Hopefully this post provides a high level of understanding and perspective about what investment bankers do. If you have additional questions please send me an email at info@ibdprep.com.