investment banking 101 abelmann bank - byu - marriott school
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Abelmann Bank Divisions
Fixed Income, Currency and Commodities
Division EquitiesDivision
Investment BankingDivision
Merchant BankingDivision
Investment ManagementDivision
Legal, Compliance andManagement Controls
Division
Executive Office
Human CapitalManagement Division
Global InvestmentResearch Division
Operations, Technologyand Finance Division
Management Committee
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Investment Banking Mission Statement
“Abelmann Bank’s Investment Banking Division identifies, structures and executes diverse and innovative public and private market transactions for corporations, financial institutions and governments.”
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Investment Banking Organizational Structure
Investment Banking DivisionInvestment Banking DivisionInvestment Banking DivisionInvestment Banking Division
InvestmentInvestment Banking Banking
InvestmentInvestment Banking Banking
Consumer / Retail
Financial Institutions
Financial Sponsors Group
Healthcare
Industrials
Latin America
Natural Resources
Real Estate
Telecom, Media & Technology
Equity CapitalEquity CapitalMarketsMarkets
Equity CapitalEquity CapitalMarketsMarkets
Investment GradeInvestment GradeCapital MarketsCapital Markets
Investment GradeInvestment GradeCapital MarketsCapital Markets
Leveraged Leveraged FinanceFinance
Leveraged Leveraged FinanceFinance
Municipal Municipal FinanceFinance
Municipal Municipal FinanceFinance New ProductsNew ProductsNew ProductsNew Products DerivativesDerivativesDerivativesDerivatives
Common Stock
Convertibles
Private Placements
Emerging Markets
Financial Institutions / FIG Structured Finance
Investment Grade
Liability Management
Bank Loan Capital Markets
Commodity Finance
High Yield Capital Markets
Leveraged Finance
Liability Management
Restructuring / Distressed Finance
Corporate Related
Energy and Public Power
Healthcare and Higher Education
Housing
Infrastructure
Public / Private Partnerships
Equity Derivatives
Municipal Derivatives
Swaps Marketing
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Examples of How We Assist Clients
Acquisitions
Sales / Divestitures
Mergers
Leveraged Buy-Outs
Mergers and Mergers and AcquisitionsAcquisitions
Capital Structure
Anti Raid
Dividend Policy
Ownership Configuration
Bankruptcy Restructuring
Business Strategy
Initial Public Offerings
Follow-On Offerings
Spin-Offs / Split-Offs
Private Placements
Bond Issuances
Bank Loans
Hybrid Loans
Convertibles
Recapitalizations
Derivatives
FinancingsFinancingsGeneral General
Financial Financial AdvisoryAdvisory
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FinancingFinancingFinancingFinancingMergers & Acquisitions
Equity IssuanceEquity Issuance
Review capital requirementsReview capital requirements
Due diligence, developing the storyDue diligence, developing the storyPreliminary valuationPreliminary valuation
Drafting the prospectusDrafting the prospectusRoadshow preparationRoadshow preparation
Investor targetingInvestor targetingRoadshowRoadshow
Indicative ordersIndicative ordersBuilding the order bookBuilding the order book
PricingPricingClosingClosing
Investment Banking DivisionThe Job Experience
Phases
Planning
Investigation & assessment
Preparation
Marketing the company
Determining value
Completion
Sale of a Business
Review of owners’ objectives
Business due diligencePreliminary valuation
Writing the selling memoPrepare mgmt presentation
Buyer contactsBuyer visits
Preliminary bidsFormal bids, negotiationsFairness opinion
Merger agreementClosing
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Mergers & Acquisitions
Buyer Strategic Rational
Macroeconomic trends
Enhancement of business model
Expansion of scale of operations
Revenue and cost synergies
Seller Strategic Rational
Realignment of strategic focus
Defensive move for long term survival
Monetization of value
Mergers and Acquisitions (M&A) - The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Does it make Financial Sense?What is the Optimal Transaction Structure?
Post-Merger Considerations?
Does it make Financial Sense?What is the Optimal Transaction Structure?
Post-Merger Considerations?
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What Is Our Role in an M&A Transaction?
Preparation Phase
Transaction Initiation
Design Phase
Negotiation Phase
Approvals/Closing
Preparation Transaction Initiation
Design Negotiation Approvals/Closing
Possible Problem
Identification
Strategic and Key Decision
Preparation
Communication Strategy
Development
Strategic and Key Decision
Preparation
Legal, Tax and structuring
Analyses
Valuation and Due Diligence Preparation
Deal and Legal Structuring
Initial Contact
Strategic Plan
Due Diligence
Valuation Refinement
PricingStructure
Preliminary Internal
Approvals
Negotiation and
Due Diligence
Documentation
Preliminary Regulatory Approvals
Others
Final Approvals and
Communications
Final External Approvals and
Communications
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Leveraged Buyout (LBO)
Debt $25
Equity $75
5 years later$100
Debt $75
Equity $25
Today$100
Use little equity and borrowed funds (leverage) to buy asset
Pay down debt over time
All excess returns accrue to the equity
IRR = 25%
Leveraged Buyout (LBO) - The acquisition of a business utilizing both debt and equity financing sources, with the debt component representing the more significant amount. The equity component is often contributed from a financial sponsor or private equity firm with the debt component raised in the bank loan and / or high yield financing markets.
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What Is Capital Markets?
Capital Markets seeks to balance the interests of investors and issuers to achieve successful offerings
Sellers/IssuersSellers/Issuers
AT&T Wireless
Freescale
Deutsche Telekom
General Electric
State of New York
Prudential
Buyers/InvestorsBuyers/Investors
Alliance
Capital
Fidelity
Janus
PIMCO
Putnam
Investment Investment BankingBanking
Sales and Sales and TradingTrading
Chinese WallChinese Wall
High Price Low Price
Capital MarketsCapital Markets
Advice and Judgment
Products
Solicitation
Allocation
Pricing
Marketing
Aftermarket Support
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Financing: Initial Public Offering (IPO)
IPO (Initial Public Offering) - Transfers a portion of a company’s ownership from a few private stakeholders to many public shareholders
Strategic Advantages
New Capital
Future Capital
Liquidity
Cashing Out
Employee Compensation
Strategic Disadvantages
Profit-sharing/Loss of Control
Loss of Confidentiality
Reporting and Fiduciary Responsibilities
IPO Expenses
Legal Liability
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What Is Our Role in an IPO?
Solicitation
Internal ApprovalDue Diligence
Preliminary Filing
StructuringRoadshow Preparation
Roadshow / Marketing
Pricing and Offering
Aftermarket Trading
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The Investment Grade Bond New Issue ProcessA Multi-Pronged Approach
Morning Market Update Call with
Client to Decide “Go or No-Go”
Announce Deal to the Market
Hold Investor Conference Call(If Necessary)
Release Price Talk and Confirm Orders
Price Transaction and Cross Treasuries with
Investors
A High Yield Offering follows a similar process although after the deal is announced there is typically a multi-day roadshow to market to investors
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• With a target market of over $400 billion in bond financings per year, the Municipal
Finance group serves U.S. based state and local governments, not-for-profit
institutions, universities and corporate issuers
• The Department operates under a three-pronged integrated approach, focused on
regional coverage, sector expertise, and product applicability
• In addition to the traditional governmental business, a substantial presence exists
in:-Public/Private Partnerships (Asset Sales)-Stadium Finance-Privatizations (Military Housing as example)-Project Finance
• We staff our efforts from offices in New York City, San Francisco, Los Angeles,
Seattle, Portland, Chicago and Houston
• Analysts help manage complex transactions, thereby developing financial
modeling, client relationship and new business generation skills
• Strong Municipal Finance candidates typically have a demonstrated interest in
finance, strong quantitative and writing skills and a love of politics
Municipal Finance
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Role of an Investment Banker
Investment Bankers Are Not… But We Do…
Consultants that are tasked with analyzing market share, generating new product ideas, etc.
Analyze a company’s strategic position relative to peers and assess its viability going forward
Accountants that audit a company’s financial statements and sign-off on their validity
“Sanity check” a company’s financials and use them to derive a valuation
Lawyers who understand every comma and “whereas” in a merger agreement or covenant package
Understand all of the major items in legal agreements that will affect our clients
Operators who analyze internal processes and suggest opportunities for improvement
Compare a client’s operations to that of its peers and communicate major differences
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Roles & Responsibilities
AssociateAssociate
Vice Vice PresidentPresident
Managing DirectorManaging Director
AnalystAnalyst
OwnsOwnsthe Analytics/the Analytics/
ProcessProcess
Leads the ProjectLeads the Project
Becomes Becomes the Trusted the Trusted Advisor to Advisor to the Clientthe Client
Analytics / WritingAnalytics / Writing
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• Internal Meetings
• Client Meetings
• Financial Modeling
• Competitive/Market Analysis
• Due Diligence
• Presentation Books
• Memorandums / Proposals
• Marketing Materials
• Road Shows
The Role of an Analyst Day to Day Tasks
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A Typical Day in the Life of a Banker
9:00am-9:30am: Arrive into work, check voicemails and meet with Team A Associate
9:30am-11:15am: Submit Team A book to WP, finish Team A model, review model w/ Associate
11:15am-12:00pm: Put together PIB, check WP’s edits; print 5 books for 12:00pm meeting
12:00pm-12:45pm: Meeting with Managing Director to discuss client book
12:45pm-1:30pm: Conference call w/ Assoc. and Vice President; process comments and submit to WP
1:30pm-3:00pm: Grab lunch, work on CSC, email Team A book to client for 3:00 meeting
3:00-4:30pm: Client meeting via conference call
4:30pm-8:00pm: Draft book for Team B, Meet with Team A Assoc. from Team A
8:00pm-11:00pm: Conference call with Team A VP, revamp analysis per VP’s comments
11:00pm-12:30am: Discuss analysis w/ Team A Assoc., finalize analysis and send to VP
12:30am-2:30am: Work on Team B analysis, check WP edits
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A Day in the Life . . . No Day is the Same!Capital Markets
Arrive between 7:00 and 7:30am. Breakfast! CCM: Attend IG/HY morning meetings to get
update on current business activity, new issue calendar, trading activity
ECM: Listen to morning call – updates on current business activity, research comments and ECM deal updates
Read news and sports headlines, check Treasury levels, Futures and economic releases for the day
Make out-going calls to clients, update them on market activity and discuss their current financing plans
CCM: Due diligence call for bond deal. Talk with syndicate desk to get updated pricing for potential acquisition financing
ECM: Confirm roadshow schedules / begin gathering feedback. Attend block trade meeting to discuss upcoming trade
Draft executive summary for upcoming pitch
Early Morning: 7:00am – 9:30amEarly Morning: 7:00am – 9:30am
Evening: 5pm to ??Evening: 5pm to ??
Mid-Morning: 9:30am – 12:00pmMid-Morning: 9:30am – 12:00pm
Afternoon: 12:00pm – 5:00pmAfternoon: 12:00pm – 5:00pm The real work begins! Continue working on client presentations Go to gym and grab dinner
Attend meeting with banking team to review presentation for meeting later in the week
CCM: Post clients via email/calls on Bernanke testimony and Treasury market reaction. Finalize term sheet for leveraged loan financing pitch. Work with Liability Management desk on tender/refinancing analysis
ECM: Continue calls to salesforce to further flush out valuation feedback. Work with traders to come up with bid for block trade after the close. Work with sales / sales traders on allocations for transaction that is pricing
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Solving Clients’ Most Important Strategic and Financial Issues
Exposure to Top-Level Decision Making/Senior Client Exposure
Fast-Paced Environment With Immediate Tangible Results
Ability to Make an Impact Early in One’s Career
Dynamic/Diverse Colleagues
Solid Business Foundation for Future Endeavors
Work Hard/Play Hard
Why Investment Banking?
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Academics Grades Not Just Econ Majors Test Scores
Extracurriculars Leadership Initiative Energy Level
Job Experience Responsibilities Purpose What Did You Learn
We look for well-rounded candidates who have excelled in three main categories:
Personal Characteristics Mature Team Oriented Self Motivated Detail Oriented Analytical “Passion”
Questions we ask ourselves Is this person a good fit for
Abelmann Bank? Is Abelmann Bank the right
environment for this person? Will this person grow and thrive at
Abelmann Bank?
What We Look For