An investment banker is an individual who works in a financial institution that is primarily in the business of raising capital for companies, governments, and other entities. They might also work in a large bank’s division that is involved with these activities, often called an investment bank.
Investment bankers may also provide other services to their clients such as mergers and acquisition advice, or advice on specific transactions, such as a spin-off or reorganization.
In smaller organisations that do not have a specific investment banking arm, corporate staff may fulfil the duties of investment bankers.
In simpler words, investment bankers are people who are good with the jugglery of money. They work at financial institutions (government banks, private banks, etc.) and through their knowledge of the money market raise capitals.
An investment bank is typically a private company that provides various financial-related and other services to individuals, corporations, and governments such as raising financial capital by underwriting or acting as the client’s agent in the issuance of securities.
How does an Investment Banker benefit clients?
Investment banking runs on a simple concept of money management with the return being so impressive that it invites more investment simultaneously. It’s a cycle that runs on its own, provided the road does not end.
By saying this we mean that investment banking is a study of the market that requires an updated knowledge of the nuances of the market.
Hence, when a person consults an investment banker he/she gives them their capital in the form of an investment that would beget profits at their time of maturity.
To put simply, investment banks help companies or governments raise capital through debt and/or equity financing. The capital markets are a fast-paced, high-stakes and highly regulated environment, so it really pays to have professional bankers navigate the process.
For example, investment banks helped Facebook, Inc. go public in 2012 and assisted Comcast Corporation when it bought NBC Universal Media from General Electric in 2013.
As a financial professional, investment bankers lead a very lavish lifestyle travelling in jet planes and staying at 5 stars. But behind all that is the power of their brains that charges all these luxurious affairs.
In a way, the work of an investment banker is that of an adviser, but whereas financial advisers are only consulted for advice, an investment banker is a complete package that takes care of your money and after a promised time span provides you with more capital than you invested.
Responsibilities of an Investment Banker
Investment bankers may act as portfolio managers or financiers. These professionals typically work in an office setting but may travel to a client’s workplace in order to conduct meetings and presentations.
For example, some investment bankers may meet with clients to arrange and negotiate large financial transactions for businesses looking to expand their operations.
Investment bankers working as portfolio managers use money pooled from multiple clients to buy and sell assets to earn a profit. Duties include researching market trends and deciding where to invest capital.
They are responsible for overseeing multiple investments in the portfolio to balance the risk of loss against potential profit – diversification is the king! Portfolio managers may handle a portfolio individually or as part of a team of investment professionals.
Investment banking financiers work with businesses to help them with budgetary issues. This may include raising money for new ventures or streamlining business costs by identifying areas of excessive spending. These professionals generally specialize in an industry like energy, healthcare, or technology.
Eligibility Criteria to become an Investment Banker
A bachelor’s degree in business administration or a related field like finance is required to become an investment banker, though many employers prefer or require a master’s degree.
Because these professionals use mathematical models to predict potential outcomes, most undergraduate programs require students to complete courses in calculus and statistics.
Advanced courses in these majors generally cover concepts ranging from mergers and acquisitions (M&A) to financial accounting. Due to keen competition for jobs, students are generally advised to complete an internship prior to graduating.
Internships allow students to work within an investment bank, analyzing assets and portfolios using valuation models. These positions help students hone their analytical skills, as well as network within the field.
Connections made during internships can help aspiring investment bankers secure a job after graduating.
Career as an Investment Banker
An investment banker isn’t usually an entry-level position. Instead, college graduates typically begin as analysts and work with an associate or more senior-level managers. Analysts assist in the research and study of market data and industry trends.
Some firms prefer candidates who have analytical experience within a given job description like M&A. Firms may prefer to hire applicants who have earned an advanced degree, like a Master of Business Administration (MBA).
Often lasting one to two years, MBA programs typically cover topics ranging from strategic management to asset analysis. Students may also be given the opportunity to work on projects for different firms, allowing them to gain an advanced insight in the field.
A day in the life of an Investment Banker
Hi, I’m an investment banker and I work for an agency where the profits of my clients measure the success which I am worth. I work 7 days a week.
On the first day on the job, I learned that this was not just a job, but a 24/7 personality referred to as the investment banker. I was like a doctor, except I was ALWAYS on call.
7:00 AM: My eyes blink open and I immediately grab my Blackberry. I’d only gone to sleep at 5, after an important call with the client on the other side of the world, but I still have four new emails from different MDs/Directors/VPs who have reviewed a version of the materials sent out the night before.
Most of them pertain to rewording text, questions about how the model is running or checking the underlying assumptions, as well as a tweak in potential acquisition targets. I shoot out the ones that require a short reply and head to the shower.
9:15 AM: I reach office and a junior analyst shares the prospectus he’s drafted for a Silicon Valley unicorn about to go public. For an IPO, it is our job to ensure that the figures are accurate and the language legally perfect.
For this, we scrutinize every word and then make hundreds of photocopies (seriously, for some M&As, sometimes we open a new room just for photocopies.)
11:45 AM: I take a break to reply to some more emails, and then switch to mind-numbing spreadsheets. One of our Fortune 500 clients is looking to raise some capital from private equity investors and I have to dress up their valuation.
Investment bankers are great at predicting what a business is worth. For this, we use a valuation method called Discounted Cash Flow, which shows us how attractive an investment opportunity is.
This is a big responsibility because even if we tweak a variable or assumption, the company’s worth jumps from Rs. 100 crore to Rs. 1,000 crore. I have to be wide awake for this one.
1:00 PM: I take a break for lunch and send out the Non-Disclosure Agreements (NDAs) to ensure confidentiality for the sale to all the stakeholders in the buying and selling party.
We often joke around about the NDAs because they’re impossible to enforce. However, both parties want to cross their t’s and dot their i’s. If nothing comes of the discussion, they want to protect their employees and trade secrets.
3:00 PM: One of our Managing Directors is on another continent to meet the top brass of a company we’re pitching. Without blinking, he requires me to send the Briefing Book ASAP because he doesn’t know jacks**t about it. It’s a physical book and impossible to FedEx, so we start scanning and making a PDF.
And they told me this job will be glamorous.
5:00 PM: The CFO of the private equity deal sends me the updated financial statements and other information. That was quick enough – I have been after him only for a week.
The VP on the deal asks me to incorporate the updated info in our models and other material ASAP so that we can send it to the buyers.
This is going to be an all-nighter again.
11:00 PM: I catch up on some Game of Thrones, answer more e-mails, share the updated model with the CFO to sign-off, refresh some slides for another client, and send them out.
Pursuing a career as an Investment Banker is a big task. You require a lot of patience for that. We hope this article has answered all your queries related to this profession. Have your say in the comment box below. Enjoy Reading!