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Investment Banking 101 Abelmann Bank - BYU - Marriott School

Investment Banking 101 Abelmann Bank - BYU - Marriott School






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  • Confirm source? Should this be included in every division presentation?
  • Confirm source? Should this be included in every division presentation?
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47 Add a defintion, as in previous M&A and IPO slide
  • 04/30/10 09:47 Add a defintion, as in previous M&A and IPO slide
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47
  • 04/30/10 09:47

Investment Banking 101 Abelmann Bank - BYU - Marriott School Investment Banking 101 Abelmann Bank - BYU - Marriott School Presentation Transcript

  • Investment Banking Division 2006
  • Abelmann Bank Divisions Fixed Income, Currency and Commodities Division Equities Division Investment Banking Division Merchant Banking Division Investment Management Division Legal, Compliance and Management Controls Division Executive Office Human Capital Management Division Global Investment Research Division Operations, Technology and Finance Division Management Committee
  • 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.”
  • Investment Banking Organizational Structure Investment Banking Division Investment Banking
      • Consumer / Retail
      • Financial Institutions
      • Financial Sponsors Group
      • Healthcare
      • Industrials
      • Latin America
      • Natural Resources
      • Real Estate
      • Telecom, Media & Technology
    Equity Capital Markets Investment Grade Capital Markets Leveraged Finance Municipal Finance New Products Derivatives
      • 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
  • Examples of How We Assist Clients
    • Acquisitions
    • Sales / Divestitures
    • Mergers
    • Leveraged Buy-Outs
    Mergers and Acquisitions 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 Financings General Financial Advisory
  • Investment Banking Division The Job Experience Financing Mergers & Acquisitions Equity Issuance Review capital requirements Due diligence, developing the story Preliminary valuation Drafting the prospectus Roadshow preparation Investor targeting Roadshow Indicative orders Building the order book Pricing Closing Phases Planning Investigation & assessment Preparation Marketing the company Determining value Completion Sale of a Business Review of owners’ objectives Business due diligence Preliminary valuation Writing the selling memo Prepare mgmt presentation Buyer contacts Buyer visits Preliminary bids Formal bids, negotiations Fairness opinion Merger agreement Closing
  • 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?
  • 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 Pricing Structure Preliminary Internal Approvals Negotiation and Due Diligence Documentation Preliminary Regulatory Approvals Others Final Approvals and Communications Final External Approvals and Communications
  • Leveraged Buyout (LBO) 5 years later $100 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. Debt $25 Equity $75 Debt $75 Equity $25
  • What Is Capital Markets? Capital Markets seeks to balance the interests of investors and issuers to achieve successful offerings Buyers/Investors Alliance Capital Fidelity Janus PIMCO Putnam Sellers/Issuers AT&T Wireless Freescale Deutsche Telekom General Electric State of New York Prudential Investment Banking Sales and Trading Chinese Wall High Price Low Price Capital Markets
    • Advice and Judgment
    • Products
    • Solicitation
    • Allocation
    • Pricing
    • Marketing
    • Aftermarket Support
  • 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
  • What Is Our Role in an IPO? Solicitation Internal Approval Due Diligence Preliminary Filing Structuring Roadshow Preparation Roadshow / Marketing Pricing and Offering Aftermarket Trading
  • The Investment Grade Bond New Issue Process A 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
    • 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
  • Role of an Investment Banker
    • Compare a client’s operations to that of its peers and communicate major differences
    • Operators who analyze internal processes and suggest opportunities for improvement
    • Understand all of the major items in legal agreements that will affect our clients
    • Lawyers who understand every comma and “whereas” in a merger agreement or covenant package
    • “ Sanity check” a company’s financials and use them to derive a valuation
    • Accountants that audit a company’s financial statements and sign-off on their validity
    • Analyze a company’s strategic position relative to peers and assess its viability going forward
    • Consultants that are tasked with analyzing market share, generating new product ideas, etc.
    But We Do… Investment Bankers Are Not…
  • Roles & Responsibilities Associate Vice President Managing Director Analyst Owns the Analytics/ Process Leads the Project Becomes the Trusted Advisor to the Client Analytics / Writing
    • 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
  • 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
  • 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 – 9:30am Evening: 5pm to ?? Mid-Morning: 9:30am – 12:00pm Afternoon: 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
    • 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?
    • Academics
      • Grades
      • Not Just Econ Majors
      • Test Scores
    • Extracurriculars
      • Leadership
      • Initiative
      • Energy Level
    • Job Experience
      • Responsibilities
      • Purpose
      • What Did You Learn
    What We Look For 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?