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Investment Banking Questions Investment Banking Questions Document Transcript

  • The Wharton Finance Club A First Year’s Interview Guide for Investment Banking This guide was prepared by Himanshu Bahuguna and Vivek Iyer (WG07) on behalf of the Wharton Finance Club in Nov, 2005 with inputs from Ashley Conn, Ian Patel, and Keith Rabkin (WG06). The Wharton Finance Club would also like to thank the Communications Department and MBACM for their contributions. This guide is intended for the sole use of Wharton Finance Club (MBA) members.
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 1 Introduction 1.1 General Introduction to interviews The majority interviews for Investment Banking are held in DIP week but your preparation should begin earlier. This guide is to help first-year students navigate the interview process and make sure they are well prepared. This is not, however, the definitive guide to interviewing and you should consult other resources at Wharton to ensure you are well prepared. These resources don’t just include those set out in Section [xx] of this document but also include ex-investment banking analyst in your first year class, second years (in particular your Finance Club mentor) and the numerous resources offered by MBA Career Management. Be sure to consult these resources well in advance to avoid a last minute panic. Also, remember that when dealing with other students, particularly second years, “use, don’t abuse” their time. 2 The Interview Process 2.1 The Interview Schedule Interview schedules for most bulge bracket banks and some boutiques will be as follows.; Group 1 Group 2 1st round Monday Tuesday 2nd round Thursday Wednesday Final offer Friday Friday You will schedule your first round interview(s) well in advance of DIP week via the MBACM website process. Be sure you know this process well in advance of when you can sign up for interviews. The second round of interviews is a little less structured. If you progress to the second round the banks will give you a telephone call. The banks could call you at any time between the end of business on the day of the first round interview up to the night before the second round interview. When banks contact you to arrange a second round interview they are required to offer you the choice of up to two slots. In order to ensure you obtain your optimal second round interview time slot be sure to have you diary with you at all times during the week and keep your cell phone with you and on at all times (except in the interview room during an interview!). Companies that interview during DIP are not allowed to make any offers before 9am (EST) on the Friday of DIP. Page 2 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 2.2 Managing interview scheduling When are you at your best? Establish what part of the day you are at your best and try to schedule your interviews for these times. Ask yourself are you a morning person? Or do you often suffer a “post lunch coma”? This may tell you a lot about the best time to schedule your interviews. Some people like to schedule first a few interviews with employers who are lower down on their preference list. This lets students “get into the swing” of interviewing before they have to interview with their preferred banks. You may also learn some useful lessons from these early interviews. Please keep in mind that we are one community at Wharton. Therefore, in the interests of student co-operation if a student asks you to change interview slots because of a conflict they cannot avoid, try to be accommodating – you never know when you will be on the other end of the request. Manage schedules with location in mind Another aspect to consider while scheduling interviews is the interview location. During DIP week all interviews will be held in Philadelphia with the majority held on campus. Take note of the exact location and the travel time between locations before scheduling interviews too close together. Count on it snowing during DIP week and factor that into your travel time. At the time of writing this interview guide MBACM informed the Finance Club that students will not be able to view the location of an interview (first round) until after the student has selected a time. MBACM is looking at ways to improve this system. However, for second round interviews you will be told of the location when you receive the call back phone call. Second round interviews tend to be held in hotels. Super day interviews Some banks (typically regional banks and boutiques) might schedule ‘super days’ after DIP week at their office in addition to the regular interviewing process on campus. These could be for one more final round of interviewing / meeting more people from the bank, or could be to choose specific groups for the summer once an offer has been made. 2.3 Interview types An interview with a set of interviewers usually lasts for around 30 minutes. As such, if you have an interview scheduled for an hour, it is likely that this will be either two 30 minute interviews or possibly three 20 minutes interviews. Page 3 of 21 View slide
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club There is no strict rule about the type of people who interview you in the particular rounds. However, as a general point you are more likely to be interviewed by Associates and VPs in the first round and then by Senior Associates, VPs, Directors and/or Managing Directors in the second round. Although it is perfectly possible for a Managing Director to conduct first round interviews and for Associates to be involved in final round interviews. It is likely you will be interviewed by some people you have meet during the recruiting process but the banks also usually want a “fresh set of eyes” to consider your candidacy. As such expect to be interviewed by people you have never met before. The majority of people interviewing you tend to be Wharton alumni and therefore understand the concepts of learning teams and the MBA curriculum. You can therefore expect to be asked questions about these feature of life at Wharton – for instance “what feedback did your learning team members provide to you?”. Be aware that if you are recruiting for the bank that gives you a division specific offer immediately after DIP week that the people from your division of interest will be highly interested in interview you. You should therefore have some clear answers in mind as to why you want to work in that particular division. You should also get to know these people well in advance of DIP week. Interviews usually follow a specific format and below are some examples of interview types (these are not mutually exclusive); Two-on-One or One-on-One As the name suggests, there could be two bankers (most common) doing the interview or one banker. Although uncommon, it is not unheard of for three bankers to be in the interview (more of a possibility in the second round). During the interview be sure to address your answer to all people in the room. They all have a say in your performance during the interview. Technical, Behavioral or Fit Interview questions could be selected to test a candidate’s technical skills or test how the candidate will react to teamwork and other Associate role specific situations. Questions could also be trying to identify if a candidate is the right fit for the banks culture. For technical questions, FNCE 601 and first semester accounting cover the majority of the topics that you will be expected to know. ‘Walk me through your resume’ Some interviews start and end with a complete discussion of the resume. This format is open-ended and it allows you to structure your interview and lead the interviewer into aspects of your resume that you want to highlight. Page 4 of 21 View slide
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club Good-cop, Bad-cop This is a rare interview format but has been seen in the past during banking interviews. In this format one banker will choose to play bad cop with the intention of making you uncomfortable with his/her line of questioning while the other banker will play good cop trying to engage you in a positive discussion while helping you along the way. An interview may also take on a hostile atmosphere with the interviewer asking you questions in an aggressive tone. In most cases it is not necessarily because the interviewer does not like you or your responses rather they are trying to test how you perform under pressure. Be sure to keep calm and calculated through these difficult sessions and remember that it is not personal. Generally 1st round interviews tend to be more technical while 2nd round interviews focus more on ‘fit’ based questions. In summary, one can never predict exactly what format or people one will face during the interview and hence it is important to prepare well for any situation you might face. 3 Preparation 3.1.1General Comments Preparation is the key for interviews. Preparation should be horned at delivering your message about your distinctive strengths in a timely manner. However, make sure that you are not so well prepared that your answers seem robotic. Wharton students have a reputation as being very strong interview candidates but the most common criticisms is that they are often too well prepared and their personalities fail to come across. The people who tend to do well in the interview process are those who stay relaxed and allow their personalities to come through. This allows students to make a connection with their interviewers. Remember it is not the bank that is selecting you, it is the person on the other side of the interview table. 3.1.2Preparation before DIP Week The follow are some of the ways you can prepare yourself well ahead of DIP week: • Career Path – Career Management has published (available for download in the Career Management web-site) a guide for navigating through the “Career Path” web-site. Be sure to read the document carefully and submit resumes and cover letters to banks of your choosing • Make a one page summary (cheat sheet) on each bank to be your quick reference guide. It should include information such as the names of the people you met and interesting comments they made Page 5 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club during the recruiting process, the name(s) of the recruiting captain(s) for the bank, the deals they have recently been involved in and what type of program they have (summer and full time). These summary pages are useful tools to read over while in the waiting room before your interview. • Have a clear timetable for your interviews written up so the information can be at your fingertips during DIP week. Include all the information about where, which firm and time. • Carry the contact phone numbers for the MBACM front office and the HR contact person of the bank. It is important to call and inform the recruiter if you are running late for an interview (needless to say that you should void being late). • Once you make the 1st round interview list some banks will allocate you a mentor for the interview process. Consult this person to establish who will be interviewing you and find out the background for your interviewer if you have not met them before. Your mentor is also a useful resource to ask about who you may end up interviewing with in the second round and where the location is likely to be. • Visit all of the locations where your interviews are scheduled to be held to make sure you know how to get there. • Have lots of singles ($1 notes) for taxis you may need to catch. This saves you having to wait for change when you may be pressed for time. • Read the Wall Street Journal in the weeks leading up to DIP. You don’t need to be an expert about everything but you should be at least aware of major events/deals. • Have a few questions prepared. At the end of the interview, there is likely to be an opportunity to ask questions. It is not completely necessary to ask questions but if you have a few questions prepared it might help prevent an awkward silence in the interview. 3.1.3Making Your Story/Pitch Every question in an interview is an opportunity for you to tell the interviewer something about yourself. Clarifying in your own mind your 3 to 4 major marketing points is key to making your answers poignant and delivering a clear and concise message. When considering your key marketing points focus on how these points fit with the role of an Associate: • What are your transferable skills to investment banking? • Are there significant accomplishments in your previous job? • Is there something unique in your background such as a significant accomplishment that distinguishes you? It is useful to think of three or four anecdotes/stories about your previous experience. Having these clear in your mind will help you answer question in Page 6 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club a timely manner and avoid uncomfortable silences while you search your mind for an answer. Remembering this simple framework will help you to stay focused on communicating your message while answering questions. 3.1.4Tips for the Day of the Interview The follow are some of the ways you can prepare yourself for the interview day: • Make sure you have a good nights sleep the night before and probably even the few nights before. • Counting on it snowing that day and prepare yourself accordingly. Women may need to wear outdoor shoes to arrive at the interview and then change footwear. • Take along some music to listen to, if that helps you relax. • Do not take your cell phone into the interview room. Leave it in the waiting room in your separate bag. • Arrive early and, if you don’t already know, check who your interviewer is going to be. All of the interviewers’ business cards will be posted on a board at the interview location. Use some of this time before the interview to memorize the people’s names. It is best to address people by their names once they have introduced themselves to you. Remember this for when you leave the interview. • Take a simple black folder/portfolio into the interview (similar to the one you would have received at the Finance Conference). In it keep a plastic sleeve with spare copies of your resume, a pen, writing paper and a few spare business cards – just in case. There will be a general meeting area at the interviews location where you can leave a larger bag/briefcase and coat so you don’t need to take it into the interview room. • Don’t drink too much caffeine during the day. The banks are likely to offer tea, coffee and soda at the interview locations. Just make sure you don’t over consume and become a nervous wreak. • Carry breath mints and an energy bar(s) in your bag/briefcase. • Make sure you eat to keep your energy levels up. You are likely to be nervous and as such you are not likely to feel hungry. However, you do need to keep you energy levels high throughout the day and eating properly goes a long way to lasting all the way through the day. • Asking for water in between interviews is acceptable. • Send thank you emails as soon as you can that day. Decisions are made quickly during DIP week (usually that night) and a follow up thank you email is a simple way to keep you name front of mind. 3.1.5 Calming Your Nerves Page 7 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club Being nervous before an interview is a typical human response, however, there are ways to control your nerves. The following are a few tools and websites with useful tips for handling nerves before and during an interview: • Practice, practice, practice. You are probably tired of reading about practicing your interviewing technique but it is the best way for you to become comfortable with an interview and curer those nerves. As mentioned previously, try to simulate the exact interview environment and experience as much as possible when you practice. • Breathe to relax. You want to breathe from the stomach muscles and not the chest. This is called diaphragmatic breathing - you slowly inhale (5 secs) using the diaphragm muscles (the muscle below the rib cage) and then exhale (5 secs). Done correctly, this has a calming effect and no one can tell that you are doing it. • Just remember that life will go on after DIP week, it is not the end of the world! Keeping a little perspective will help lower your anxiety level. • Stay positive throughout the interview process. Have some confidence in your ability during an interview – after all you were admitted to Wharton! Useful websites include: http://interview.monsterindia.com/interview/ic251001_010/ http://www.collegegrad.com/jobsearch/16-12.shtml Follow the "Next" prompt for more information. http://interview.monster.com/articles/nerves/ http://www.navis.gr/manager/ivw_stra.htm 3.1.6International Students International students (particular those for whom English is not their first language) face some additional challenges when interviewing for US based positioned. However, many students have successful been able to frame their international experience into a distinct advantage during an interview. The following is some of the important considerations for international students: • Practice is all the more important. Try to practice with native English speakers (eg people on your learning team or those you have gone to EISs with). Some students have made a contract with themselves to only speak English in January or during the weeks leading up to DIP week, particular when spending time with their fellow countrymen and women. • Be ready to market yourself. Americans are notoriously great self promoters while self promotion is often frowned upon in other cultures. Page 8 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club Practice marketing your strengths with some of your American classmates if you feel uncomfortable about promoting about yourself. • Be more direct. Americans have a reputation for being direct and to the point where as some international students have been criticized for being too long winded with their answers. Avoid putting the answer to a question at the back of an explanation. Preferably answer the question in its simplest form upfront and then provide an explanation. • Provide positive rather than negative answers. For instance, “I love Barcelona” is better than “I don’t like Real Madrid”. • If you don’t understand a question fully ask for clarification. Seeking clarification on a question is much better than providing an answer that does not match the question. Useful ways to ask for this clarification include: “Could you please clarify your question?”. “Could you please be more specific?” or, “Could you please re-phrase the question?”. • Don’t be apologetic for your accent. If an interviewer has not understood your answer and you think it is because of your accent, simply re-answer making a greater effort to make yourself clear. • Make the fact that you are international a selling point for yourself. Most of these employers are looking for lots of diversity of thought and experience and as such want to hear about your relevant international experience. Don’t be afraid to mention this in an interview • Practice voice modulation when mock interviewing. It is not just what you say but often how you say it. Therefore, practice making your voice sound excited when you are talking about an important point about yourself. • Keep your confidence all the way through DIP week. Almost everyone who interviews during DIP week will be rejected by one employer (ie get “dinged”). Don’t let this discourage you and make sure you keep your confidence. Because international students are sometimes concerned about their language ability their disappointment about being dinged by an employer tends to come across more than for a US candidate. As such, international students may have be work a little harder at maintaining a positive attitude all the way through DIP week. 3.1.7Practice Interviewing As discussed practicing is key to interview preparation. Form study groups – It is highly recommended that the students form a small study group of 3-4 students. This group can provide the much needed support during the recruiting season e.g. sharing information on closed list events, conducting peer mock interviews, resume reviews, etc. To get the maximum benefits try to form a diverse group based on nationalities, ethnicities, gender, etc. in order to draw from the experiences of the group. Page 9 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club Mock interviews – Career Management conducts a mock interviewing day(s). Be sure to sign up for this event. A video-taped feedback session follows the mock interviews. In addition, the Finance Club would also post a sign-up sheet for mock interviewing with second-year students. Take advantage of both opportunities. The following are a few pointers for interview practice: • Practice full length interviews. Investment Banking interview tend to run for about 30 minutes. It can be difficult to sustain the energy, enthusiasm and focus during such a long period. It is therefore best to practice for the full length of time so you become accustomed to the pressures of a real life interview. • To try simulate the environment as much as possible. Once again, to become accustomed to the interview format and environment try to make the interview as real life as possible. Suggestions include finding a quite room with a table and chairs (rather than just a couch and coffee table) and sitting directly across the table from your mock interviewer. • Sit up straight but relaxed in the chair. It is often useful to sit toward the front of the chair to avoid slouching back. Keep you hands on the table or in front of you where they can be seen. This is the best for gesturing when appropriate. • To gain an unbiased perspective on your interview technique practice with someone who does not know you very well. • It can be useful to do some of your practice in groups of three. One person is the interviewer, one is being interviewed and the third can focus on the feedback for the session. 3.2 Dress 3.2.1Women • Traditionally, a skirt suit is considered more conservative than a pantsuit, but either is completely fine for interviews. You might get by if you wear a color-coordinated blazer, pastel blouse, and long skirt or slacks. But you can't go wrong wearing a solid navy-blue or medium- to-dark-gray business suit, with a solid-white, long-sleeve, no-frills dress blouse. • It is highly recommended that you wear hosiery. Carry a spare pair in you bag, just in case the pair you are wearing ladder. • Wear low-heeled, conservative dress shoes that are color coordinated with your outfit. • Don't go without a belt if you're wearing a skirt or pants with belt loops. Wear a dress belt that matches your shoes (e.g., black with black). Page 10 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club • Style your hair tastefully or have it professionally done. If it's long, wear it up or back, so you're not constantly flipping it out of the way. • Avoid fingernail designs and bright- or odd-colored polish. Clear or no nail polish is best. • Apply makeup sparingly and avoid unusual or bright colors. Definitely don't apply sparkles to your hair or face. • If you wear earrings, wear small, conservative ones. Wear only one per ear in the traditional earlobe position. • Be careful not to wear too much perfume as the interview room can often be very small and it is a common observation that students’ perfume is over powering. Limit yourself to “one squirt” of your perfume in the morning before the interview. • It's better to carry a briefcase or portfolio into an interview than a purse. 3.2.2Men • A solid navy-blue or medium-to-dark gray business suit is best. (pinstripe grey or navy blue is fine too). Avoid green, maroon and other very light colored suits. Avoid wearing different colored pants and jackets (such as dark grey pants with a blue reefer/blazer jacket) but rather invest in a suit as described above. • Long-sleeve dress shirt. Solid white is always a safe option. • A conservative silk tie. Silk makes a smaller, much nicer knot than most other fabrics. If you can't afford 100-percent silk, try a silk blend. • Wear calf-length dress socks (not crew or tube socks) that match the color of your suit. • Wear low-heeled, conservative dress shoes (cap-toe or wingtip) that are color coordinated with your suit. (For example, don't wear brown shoes with a navy-blue or gray suit. Wear black.). Make sure they are well polished. Some say that laced shoes are dressier than loafers, but that's a minor detail. The important thing is to wear conservative, color-coordinated dress shoes, not sneakers, cowboy boots, etc. • Don't go without a belt if you're wearing pants with belt loops. Wear a dress belt that matches your shoes (e.g., black with black). • Get a professional haircut or trim. If you can't stand the thought of cutting your long hair for interviews, at least tie it back in a ponytail. In short, well-groomed hair is best. • Clean-shaven is the best way to go too. If you have a beard or moustache, shave it off for interviews. If you just can't, at least make sure it's well-groomed. • Be careful not to wear too much cologne as the interview room can often be very small and it is a common observation that students’ cologne is over powering. Limit yourself to “one squirt” of your cologne in the morning before the interview. 4 SAMPLE INTERVIEW QUESTIONS Page 11 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club It is highly likely that you will be asked the following questions: 1. “Tell me about yourself” • You will almost certainly be asked this question in most interviews (even though they have your resume in front of them!) and it is an invitation for you to market your distinctive strengths • You don’t have to cover your entire life history. Restrict your answer to the aspects of your experience that highlight your key marketing points or those that are required to make your answer flow properly. • Restrict your answer to around 2 minutes. • Be careful of practicing this too much that it sounds unnatural. 2. Why banking? • Well, why banking? Be honest with yourself. This is where you will find the best answer to this question. • The question may also be asked as “Why not consulting/Sales and Trading/Private Equity?” • Money is not a good answer to this question. 3. Why “XYZ” bank/firm? • Ask yourself - what are the features of the bank that appeal to you the most? • How do the features of the bank match with aspects of your previously jobs that you enjoyed? • Did someone say something at an EIS that struck a particular accord with you? • Try to answer this question in terms of the ways you best fit with the bank rather than just in terms of what the bank can do for you. 4.1.1General In addition to the questions set out below MBACM has a list of non-industry specific questions (these are also located on the Finance Club’s webcafe website). 1) Why you? 2) Why this firm? 3) Tell me about yourself. What is your background? 4) What are you looking for in a firm? 5) Which area could you see yourself working in? 6) What are your strengths/weaknesses? 7) What is your proudest achievement? 8) How are your grades? Do you expect to make the dean’s list this year? Page 12 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 9) Why did you not make the Director’s list? 10) Favorite finance class and why. 11) What kind of banking do you find most appealing? 12) What firms are in the bulge bracket? 13) What other sorts of firms are you interviewing with? 14) Assume you get offers from other major banks, how will you make your decision? 15) Why did you choose Wharton? 16) What factors did you consider in deciding on your major? 17) Why did you choose your campus involvements? What did you gain? What did you contribute? 18) Talk about your interests listed here. 19) What are you passionate about? 20) Why did you come to Wharton? 21) What has been your greatest learning at Wharton? 22) Why would we not have given you an offer at the end of summer? 23) Where are we on your list of firms? 24) Would you take an offer from us over another firm? 25) If we offered you right now, would you accept? 26) Where do we fit in vis-à-vis our competition? Who is our competition in each of the major categories? What differentiates our firm? What are our strengths and weaknesses? 27) What don’t you like about banking? 28) Would you rather be on the buy-side or sell-side of a transaction? 29) Most people come in wanting us to know three things – give us seven. 30) What about your background will make you a good investment banker? 31) Of my colleagues who have interviewed you to this point, whom would you hire and why? 32) Were you surprised that we called you back for 2nd/3rd round interviews? 33) How many of your classmates are truly qualified to do this job? 34) Of those, how many will fail as I-Bankers? Why? 35) How do you feel about taking orders from a VP or MD who is younger than you? 36) How do you think that the IB industry can benefit from technology and how can technology help banks to win business? 37) What issues do you think are most pressing for the industry today? 38) Tell me about some recent deals that have piqued your interest. 39) Why would you be dismissed for something that was in your control? 40) Let’s say you’ve had a long and successful career. What would clients and co-workers be saying about you at your retirement party? Page 13 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 41) Of those banks you’ve interviewed with up to 2nd or 3rd round and didn’t give you offer, what feedback did they give you for why? If not, why do you think they didn’t give offers? 42) Where do you see yourself in 5 years, 10 years? 43) What contributions could you make to our firm? 44) Why did you choose your major? 45) If you were the interviewer, what are the three most important criteria for hiring someone into this position? 46) Could you relocate? Could you travel 3 days a week? 47) How much do you think you’ll be earning in 10 years? 48) What’s the lowest salary you’d consider? 49) Is there anything that could potentially interfere with your performance? 50) What do you think our concerns are about you? 51) Describe some potential deals. 4.1.2Behavioral 1) Talk about a team/group experience (recent/less recent). What role did you play? 2) How would your learning team describe you? 3) A time you overcame adversity/greatest challenge as a leader. 4) Talk about a leadership experience. 5) Team breakdown/difficulty/disagreement. 6) Example of working under intense time pressure or deadline. How did you handle it and react? 7) Describe a leadership role of yours and why you committed your time to it. 8) Has your work ever been criticized or what have you been told to improve? 9) Give an example of a past mistake/failure/greatest disappointment. 10) Give an example of something not on your resume. 11) What is your favorite quote? 12) Who is your idol or mentor? 13) What do your do for fun? 14) How did your greatest weakness affect your last job? 15) Talk about a team experience that went poorly? 16) What would your cohort mates say about you? 17) Tell about a lapse in judgment you displayed? 18) What accomplishments are you most proud of? 19) What were your best and worst subjects in school? 20) What kind of people do you have trouble getting along with? 21) How do you get people to do things they don’t like to do? 22) On what grounds would you dismiss someone? 23) Do you like working with people? Is it an important factor in your job? 24) Describe an ethical dilemma you’ve faced. Page 14 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 25) Describe a time you had to compromise your standards. 26) Imagine that you are the associate in charge of a project and you are working at the client's office. The CEO of the client company comes to you and complains that the managing director does not spend enough time with them. How would you react? 27) You are sitting w/ the CEO. You can ask three questions about his business. Then, you have to give him an estimate of his business. What questions would you ask? 28) How would you deal with an angry client? (Could be due to a corporate policy or due to performance of a specific individual). 4.1.3Unusual 1) What is your most embarrassing moment? 2) Tell a joke. 3) Sell me this highlighter. 4) If you could be any animal, what would you be? 5) What three things would you want if stranded on a desert island? 6) What’s your personal discount rate? 7) If everyone has a chip on their shoulder, what is yours? 8) What are you reading right now? 9) Based on your resume, what do you think concerns us about you? Knowing what you know about yourself, what should concern us most? 10) How would you value yourself? 11) Walk me through how you would structure a pitch book. 12) London’s tube (subway) stations have two escalators going up and only one going down. Why? 13) Give me an example of a circular reference in excel. 4.1.4Conceptual 1) What makes for a good LBO candidate? 2) Imagine you own a football team, how would you value it? 3) How would you go about valuing Wharton? 4) If ROE has declined, tell me three reasons why that would happen. 5) You are an auto manufacturer in need of $500M in financing - give me three ways to raise the capital? Which is the most appropriate? Why? Now you are a biotech - same drill. 6) What happens to the WACC as leverage increases from 0% to 100%+ in a firm? 7) How would you value a software company with no revenue (product sales or advertising), no product shipments, but with 8M captive eyeballs? 8) Why would a Private Equity firm be more interested in IRR instead of NPV for a particular company? Page 15 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club 9) How would you value a bond, and what interest rate would you use? 10) How would you value yourself? 11) What type of debt is the most expensive? What type is the least expensive? Aside from cost why might a company choose one type of debt over another? 12) If your client is planning on selling his company one year from now, what actions would you recommend he take over the next 12 months to increase the price he receives for his firm? 13) How do you estimate the cost of financial distress? 14) If doing comparative analysis for a client, what are some ratios you would use and why? 15) What is minority interest? 16) What is the P/E ratio and why do analysts use it? 17) How would you find the appropriate discount rate for a .com? 18) If a company has three divisions, and one is under performing, which causes depressed company stock price, what five things could I do to improve the firm’s stock price? 19) If you were a private company considering an IPO, what steps would you take? 20) If you’re interested in M&A, give us an idea for a deal that should be considered in the market today. Consider: Strategic considerations; Financial (accretive or dilutive?); What combined company would do; Legal and anti-trust ramifications 4.1.5 Quantitative/Technical The most important point when answering quantitative/technical questions is to voice your thinking. Similar to an exam, an interviewer is likely to give you partial credit (if not significant credit) if you don’t answer correctly but if they can listen to your thinking and understand how you dissect problems. It is best to try and provide some sort of answer to a question and, as stated previously, articulating your thinking (even if you are unsure of the exact answer) will always help you. The balance to this advice is to ensure you do not ramble with your answer in an effort to try and talk your way out of delivering a direct answer. This will not work and you are likely to only aggravate the interviewer. However, if you genuinely do not know the answer to a question, seek further clarification or more information that may help you. If you still don’t know, state that you do not know the specific answer to the question and then provide a brief response that looks to address some part of the question. 1) What is the WACC? 2) How would you value this company? a. DCF Analysis Page 16 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club b. Comps c. Public Transactions 3) What is Beta? 4) How do the three main accounting financial statements relate? a. P&L b. B/S c. CFS 5) Explain the difference in two companies differing P/E ratios. 6) If one of your clients had extra cash, how would you tell them to invest it? 7) Imagine you own a hamburger restaurant, describe the accounting entries for the sale of a hamburger. 8) Imagine you overestimated depreciation by 100 go through the effects on the 3 financial statements. 9) Where would you put a convertible bond on the balance sheet? 10) You have $10 Kin credit card debt at an 11% interest rate and $10K in mutual funds. Do you liquidate? Why or why not? 11) If I gave you $100 per year for the next 10 years how would you value it? 12) How do you treat deferred tax assets? 13) Pick a company that you would invest in and tell me why you think it's at attractive opportunity. How do you expect it's multiples to behave over time? 14) If you have the rate of equity, rate of high yield debt and rate associated with a convertible preferred bond, which would typically have the highest rate and why? 15) If you had to choose only two, which financial statement would you use to value a company? 16) If a company with EPS of $1.00 pays all cash to buy another company with EPS of $0.50, why is the EPS of the combined company not $1.50? 17) An analyst finds interest expense on the income statement but no debt on the balance sheet. Why might this be the case? 18) If a company decides to use a more accelerated depreciation method (taking 20M in depreciation expense per year instead of 10M), walk me through how the three financial statements change? 19) If a company with a P/E multiple of 20x buys a company with a P/E multiple of 10x, is it accretive or dilutive to earnings? 20) What is 43/64 in percentage terms? 4.2 USEFUL RESOURCES1 4.2.1Books 1 “A First Year’s Guide to Finding a Summer Internship” guide prepared by Sairah Burki and Chris McKee. Page 17 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club This is by no means meant to represent an exhaustive list, but rather intended to provide an overview of books, websites and journals that second- years found useful last year and finance professionals use regularly. We would be happy to hear about your favorites to further enhance this list of resources for those recruits that come after you. Financial Analysis for Managers, by Robert C. Higgins – This book can be particularly useful for those without prior finance backgrounds. In straightforward language, Higgins sets out corporate financial and valuation principles in an applied fashion and in a way which a corporate finance manager would use them. It is by no means the finance gospel but it is clear application of financial theory. Principles of Corporate Finance, Brealey and Meyers – It is the bible. It is as simple as that. This book is the reference book for financial theory and a great guide as you work your way though that exhaustive list of Wharton Finance Interview Questions. The Culture of Success, by Lisa Endlich – This book may be specific to Goldman Sachs and its culture but it is an interesting look into the history one of Wall Streets marquee banks. There and the fact that the author is from the trading side. The House of Morgan by Ron Chernow – This book will not land you a job but it is a good perspective into the history of banking in America. It is business history but it is good business history. Read it after you land the job. 4.2.2Websites – Finance, Business and Industry www.wsj.com - Paid print subscribers get free online access to the Journal’s site. It is still regarded as the domestic source of financial information. The site also has decent search features that allow you to research firm coverage and deal activity. The international compliments to the WSJ are the Asia Wall Street Journal. www.tfsd.com - This is an excellent site for financial services offering a broad array of research and financial data. Though much of the research (e.g. FirstCall) is only available on a subscription basis TFSD offers free league tables and is generally considered the definitive source in deal listings. The site also offers complimentary one-time subscriptions to industry journals such as Mergers & Acquisitions and Buyouts. Sign up on the website. www.iimagazine.com - Institutional Investor online site offers the II ranking as the primary attraction. II rankings are regarded on the Street as the measure for a firm’s Analysts. Analyst strength typically translates into banking strength in a particular industry. The site iimagazine.com also offers Page 18 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club a complimentary monthly email newsletter service that contains recent developments in the industry and excerpts from the print magazine. www.euromoney.com - Perhaps the most valuable issue of Euromoney comes in the Euromoney Awards for Excellence issues. Here, Euromoney posts its winners in an array of financial services categories (Best M&A House, Best in IPOs, Best in Convertibles, Best Investment Bank, Best Risk Management House, etc.). The website and the print magazine have a refreshingly non- U.S. focus. www.thedailydeal.com – This website is operated by [Dresdner Kliewort Wasserstein] and offers insight into M&A, Private Equity and Restructuring activity. It is a decent source of current deal information, though its regard on the street brings mixed reviews. The “Dealmakers” section has particularly in-depth insight into personalities in the industry and gets beyond the firm- specific level. This is helpful in researching key-players at each firm. www.mergerstat.com - Mergerstat is another often used source for current M&A activity. Similar to TFSD, many of MergerStat’s research are by subscription only. Note that the site does offer free league tables and ranking specific to M&A activity. www.wallstreetreporter.com - Someone please tell me who sponsors this site. It offers good insights into Wall Street news. Features include IPO, Venture Capital, Private Equity and Legal related content in addition to an array of interview which typically focus on CEO’s and Wall Street Analyst. There is also a print version of The Wall Street Reporter. www.wsn.doremus.com - The source of this site is unclear. That said, the absolute most useful feature is the deal search tool the site offers (the WSN Databases for Debt, Equity and M&A). It allows you to search deal activity by type, firm, industry, product, and a host of other options. These features can be invaluable in attempts to research firm specific deal information. www.feer.com - This is the sit for the Far East Economic Review. This Dow Jones publication focuses exclusively on Asia with emphasis on economics more so than finance. There are links for investor articles and capital market information. www.yahoo.finance.com - One helpful resource that Yahoo! and the array of other finance sites offer is the ability to create a stock portfolio. It is useful to create a portfolio of public firms that you are targeting to monitor their stock performance and earning announcements on a daily basis. 4.2.3Websites – Recruiting Related The financial recruiting websites offer cursory information about financial services firms and careers in finance. These source are in no way stand-alone Page 19 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club nor comprehensive in nature. Generally, the most current and meaningful information will come from the company itself (e.g. presentations, days on the job) and finance related resources (e.g. WSJ and TSFD). We recommend using recruiting guides to gain some general background about the careers and the firms. During the interview though, it will be information gathered from your contacts, your firm visits, info sessions and firm specific research that will set you apart www.thevault.com - The vault offers a recruiting and job search website the collects information and accounts about firms and job opportunities. The general firm information is decent however, specific account are suspect. Use with caution. The Vault site also offers a platform to purchase Vaults Guides. Useful and popular guides are Career Guide to Finance Interviews and the Career Guide to Investment Banking. The Wharton Career Management website offers a copy for free download. www.wetfeet.com - Wetfeet offers recruiting and job search information similar to The Vault. Wetfeet’s online platform also offers sales of its popular industry (Careers in Finance) and firm guides (firm specific). The Wharton Career Management website offers a copy for free download. www.bschools.com - They publish a comprehensive Investment Banking guide for the eager I-Banker. 4.2.4Journals – Business and Finance If you are focused on a particular industry we recommend pursuing journals in that industry. Many of the Wharton Clubs are a great resource in this area (e.g. Tech Club, Telecom Club, Energy Club). Specific products have specific journals as well (e.g. IPOs and Red Herring, M&A and Mergers & Acquisitions, LBOs and Buyouts). The following is a brief list of general finance and business publications that we have found helpful and commonly used in practice. Many of the journals are covered under the website section: The Wall Street Journal, Financial Times, Institutional Investor, Euromoney, Mergers & Acquisitions (TF). Here are some others that are not. BusinessWeek –It is still widely read and used as a source for weekly business and financial information. The editorials and economic analyses are good. The Economist – A very well regarded magazine, however it is not capital markets focused. It has great international coverage and exceptional writing. It is in no way a one-stop-shop for financial news but it does provide exceptional insights into global industries and periodic reviews of financial services and the global capital markets. Page 20 of 21
  • A First Year’s Interview Guide for Investment Banking The Wharton Finance Club Forbes – Similar to Fortune in its managerial insights and lack of capital markets focus. People see to use this interchangeable with Fortune as a good macro- level magazine with broad industry and geographic coverage. Fortune – This magazine has good managerial insights into industries and the market however it lacks a timely capital market focus. Use the magazines website (www.fortune.com) to conduct company specific information. The magazine also publishes its annual list of Wall Street Analysts. It is not as influential as II’s ranking but it does offer another perspective. 4.2.5Other resources Juice Job cards – Juices job cards have been popular with second year students in the past. It might be a good idea to buy this off a second year student or online from www.amazon.com. Page 21 of 21