Global Investment Banking Michel Fleuriet • Overview:


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Global Investment Banking Michel Fleuriet • Overview:

  1. 1. Global Investment Banking Michel Fleuriet • Overview: This course is about the professional practices of investment banks. The business of an investment bank is doing deals. This involves raising capital (debt, equity) for clients and advising on M&A transactions. In addition investment banks sell securities to institutional investors. They also trade for their own account. Many banks are finally involved in managing third-party assets. We start with the trends in the industry, the strategy of investment banks, and the various business models of Exchanges. The course analyses the professional objectives and behavior in the various departments of an investment bank: departments of research, equity capital market, debt capital market, M&A and asset management. Other topics include the personal strategy of an investment banker (objectives, ethics and compliances). Throughout the course we will try to compare the North American practices with European practices, with references at times to a developing market (Brazil). • Course Objectives: Provide students with a fundamental understanding of the role of Investment Banks and how they operate. Provide a framework for analysis of the various businesses of an investment bank. Give a framework of reference for future professionals in the investment banking industry. • Prerequisites: the course is open to 2nd year finance majors. I will ask you to indicate which finance electives you have taken or are taking, so I could check if you could take this course. • Course materials: Bulk Pack and indication on additional readings will be provided in due course. • Course mechanics: Lecture format with a few cases (there should me more cases to come).. • Workload: The readings, cases should take 12 to 15 hours a week. • Grades: Case write-ups count 50%; the final exam counts 50%. The final exam will have four essay questions. • Tentative outline of topics for each of 13 lectures, where each lecture is 80 minutes. Lecture 1 The businesses of investment banking Investment banks’ role and function and the trends in investment banking. Where does the industry come from (history of investment banking in Europe, in the US)?
  2. 2. The players: lines of businesses, industry segregation (there are many types of investment banks, from the purely advisory boutique specialized in M&A to the full-service brokerage and investment bank. How the boutiques can strive alongside global banks?) The spread of universal bank model in Europe: is investment banking soluble in commercial banking? Trends in investment banking: competitive situation, risks and scandals. Lecture 2 The strategy of an investment bank How are investment banks organized, and how are they evolving? The strategic evolution of the investment banks. The underlying dynamics of each businesses.(What really drives it? What creates a competitive advantage? How to sustain that competitive advantage?) Case study of Merrill Lynch. Lecture 3 The Marketplace The strategic evolution of the exchanges. We compare two business models: the American and the European models; competition between exchanges, listing or not listing an exchange, the new world of electronic trading, market-making vs. electronic matching, the winners and the losers. Lecture 4 Research The basics. The players and their role: sell side and buy side equity research, the evolving role of Equity Research in investment banks. The dual loyalties of analysts: ethics and conflicts of interest. Stock price and equity research: Theory and practice of valuation from the point of view of research departments. Lecture 5 The Equity Business The basics. The players and their role: corporate issuer, potential investors, investment banks, lawyers. Sourcing a deal i.e. getting the mandate; factors influencing the capital structure Executing a deal: pricing techniques, risk for the underwriter and fees, delivery to the customer, due diligence. Lecture 6 Sources of financing for the developing world’s corporations The basics. The players and their role: How can investment banks help? Sourcing a deal
  3. 3. Executing a deal Example of Brazil Lecture 7 The Debt Business The basics. The players and their role: marketers, traders, structurers. Sourcing a deal: from the issuer side (underwriting fixed income securities) and from the investor side (creating an adapted investment product). Executing a deal: pricing techniques, risk for the underwriter, delivery to the customer (institutional sales, syndicate, fees), due diligence. Lecture 8 Valuation of companies The basics: Are stock pricing and company valuation part of the same process? The players and their role: valuation techniques used by investment banks; credibility of management forecasts Executing a deal: the work of a corporate finance team in corporate valuation Lecture 9 Mergers and acquisitions in a global context The basics. The players and their role: the trends in the U.S. and in Europe Sourcing a deal: the buy side, the sell side Executing a deal: the role of investment banks in structuring M&A transactions, due diligence. Case study: the international consolidation in the steel industry: Arcelor. Lecture 10 M&A and international alliances The basics. The players and their role: the trends in the U.S. and in Europe (international mergers of equals) Sourcing a deal: alliance, consensus and divergences. Executing a deal: the role of investment banks in structuring alliances, due diligence. Case study: the acquisition of the Japanese company Nissan by the French carmaker Renault Lecture 11 Asset Management The basics. The players and their role: managers of assets, marketers Sourcing a deal: the different types of investors, required rate of return, risk level Executing a deal: Investment Performance Evaluation, conflict of interest and ethical behavior.
  4. 4. Lecture 12 Ethics and compliance The basics: why are the values and culture of the bank so important for success? Differences in corporate governance between corporate clients and investors (in the US, in Europe and in Brazil). Is corporate governance likely to converge on the Anglo-Saxon model? The players and their role: managing for high levels of professional conduct. Ethics and compliance when sourcing a deal and executing a deal. Lecture 13 The strategy of investments bankers The basics: career strategies (calling, job or livelihood?). The players and their roles: internal clients and real clients, relationship strategies for investment bankers. The challenges of managing. Important note: this tentative outline is not a contract. It is there to give you an idea of what we will cover. But, you know, I may change my mind!