Job Description

M&A Investment Banking Analyst

What is an Investment Bank?

Investment Bank is like an agent. We don’t create anything and we don’t buy anything. We just sell things that aren’t ours to begin with. We take profit off from a client once we complete our transaction. Investment Banks act as the middlemen between sources of capital and uses of capital – those who have capital and those who need it. Sounds greedy? It might look so on the surface, but I chose this job as a business student at USC and although many people are not familiar with such career, M&A investment banking analysts offer services deeply rooted in today’s economy.

Who is an M&A Investment Banking Analyst?

           

Simply put, M&A investment banking analysts evaluate the worth of a possible acquisition and assist parties to eventually arrive at a fair price from beginning to end. We typically spend 70-90 hours a week in the office providing advisory services for buying/selling of companies, assessing the value of companies and ultimately marketing the value of the banks’ expertise to client companies. We exclusively focus on a Mergers and Acquisitions division, the buying and selling of companies.

Because it’s difficult for people not in finance field to easily understand the responsibilities of a M&A investment banking analyst, I listed the most important and valuable duties that we do:

·         Research

·         Analytical Valuation

·         Presentation

I’ll describe these duties using examples of my experience this past summer.

Research

Research is the most fundamental part of the job that is necessary for any kind of services that M&A investment banking analysts provide. There are three main purposes of research:

·         Doing industry and company research to better understand the market that the client is planning to enter or exit and familiarize oneself with the company as well

·         Spend time finding reports for senior bankers to back up their work

·         Random and administrative research

The first two research listed above are crucial in what we do. For example, I was working for a computer software company and I would download industry research to understand the companies that are thriving in this market, the average revenue and cash flow for the industry or the number of acquisitions made in this industry for the past 5 years. Sometimes, senior bankers will randomly ask analysts to find telecommunications companies whose annual revenue is higher than $5 billion. Lastly, we don’t always do research on the most important aspects of transactions. An absurd research such as trying to find the adoption rate of laptops in a small province of Sweden can be just as an important task.

Analytical Valuation

In this role, I am like an architect. With given materials and research, I build financial models. Simply put, I use tools in Excel to build a model that forecasts and predicts a financial performance of a business in the future. The output of a financial model becomes a backbone for decision making and performing financial analysis. Just like how architects use blueprints to start their projects, M&A investment banking analysts use financial models in a similar manner.

There are three major analyses we use through excel to build financial models:

·         Public Comparable Analysis

·         Precedent Transaction Analysis

·         DCF Analysis

Public Comparable Analysis is like trying our best to compare apples to apples. We look at the value of similar companies to come up with a fair value of our target company. Precedent Transaction Analysis is slightly different. We look at the value of completed acquisition similar to a current transaction that we are working on. Then, based on historical price of the acquisitions, we come up with a fair price for our acquisition. DCF Analysis is like a handy crystal ball that we use. It is a way to put a price tag on a company. The analysis estimates how much cash flow the investment can generate in the future and discount these cash flows to reflect the value of money over time.  

Presentation

The last responsibility of the job is creating presentations, or “pitch books.” These are essentially marketing materials for bankers to present to their corporate clients. These PowerPoint presentations will generally be 30-40 pages in length although it can be sometimes a lot longer.

Presentations include:

·         Investment bank’s qualifications

·         Recent industry data

·         Sample transaction and analysis information

·         Advisory recommendations

This is a total package that includes all of bankers’ efforts. Through continuous calls and meetings, we strategize with CEO and executive teams about where the company is moving and lead their clients through every stage of transaction lifecycle. We try to be perfect in every section and page of the book because we use these materials for C-level executives of top companies. 

Flesch Reading Ease: 50.4

Flesch-Kincaid Grade Level: 10.5

Passive Sentences: 0.0%