Job Description

Investment Banking Analyst

Investment banking analyst position in the finance industry is very prevalent and competitive in most business students’ eyes. However, they’ll never know what investment banking analysts do on a daily basis until they get a job. I want to share some of my work experience as an investment banking analyst to give you some insight into whether this is the right job for you. 

An investment banking analyst is a person who conducts industry research, due diligence, financial analysis and valuation to support financial transactions in the business world. On a daily basis, we help senior bankers by creating presentations and marketing materials such as pitch books and memoranda for clients. We also assist with logistical details such as scheduling meetings and calls. In essence, investment banking analyst is a flexible, helpful, and professional job that provides reliable and comprehensive solutions to financial problems. 

Most investment banking analysts are in charge of three main duties: 

·     Industry Research 

·     Due Diligence

·     Financial Analysis and Valuation

I’ll use examples to explain these duties in detail individually. 

Industry Research

Industry research is the most fundamental task in investment banking division. It includes four basic processes: 

·     Choosing an industry based on the requirement of a client

·     Summarizing the most recent financial transactions

·     Conducting competitive analysis among top players

·     Forecasting the future trend of the chosen industry

Here’s an example. If one of my clients is Comcast NBC-Universal, based on its request, I will choose to research media and entertainment industry. Then, I will include the recent transaction activities in the sector such AMC Networks Inc. acquiring Levity Live LLC and the competitive analysis among top players such as Walt Disney, Time Warner, Viacom Inc. and Comcast itself. I will analyze these competitors’ business models, current performance, and potential transactions individually. Finally, I will forecast the future trend of the industry according to the competitive analysis, the current political situation, and the new governmental policies.

Due Diligence

The work of due diligence includes three processes: 

·     Understanding the industry environment by reading industry research

·     Analyzing the financial status of the client’s company

·     Assisting due diligence meeting with the client’s management team

Due diligence is a complicated but straightforward task, combining independent due diligence research and collaborative due diligence meetings. For independent due diligence research, for example, I should read all the available industry research and generate a comprehensive idea about the industrial environment of the client’s business. Then, when analyzing the company’s financials in detail, I will try to discover the firm’s potential problems in all aspects such as operation, finance, and human resource and summarize these problems in a memorandum. For the collaborative due diligence meeting, my primary duty would be to facilitate my manager to ask questions in the memo and take notes during the meeting. 

Financial Analysis and Valuation

Conducting financial analysis and valuation is the most technical and challenging part of an investment banking analyst’s job. It consists of three main approaches: 

·     DCF (Discounted Cash Flow)

·     Public Comps

·     Precedent Transaction

There is an enormous amount of financial knowledge and concept behind these methodologies, but in essence, they are all methods to value a business based on its financial performance quantitatively. DCF discounts all the forecasted future cash flows of the company back to the present because the money in the future is worth less than the same amount of money today. Public Comps adopts a comparative approach by using other similar companies’ valuations as references. Precedent Transaction is identical to Public Comps but uses historical transaction prices as references. By running all the three approaches along with other minor supplements, I should be able to get a value range of the company I am analyzing and use it to support the pricing of the client’s business.

Readability

Flesch Reading Ease  29.8

Flesch-Kincaid Grade Level  14.4

Passive Sentences  0%