Investment Banking For Dummies

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Human progress takes money and ideas. But more times than not, the people with the money aren’t the same ones with the ideas. Having a mound of cash and no creative ideas only creates a mound of money. Meanwhile, an entrepreneur with all kinds of dreams can’t even break ground if there’s no cash to break ground with. In many ways, the use of debt, in a process called leverage, can be much like dynamite. When used prudently, leverage can be a creative force that gives companies the power to grow and create wealth faster than they would have otherwise. But at the same time, leverage can be abused and lead to great destruction of wealth, jobs, and enterprise. The graveyard of companies is littered with examples of businesses that lit the leverage bomb and didn’t know how to harness the power. Seven figure bonuses, generous expense accounts and adrenaline-filled trading sessions. All of these come to mind when one thinks about investment banking. I have no doubt that these alone attract thousands of bright graduates into the competitive industry each year. Job interview guides - shorter titles aiming to inform and train undergraduates for a grilling at one of the major investment banking groups. Due to the high starting salaries in investment banking, the interview process needs to be tough to allow the interviewers to eliminate the vast majority of the candidates. If you’re like most people, when you hear the term investment bank, one of a few things may cross your mind. Your eyes may glaze over as you think about mind-numbingly detailed financial statements and valuation metrics. Yawn. Or, you may think of exciting high-stakes financial maneuvers, like those out of the movie Wall Street, where well-dressed bankers treat companies like Monopoly squares to be dispassionately bought and sold.

Investment banking operations are rarely identical between firms. Some banks and investment banks are engaged in some front-office areas, while others steer clear of them completely. There are also some peripheral areas of business some banks and investment banks include as part of their services that don’t fall in one of the traditional “offices.” One example of a service that is often grouped in investment banking is investment management. In an investment management unit, investment professionals are paid to invest money on behalf of individual clients or institutions. Now that you see that the chief role of investment banks is selling securities, the next question is: What types of securities do they sell? The primary forms of financial instruments sold by investment banks include the following:If you are in the process of networking for an entry-level role at an investment bank, we recommend you add this book to your reading list.

This book is a great resource to learn about RJR Nabisco’s corporate finance strategy, the history of leveraged buyouts (LBOs), and the role of junk bonds in LBOs, among other exciting topics. In addition, the book gives insight into negotiations, valuations, and the personalities that inevitably make their way into decision-making, even at a high level. It’s also a warning of the dangers of too much leverage. Wrap your head around the complicated world of investment banking with this understandable and comprehensive resource Brokerage services: Some investment banking operations include brokerage services where they may hold clients’ assets or help them conduct trades.

4. Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions

Given how important investment banking is to how Americans save and invest, it’s critical to understand what investment bankers do and the role they play. Traditional banks are easy to understand. They take in deposits from consumers and businesses, and then lend out the money to companies or consumers. But the duties of investment banks are quite different. Instead of taking deposits, investment banks sell securities. The proceeds from selling these securities, in some cases, then go to finance usually massive projects that might be too risky for traditional banks. Projects investment banks take on often fall into one of several categories, including the following: Investment bankers often find themselves playing the role of a corporate matchmaker. A big part of the job description is finding new ways to raise money and help companies restructure themselves in a way that makes them more profitable for their owners. Reading this book will show you how these interconnected high-finance organizations create value, manage risk, and influence the financial headlines. As with other books on this list, this text includes case studies and spreadsheet models to allow readers to apply the book’s lessons to real-world- investing and advisory activities.

Build a relationship with an investment banking firm. If an IPO is in particularly high demand, you can be sure the investment banks doing the deal will be judicious with who gets shares. And in these cases, the vast majority of shares will go to the client’s own customers. If you think that buying IPOs is going to be a frequent occurrence with you, you might consider creating a brokerage firm account with one of the investment banks that’s doing the types of IPOs you’re interested in. Keep in mind, though, that the brokerage units of investment banking firms tend to charge much higher commissions and fees than discount brokerage firms, so you’re not getting something for nothing. The celebrated authors of Investment Banking For Dummies, 2nd Edition have updated and modernized their best-selling book to bring readers an invaluable and accessible volume about the investment banking industry. Bill Gates, an avid reader, has this to say about Principles “Ray Dalio has provided me with invaluable guidance and insights that are now available to you.” Traditional banks take deposits from savers with excess cash and lend the money out to borrowers. The main types of traditional banks are commercial banks (which deal primarily with businesses) and retail banks (which deal mostly with individuals). Insiders in the investment banking business use all sorts of terms, some decidedly derogatory, to classify the players in the business. Some classifications that investment banks fall into include the following:

5. Investment Banking Explained: An Insider’s Guide to the Industry

Given how desired shares of hot IPOs are, it’s not surprising that investment bankers hold them very closely. Investment bankers’ role in the IPO process remains one of their most high-profile functions. The investment bankers are in charge of helping the company promote itself to prospective investors and determine how much to sell the shares for. Pignataro uses Walmart as a case study to teach readers how to perform an in-depth analysis by walking them through all the steps to develop a sophisticated financial model. Each chapter ends with review questions, case studies, and other helpful material.