Doing An Investment Banking Job Search

Overview of the Industry

The most obvious functions or divisions of investment banks are corporate finance, where banks help their client companies raise capital through equity, debt or other types of offerings, and mergers and acquisitions services, a major source of fees for some banks. Sales and trading in equities or fixed income, or more exotic products such as derivatives are other main divisions for most investment banks, and research jobs in these product areas might be another option. Equity research is a function open to new associates, if you have a passion for and some knowledge of a specific industry, though jobs are fewer than in other areas, such as corporate finance and mergers and acquisitions. You work with clients, traders, M&A and are involved in valuation, analyzing company fundamentals, very hands-on. There are also product areas such as equities, fixed income, derivatives, real estate, private equity, and foreign exchange. Many areas of banks depend on contacts and relationships of bankers with clients -trading, sales, corporate finance. Most functions are somewhat sales-related. "Bankers are paid for executing transactions in the context of relationships," not for taking vacations, and having someone else cover for them. (Correctly or not, this was stated by the panelists in an April, 1998 investment banking presentation at SLS as a difference between working in a law firm and an investment bank.) There is certainly the challenge of bringing together the right people, of thinking up new combinations, new ways to do deals. It's more a business of continual change, a business of execution, than a business of innovation. It may also be a "narrow, parochial lens on business", according to Barry Newman, JD/MBA alum, Managing Director at Salomon Smith Barney. Many more people are heading firms now, who worked early in their careers for McKinsey, than those who worked in all I-banks combined. He points out that bankers "are agents and don't principal anything." Two Major Trends In all divisions of banking firms, two trends cross-cut most jobs. One is the increasing globalization of products and services, making having a second language an additional positive attribute. The other is a trend toward industry specialization within a product area. So someone who works in M&A may initially have exposure to deals in many industries, but soon will find that he or she becomes a specialist in telecommunications or media company mergers.

Categories of Investment Banking Firms

Bulge Bracket Banks

With mergers of all types of banks moving forward so quickly, almost anything said about the shape of the industry will soon be wrong, but there are some general categories to keep in mind. The most visible at the Law School is bulge bracket firms such as Goldman, Merrill Lynch and Morgan Stanley. These firms all recruit on campus at the Business School and sometimes recruit at law schools too. They will all consider law students and practice in virtually all areas. The next group of firms like Lehman Brothers, and Salomon Smith Barney, have more focused practices. Major Bracket Firms and Foreign Banks Many aggressive growth banks today that are not within the bulge bracket are the commercial bank affiliates that are expanding their investment banking divisions. Examples include JP Morgan and CS First Boston, as well as more traditional banks like Bank of America, Chase, and Citigroup. Foreign banks are also expanding in this business, such as Deutsche Bank, Gleacher/NatWest, UBS and Swiss Bank/SBC Warburg. Regional Firms and Investment Banking in Commercial Banks Most regional firms have merged with commercial banks in recent times, so possibilities may be very limited. They specialize in a limited number of areas, and do not provide the same level of training and lateral mobility as the bulge bracket firms. They will generally handle smaller or niche deals in terms of dollars, international scope and industry coverage. Examples are Hambrecht & Quist, Nations Bank Montgomery Securities, Robertson, Stephens (Bank of America) in San Francisco, Piper Jaffray in Minneapolis and San Francisco, and Alex Brown (Bankers Trust) in Baltimore, San Francisco and New York. Boutique Banks A final option is the boutique investment bank. These are firms that focus on particular industries or products. Some examples are Broadview Associates, which concentrates on high tech M&A and has an office in San Mateo, and Wasserstein & Perella, a firm specializing in the overall M&A business, and Allen & Company, which provides corporate financing services to media companies. There is a number of other specialty firms, and they can be identified through trade periodicals, LEXIS or the Web.

Compensation and Advancement

Compensation in most positions is a combination of salaries, which are relatively standard (and lower or equal to many law firms' offers) for new associates across the industry, and bonuses, which are partly profit sharing. After the first few years compensation is mostly performance-based and related to the level of fees brought in or earnings generated. By the time an associate is promoted to vice president, approximately after four years, compensation varies widely, and salary may be a small part of overall compensation.

Necessary Qualifications and Commitment

A great deal of emphasis is placed on having a passion for banking, for being able to multi-task, and for enjoying the ambiguity of not knowing what will happen each day when you get up in morning. Banking is a culture that revolves around money and you will be asked if you are comfortable working in that culture. Investment banks hire the great majority of their professional level staff at the associate level from top MBA programs, making the opportunities for law school students very competitive. Nevertheless, in the current economy, bankers are looking for very bright, analytical people with quantitative as well as interpersonal skills, and are looking beyond the usual sources. Because the recruiting timeframe for MBA summer associates (January through February) does not coincide with law firms' timeframe (September through December) for second year summer recruiting, the dilemmas for law students are: how committed am I to working in banking? much risk is it comfortable for me to take? How much effort will it be? And will effort be rewarded? What are the value-added efforts I can make to improve my candidacy?

The question of your commitment to banking will come up again and again, even as it does for MBA students. The intense level of work, and the high ratio of travel in most service and product areas demand a strong commitment. As Paul DiNardo, Vice president, Investment Banking, Goldman Sachs, pointed out about his job search, "some banks wanted to know why I didn't have a prenatal desire to be a banker."

Your Experience
Another indicator is what you've done in the past; for example, managing your own portfolio of stocks or mutual funds, understanding the economic trends in industries in which you've invested. If you haven't invested, at least you've followed the fortunes of certain companies or industries.

if numerical analysis is easy for you, you enjoy gathering information and putting together presentations under tight time constraints, your idea of fun is bringing together people with divergent opinions and wresting agreement in the face of difficult odds under tight deadlines, and you know from your prior work experiences that you can function well with 50% or more travel and less than 8 hours sleep, your commitment is probably realistic!

Your Job Search Strategy for Investment Banking

First Year Students
You need to plan and do research as early as possible. It's ideal to know about or learn about investment banking and possible career areas of interest to you early in first year. If you think I- banking might be the career direction for you, it is important to realize that you should start your job search plan as a first year, even though banks will not interview you for that first summer. You may know already that you are committed, if you routinely read the New York Times business section or Wall Street Journal; if you also plan to read or have read all the books and magazines on the list at the end of this overview. You should plan to take an accounting class in the next year, or over the summer, if you never have. You may also be seeking out classes to take at the GSB and figuring out how to improve your chances of getting into those classes. Taking Courses, Summer Reading Bankers often seem unaware of the course work available to you that really gives you insight into understanding how deals are structured, how financial markets work and how business organizations are set up and run. You need to take the courses, and you need to make sure that this information is explicit in e-mail communications, on resumes and later, in interviews. It is true that the core curriculum does not provide the basic accounting and finance courses that most MBA students have, so you must decide if you have enough interest in these courses to take them next year and do well. The Law School course work that you most need to help you understand banking and other business fields you will not take until your second or third year, so adding to your reading load over the summer is essential in order to come up to speed. Finding the Fit Decide what area of investment banking is the best fit for you. Use the resources mentioned earlier, and over the summer, find some time to talk with Law School alumni in divisions that interest you, to test the reality of your interest. If you can't find an alumna/us, ask Susan or Kelly for recommendations. Stanford Law School alumni may be willing to spend a short time with you to talk about what they do, and give their advice about career interests you are exploring. It is crucial to prepare for this type of conversation by researching their firm's website, understanding a bit about what the alum does in his or her work, and having some idea of what function or division interests you and why. For your first summer the possibilities to consider are many, but two are most consistent with an interest in investment banking:

working in a business law firm, especially a firm that does M&A or intellectual property work for reality testing purposes working in a company to gain some industry experience, if you have skills to offer

Second Year Students

As a law student, it is very important to have a summer in I-banking, not only to make yourself attractive for career recruiting in your third year, but to explore the culture of at least one investment bank, and to test your commitment to the industry. There are typically more spots available in corporate finance and M&A than in sales & trading or research in any product areas, but don't let numbers be a determining factor. Students are hired into banks without prior banking experience, but those hires most often have knowledge and experience in an industry, or have worked in other professional services such as management consulting, or have sophisticated quantitative skills that allow them to work in derivatives or other innovative product areas. This reality gives you three possible scenarios: some banks may consider you for a summer associate in the fall of your second year, before they start their summer associate MBA recruiting season, you may convince a law firm to hold an offer for you until spring you may give up offers you have from law firms in order to compete in the normal recruiting pattern for banks' summer associates slots Generating Interviews in the Fall Many top business law firms will not discount a candidate who chooses to explore banking in his or her second summer, so it may be advantageous to make strong efforts to be hired early by a bank in the fall of your second year. Some students have been successful in combining banking interviews with law firm fly-backs, if the firms they are seeking are located in New York. They have persuaded the relationship manager for Stanford (usually a VP or higher level banker who is often a Stanford MBA or a senior level SLS alum) to arrange for them to interview early. It's highly likely that you will have to spend a summer in New York in order to be considered a serious candidate by an investment bank. It is likely, too, that you will have to work in New York for the first few years, as training programs are centered there, and the stars of most corporate finance and mergers and acquisitions work are there. Campus Interview Program (Fall CIP Program) A few banks have been successful enough at the Law School to hold fall interviews for second years that coincide with law firms' recruiting. If you interview with only these

"convenient" banks, your candidacy is seriously questioned. You will be asked what other banks you are talking to, and why those banks. Your reasons should be defensible and reflect knowledge of the company. If you have taken the time to talk to or meet with alumni who are at the bank, or followed up their suggestions of what to do to learn more about the industry, you will be better prepared than most of your peers. You will specialize in one of various functions, or groups within an investment bank, so it's important to know what types of work and tasks you prefer. Hopefully, you learn the area you like most via a rotation experience in different product areas your second summer. If you work hard, and are fortunate, you will also find a vice president or managing director who is willing to champion you as a career hire in the fall. So, part of the work you will do is to pay attention to the political landscape and make sure you have visibility. Planning Ahead for the Career Job Search If you give your best effort and fail to land a job for the summer, continue your program of taking all the business and quantitative classes you can, talking with OCS advisors, doing research on firms you have targeted, meeting with bankers in New York in August (especially with alumni.) You should also try to take advantage of meeting bankers at summer events they hold for candidates (typically for MBA students, but Susan Robinson has requested that firms extend invitations to you.) This is a relationship business, to state the obvious, and the more people who can say good things about you the better!

Third Year Students

Is it possible to interview both for law firms and for investment banks in the fall of your third year and survive? Some people have done it, and are eager to help you. Law School alumni who are in banking, both new associates and more experienced VPs and managing directors may coach you about the people and politics you will meet during the recruiting process, and champion you to the hiring committee if you demonstrate knowledge of their firm, maturity and real interest. Preparing for Interviews Investment banking interviews, for any of the functional or product areas, will be more unpredictable than the format of management consulting interviews. Banking firms expect the same level of preparation and knowledge from law school students as they do from business school students. That said, there are some general strategies from which you can benefit. You should know what's happening on Wall Street that day, this and last week, month and year. Depending on your functional area of interest (corporate finance, mergers and acquisitions, institutional sales or structured finance to name a few), you should know such information as:

what companies they have lead managed in IPOs public information about their advising in mergers or divestitures where they stand in underwriter rankings who are their well-known securities analysts This suggests that you should have more than superficial knowledge, and requires you to do some reading of newspapers and trade publications on-line, in the business careers resources in OCS or in the Law or GSB libraries. You should know their competitors, how they stack up against other bulge bracket firms, what are their specializations. You should know who they compare themselves to, and to whom they do not like to be compared. You should prepare for questions that attempt to determine what you know - questions such as: how would you calculate net present value? what economic forces are contributing to the current state of the securities markets here, in Europe, in Asia? how would you advise an individual or a firm to invest and why? You may also be asked questions about your resume, particularly about your leadership experiences and academic performance, as firms attempt to judge if you can use your well-developed intelligence to create tangible outcomes for them. Finally, but most importantly, remember that this is a relationship business, where you will work long hours with a small team, and where high client demands in short time frames are the rule. So not only will your intelligence be assessed, but also your personality will be scrutinized in these interviews. You may be asked many questions about your interests outside of professional life, and you may be challenged at some points to defend your choices and assertions. How you perform under pressure and how well you retain your composure are important points for interviewers to determine early on.