What is Investment Banking?
Investment banking is a diverse industry with many interesting and unique functions within it. The purpose of an investment bank is to help firms raise capital and to provide advice on any large financial decision. More specifically, investment bankers provide strategic advice to firms on mergers, acquisitions, restructurings, and on debt and equity financing.
Entry level employees at investment banks are called investment banking analysts, and comprise a majority of the entry level positions in front office finance. Investment banking analysts perform the "grunt work" for an investment bank. They are the ones performing analyses in Excel, building PowerPoint presentations for pitches, and doing any other administrative work required for a deal.
As an investment banking analyst, you develop many technical skills and knowledge relating to corporate finance, valuation, deal execution, and how to run and operate a business. The skills you develop as an investment banking analyst are highly desired by private equity firms, hedge funds, and large companies. The skills and knowledge gained in investment banking analyst positions make investment banking roles very desirable, since these "exit opportunities" are very desirable.
Salaries in investment banking analyst positions are also high, but these opportunities come at a cost, since many investment bankers work between 80 and 100 hours every week. The long hours are a by-product of the great experience one gets in an investment banking analyst program, since you gain 5 years of work experience after only two to three years on the job.
Investment bankers' roles are divided between product and coverage groups. See below for a description of each.
Investment Banking Industry Coverage Analyst
Investment bankers who work in coverage groups cover a set of clients within a specific industry. Some of the industries covered include real estate, technology, financial institutions, or healthcare. These bankers are expected to develop an expertise in the drivers of the industry and understand how to value companies in this industry. Coverage analysts' work is limited to an industry, but they get to see many different types of transactions. For example, they could work on leveraged buyouts, a debt financing, and mergers within their industry.
Investment Banking Product Analyst
Investment bankers who work in product groups work on a specific type of transaction instead of with a specific industry. These bankers focus on developing a deep understanding of the transaction (also known as a product) they work with, and work in many different industries. The different products include mergers and acquisitions, restructuring, leveraged finance (non-investment grade debt), equity capital markets, and debt capital markets.
For more information on coverage and product groups, and what each one does, click on this link for a Mergers and Inquisitions article on coverage vs. product groups.
Resources from Mergers and Inquisitions
The worst day in the life of an investment banker