What Do Investment Bankers Do?
Professionals who combine financial knowledge with powerful analytical skills and excellent persuasion techniques to support institutional clients.
What Is An Investment Banker?
Investment bankers are professionals who combine financial knowledge with powerful analytical skills and excellent persuasion techniques to support institutional clients. In addition, they help their clients raise capital and work through merger and acquisition deals.
Bankers can help their clients raise capital through capital markets. For example, they can help them issue debt or have equity offerings for investors. With mergers and acquisitions, bankers will advise on selling or acquiring companies, such as price and valuations.
Investment bankers carry many roles within the two largely grouped divisions. These roles include:
- Arranging finance
- Equity financing
- Underwriting deals
- Arranging private placements, etc
These are a few roles the bankers will fulfill throughout their days and weeks.
Depending on the firm where one banker works, they could wear many hats or be assigned a specialized task. However, as stated earlier, all bankers' goals are to help their clients raise money or produce and execute plans for M&A deals.
Investment bankers typically have long workdays, often staying late into the night after starting in the morning. However, some days can be relaxed with minimal work, and others can be stressful with more work than one can imagine.
The banker's days, fortunately, do begin a little later, so following the late nights working until 1 am to 2 am, bankers will not have to be at work until 9:30 or 10:00. Some investment banks may offer perks such as free dinners to compensate for the long work hours.
Entering the field of investment banking can be highly competitive and demanding, often requiring extensive education, internships, and dedication. Most bankers will complete a bachelor's degree to become an analyst or a master's degree to become an associate.
Key Takeaways
- Investment bankers assist clients in raising capital and navigating mergers and acquisitions, working in long hours to fulfill various roles within the field.
- They help clients with debt issuance, IPOs, valuations, mergers, and acquisitions, among other financial tasks.
- Investment bankers handle debt and equity financing, underwrite deals, arrange private placements, and advise on mergers and acquisitions.
- They work long days, beginning with morning routines of emails and meetings, followed by afternoon deal work and late-night revisions.
- Entry into investment banking typically requires a bachelor's degree, internships, networking, and possibly an MBA for career advancement opportunities.
Responsibilities of an investment banker?
These bankers are specialized professionals in finance and business; their main focus is to help their clients raise capital or work through a merger or acquisition. They can raise capital by issuing debt or selling equity in the client's company.
Some of the responsibilities include:
1. Helping with issuing debt
Issuing debt involves a company selling corporate bonds to investors, thereby borrowing money. Upon maturity, the corporation repays the principal amount borrowed along with interest.
One challenge in issuing corporate bonds is securing investors willing to invest significant amounts. Investment banking firms play a crucial role in connecting companies with potential investors.
They will have their bankers reach out to the investors they know about and help companies find investors to fund their projects.
2. Helping with IPO
When companies want to issue stock to the general public, they will go through a whole process and eventually have an initial public offering (IPO). Investment banks are the go-to firms when people want to publicize their companies.
During an IPO, bankers assist companies in selling shares to the public.
Note
In addition to finding investors, investment bankers guide companies through the IPO process, ensuring compliance and maximizing success.
3. Valuation
When companies decide to buy, merge, or sell another company, they will reach out to investment banking firms. Depending on which side the companies are on, they will need a sell-side or a buy-side banker.
M&A bankers assist clients in valuing their own companies or potential target companies during mergers or acquisitions. They will also help their clients with the stipulations that should be implemented, ensuring they are within the legal bounds and finding investors if needed.
Roles of the Investment Banker
Investment bankers can play many different roles in the banks they work for. Some bankers may have a broad range of responsibilities, while others may be more specific. For example, some roles they might play include arranging financing, underwriting deals, and much more.
Some of the rules include:
1. Debt Financing
Investment banks assist clients in generating capital for projects by facilitating debt financing, such as issuing corporate bonds. The firm can help them debt finance their project by selling corporate bonds.
2. Equity Financing
When companies want to transition from private to public, they will take their business to investment banks. Investment banks will help them prepare to sell company stock on their IPO day. Investment bankers will fill many roles in this situation.
Investment bankers assist companies in setting an initial stock price for their IPO, facilitating interactions with investors, and structuring the offering. They will also help find investors to buy the stock, some preferred and others common stock.
3. Underwriting deals
Investment bankers participate in underwriting deals, assuming the risk of purchasing securities from issuers and selling them to investors, thereby facilitating capital raising.
The investment banks will buy the shares at a predetermined price and then sell the shares at a higher price to make a better profit. This is called an underwriting spread.
Note
Most of the time, one lead banker will work with a few others to complete this work.
4. Arranging Private Placements
Although investment bankers deal with many companies that want to go public, some companies prefer not to; in this case, they can raise capital through the help of private placements. As a result, bankers will need to have contacts available to help companies find capital.
When companies prefer to remain private but seek capital, investment bankers assist in arranging private placements, including issuing bonds to institutional investors. Insurance companies, retirement funds, or other large institutions can buy these bonds.
5. Mergers and acquisitions
Bankers also help negotiate mergers and acquisitions. Again, these processes must be planned and drawn out for the companies. Investment bankers assist in planning and negotiating mergers and acquisitions, advising clients on strategic decisions, and structuring deals.
A Day In The Life Of An Investment Banker
Investment banking is one of Wall Street's most desired careers but is also one of the hardest to accomplish and fulfill. The responsibilities of these bankers are extremely high and time-consuming, and one aspiring to be one needs to know what a day in life looks like.
This fast-paced job makes you want to pull your hair out of a career and is not for everyone. If you are looking for a laid-back 9 am-5 pm finance job, this career is not for you. When companies reach out to IB firms, they must handle their business immediately.
Let's check out some of the routine followed by an investment banker:
1. The Morning Routine
Analysts and associates who have settled down in their positions can expect to have mornings filled with emails, text messages, and morning meetings with co-workers. Most nights prior will be late and filled with work to complete.
Morning routines for investment bankers typically begin around 9:30 am or 10 am, allowing analysts and associates time to recuperate from late-night work.
Between the time analysts and associates begin to work and lunchtime, the work is less chaotic and more methodical.
Note
Many times out of the week, investment bankers will attend meetings or work on adjustments made by their senior management leaders.
During slower days, analysts and associates may have the opportunity to address personal matters, although such days are infrequent. The only off days are often on the weekend, and even then, weekends can become work days.
2. Afternoon Routine
Lunch breaks typically last forty-five minutes to an hour. While some opt for local sandwich shops, many first-tier firms provide free cafeteria facilities for their employees.
Once the team members return to work, associates can expect to have models updated and submitted back to them by the analysts. The associates may make more corrections and return them to the analyst if necessary.
This can be stressful for all parties involved. Associates desire to contribute to deals, while analysts feel pressure due to model creation and revisions requested by managing directors.
The afternoon work can often be considered the "live deal" times. This is when the teams are most focused on the active deal. Most teams are assigned one deal at a time, and the senior bankers have to make sure that no mistakes are made.
3. Evening routine
Workdays are normally split into two halves: before dinner and after dinner. Before dinner, analysts schedule their time to accommodate model revisions required to meet deadlines.
In the evenings, analysts and associates complete work that the vice president, senior vice president, and managing director have commented on or asked questions about. The comments or questions could cause massive changes to happen.
Getting Started in Investment Banking
It takes a very long time to become an investment banker, and it is a challenging task. Entering investment banking typically requires at least a bachelor's degree. Preferred degrees often include mathematics, finance, economics, or related fields.
Some firms sometimes pick those with computer science or engineering degrees. Although, it would be worthwhile to attend a college with a strong and well-known business plan. Ivy League schools are dominant in IB.
Securing at least one internship during college is advisable, with internships at bulge-bracket firms often leading to job offers in investment banking. Unfortunately, these internships are very hard to get into, and you almost have to know someone to get into them.
If unable to enter investment banking after completing a bachelor's degree and internships, pursuing an MBA could be an option. Once one gets their MBA, they could apply for an associate's position instead of an entry-level analyst.
Note
If you cannot get into a leading school, you should consider doing your best throughout your bachelor's, completing a good internship, and landing a good job. Then, once you have done this and gained some experience, you should apply to an excellent MBA program.
Networking and connections can significantly improve the chances of securing interviews for internships and jobs in investment banking. There are so many applicants for these positions that only those who stand out and have a connection make it in.
Although this process can be long and painful, on the other hand, it is more than worth it. Successful professionals in investment banking often have significant career advancement opportunities beyond their time in the field.
Summary
Investment banking is arguably one of the most prestigious positions on Wall Street. Many people who are trying never end up making it, and those who do work hard to progress. Many bankers have long days and longer nights.
Responsibilities include assisting companies in raising capital for project expansions and facilitating mergers, acquisitions, or divestitures. These processes must be planned out and executed perfectly, but they must be done quickly as they cannot waste clients' time.
Responsibilities that bankers must fill include finance arrangements, such as debt and equity financing. Others include mergers and acquisitions, underwriting deals, and arranging private placements. These are the tasks they spend most of their time on during the week.
The days are long for those who work in investment banking. The days last into the late afternoons, and the evenings usually last into the early night. Typical workdays span 14 to 16 hours, resulting in 70 to 80-hour workweeks.
Often, workweeks can extend to 90 to 100 hours. However, many people see this and do not mind because these jobs pay six figures straight out of college. These careers take lots of work, but getting into them is just as hard.
Most investment bankers hold at least a bachelor's degree, commonly in finance, economics, or related disciplines. In addition, students must complete at least one internship before being considered.
Once you have been on the job for a while, you can get promoted; however, if you cannot make investment banking straight out of college, You can gain experience at a good job.
Another route is to gain experience in a related field and then pursue a master's degree at a top finance school before entering investment banking as an associate. This is how most people get into investment banking and the responsibilities and roles they play once they are in.
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