When we hear the phrase ‘mergers and acquisitions’ (M&A), we often associate it with headline news, glamorous deal-making and corporate takeovers. Indeed, M&A is a regular enough event as organisations seek to improve their operations or increase their overall value by acquiring others, participating in a stock buy-back or undertaking a corporate restructure.
To engage in M&A activity – as well as meet other business needs – organisations need capital i.e. money.
This is typically available through the capital markets, where organisations might, for example, sell shares to investors. Another common way to raise money is for a private organisation to list itself on the stock exchange, known as an initial public offering (IPO).
Investment banks help organisations meet these financing needs by acting as a broker in the marketplace – connecting organisations with investors and vice versa.
They also help organisations with their M&A activity by supporting negotiations and conducting analyses to determine the right price, structure and conditions.
The investment banking industry is relatively concentrated, with a handful of players generating the most revenue. Macquarie Bank is one the leading Australian investment banks and plays alongside global banks such as UBS, Goldman Sachs, JP Morgan, Bank of America’s Merrill Lynch, Morgan Stanley, Lazard and Deutsche Bank.
Entry into an investment bank is challenging – investment banks look for the best and brightest from top-tier universities and those with the financial acumen to cut it in the world of M&A and capital markets.
As a graduate, your day-to-day work will typically involve interpreting data, financial modelling and preparing deal proposals or pitch books. Analysts either work on the ‘sell-side’ or ‘buy-side’. Sell-side analysts are required to convince investors to invest in a particular organisation. Buy-side analysts seek to buy securities to meet their investor’s needs.
Working at an investment bank is an intense experience. Workweeks of 80 hours plus can be common and managing your personal time may be challenging. On the upside, investment bankers are financially rewarded for their efforts and it is one of the more lucrative specialisations in the finance industry. Note, however, the size of bonuses paid has fallen recently after intense scrutiny following the global financial crisis.
You will find that most further education typically takes place on the job. Not only will you develop your technical and quantitative skills but you will learn more about the art of deal-making and client management. Furthermore, working in a demanding environment will help build resilience.
Many career investment bankers seek opportunities overseas after gaining experience in Australia. Geographic mobility is one of the best parts of being an investment banker, as skills are easily transferable and most banks have a global presence.
Overseas experience is favourably looked on, particularly for those seeking to climb the investment banking ladder. Career investment bankers typically work towards becoming a director or head of a division within their organisation.
If you decide not to stay in investment banking, you may choose to do further study, such as an MBA at an overseas business school.
Alternatively, some experienced investment bankers move into other areas of the finance industry, for example, as a chief financial officer at a corporate. Others may start their own advisory firms or work in private equity or venture capital.
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