As sophomore MBA students chat at cocktail parties, one of the main topics of discussion is who got the investment banking offers. Although investment banking’s reputation has taken a hit after the 2008 financial crisis, corporate finance jobs are still an amazing way to gain valuable business experience and earn a good salary.
Since the financial crisis, investment banking is perceived by many to have changed forever, and in many ways it has. But there will still be initial public offerings, leveraged M&A, and the need to raise capital to grow companies, and that means there will be jobs for those who have what it takes to succeed in corporate finance.
For the MBA, the typical job entry into the corporate finance department is an associate position. It’s a demanding role, but it’s a rung above an analyst role, pays well, and leads to great client exposure and trading experience. So what does it take for an MBA to secure an associate position?
From B-School to I-Banking
Yes, corporate finance is looking for bright people who can clearly articulate business insights and who will dazzle clients with soft skills. But at the associate level, investment banks are also looking for MBAs who have a strong background in finance and who are self-motivated and disciplined.
In terms of experience, bankers ideally look for candidates with prior experience in corporate finance. Such experience could be a pre-MBA stint as an analyst or a summer internship at an investment bank. Companies also tend to value candidates with Big Four accounting experience, commercial banking experience, or other positions that require significant exposure to finance and accounting.
Like the analyst hiring process, interviewing for associate positions can be intense, raising the ante for candidates who have completed graduate programs and are expected to work more closely with clients. Associate candidates must spend several hours on practice interviews and be prepared for all kinds of questions. For those who have already gone through the interview process as an analyst, the interview will not be as intimidating (otherwise, brace yourselves!).
Interviews can involve several rounds, culminating in a “Super Saturday” round in which the best candidates meet with all of the company’s bankers for another round of interviews and socialization, giving the company an opportunity to see which candidates are the most culturally suitable.
As with most interviews, candidates must be prepared to impress the company with their intellect and skills, but more importantly, they must demonstrate that they are likeable people who will work well with the company’s employees. For candidates receiving offers, it’s time to prepare for life as an investment banking associate.
The Quarterback of Corporate Finance
There’s a good reason associates earn a healthy salary and a large bonus each year. In short, they are the quarterbacks of the corporate finance office. They may have analysts they can assign projects to, but they have to juggle multiple projects from multiple bankers with complicated schedules. Managing analysts is not an easy task either, as each of them is maxed out with their project workloads.
Like analysts, associates can start their day at 8 am and not finish it until 1 or 2 am. They come over the weekend to stay on top of projects and make sure documents and presentations are completed in plenty of time for a full edit. Associates generally spend as much time as analysts, often 80 to 100 hours a week at New York firms or 60 to 80 hours at off-Wall Street firms.
The deal cycle
Associates play a key operational role in the business cycle of the corporate finance department. In the trading cycle, investment bankers (the vice presidents and managing directors) will be approached or approached by companies with ideas for possible deals. These deals may include IPOs, follow-on offerings, private placements, mergers and acquisitions.
The bankers will arrange a meeting with the company called a presentation, in which they will introduce the company’s services to the company and present their analysis of the feasibility of the potential transaction.
At the presentation, the bankers will present the potential customer with a pitch book, usually a printed PowerPoint presentation outlining the bank’s credentials along with a detailed analysis of the market in which the business operates and often an assessment of the bank’s company. itself.
If the firm is impressed with the firm and is interested in a deal, it will hire the firm to execute the transaction. Depending on the type of transaction and market conditions, these transactions can take anywhere from a few months to a few years to complete. At any one time, bankers may be working on multiple pitches and deals at once.
What do the associates do?
Analysts tend to work at the front end of the deal cycle, working on pitch books for bankers. Associates also work at the front end of the deal cycle, supervising and editing the work of analysts in preparing the pitch books.
But associates also help execute deals: They prepare sales documents for various transactions, edit prospectuses, and even discuss due diligence materials with potential buyers on M&A and other transactions. As associates earn the respect of senior bankers, they may come to accompany senior bankers on presentations and become more involved in business development.
A first-year associate may initially perform many of the same analyzes as analysts: compensation, DCF, LBO, etc. — but associates eventually transition to higher-level work. Instead of using the template financial models that analysts work with, some may redesign these models or create models specifically for particular deals.
Much of the field work associates do involves disclosing client financials to share with potential investors or writing proprietary information memos for M&A or private placement transactions. Due to the nature of this job, associates often work closely with clients, speaking with CEOs, CFOs and other members of the management team to gather relevant information for sales documents.
Associates quickly learn to charm customers while leaning on them to provide timely and detailed information for sales documents. Corporate finance transactions can be extremely stressful for clients (and associates), and associates must be able to navigate difficult situations where clients have grown weary and excited about the negotiation process.
The advantages of being associated
Despite all the pressure and long work hours, there are some benefits to associates who stay. Depending on the company, starting salaries for associates can range from $100,000 to $150,000, but when bonuses are added, often in excess of 50%, total compensation can range from $150,000 to $250,000.
Many companies have a policy that when employees have to stay at work after 7:00 pm, they are paid for dinner. Like analysts, associates stay past 7 pm most nights, so free dinners can add up to a lot of money quickly.
Other benefits often include reimbursement of cell phone or Blackberry bills, free cab rides for late trips home, and the occasional opportunity to celebrate with other bankers at a lavish closing dinner.
career progress
If an associate decides to leave the world of investment banking, their experience can often be leveraged to move into positions that would normally require more experience. Investment banking is an incredibly rigorous job with associates logging twice the hours of the average worker and performing their work at a level of intensity that is among the highest in the business world. No wonder they find it easy to excel in other careers.
For associates out there, two to three years of experience typically leads to promotion to a vice president position. Hours for VPs may be a bit lower, but travel is a bit more.
A high-performing vice president may make the leap to senior vice president or managing director after several years. While the hours and seniority of these positions can be a bit more attractive than an associate position (you can still find senior bankers in the office many weekends), they also carry much more responsibility for attracting new business.
Like any career, anyone considering an investment bank associate position should look beyond the salary and prestige and consider whether or not they will enjoy the job. Some of the most valuable benefits investment banking offers are the incredible experiences of working with companies during crucial times, and the character those experiences build.
