I have some big plans for Mergers & Inquisitions coming up over the summer and into the fall (amazing what an extra 80-100 hours of free time each week allows you to do), so stay tuned for announcements soon.  In the meantime, let’s proceed to this week’s edition of reader Q&A.

The Age Factor And Part-Time MBA Programs: How Old Is “Too Old?”

“I’m in my early 30’s and about to start a part-time MBA program at a top 20 school. I’ll be in my mid-30’s when I graduate.  Since I’m making a career change and will be above the median age for new Associates, I’m worried about actually getting into investment banking.

How much does age factor into recruitment? Am I going to be at a severe disadvantage?”

Inquisitor:

Make no mistake: age definitely plays a factor in recruiting.  Banks, for example, are unlikely to hire Analysts older than their late 20’s (anyone older than that would never put up with staying in the office until 4 AM and waking up at 6 AM); if you’re over 40 it’s going to be hard to break in no matter how senior you are.

However, I don’t think you’ll be “too old” to get into banking.   Most Associates are a bit younger, but not by enough to put you at a disadvantage.

The bigger problem will be the part-time MBA program - banks recruit mostly from full-time MBAs, and in general the part-time programs are not regarded in the same light. I would do some research and assess the recruiting environment at your school; if there isn’t any recruiting, either consider a full-time MBA program or get started networking with alumni and friends in the industry right away.

Finance Internships Abroad vs. Staying In The US

“I’ve accepted an internship at a well-known European bank. The internship is in London and seems to be very similar to US internships; as an added benefit, I’ll be getting a lot of great contacts in Europe.

What would you think when looking at a resume of someone with my background? I do want to work full-time in New York since I was born and raised in the US - how would US banks react to an internship in Europe? Would it be positive since it stands out from other people or negative since London is much different from New York?”

Inquisitor:

Working abroad anywhere is a positive, especially in today’s world.  Over time experience outside the US will continue to grow in importance, especially since the US is no longer the center of the world (see: investment bankers flocking to Dubai).

Even if the European bank is less “prestigious” (I hate that word) than its US-based counterparts, the internship itself will still be a huge positive and won’t hinder you from working in New York, especially since you’re from there originally.

I might have mentioned this before, but my experience abroad is one of the reasons I got into investment banking in the first place - it made me stand out compared to everyone else applying for the same spots.

Fall Analyst Recruiting At The Bulge Brackets

“I graduated from a top 20 university last year and have been working at a well-known (but not M/B/B) consulting firm for the last several years. I really want to switch into investment banking, but I know it will be hard given the current hiring market.

I’ve been thinking about trying to squeeze into the fall analyst recruiting cycle and interview alongside undergraduate candidates - do you think this will work? And do you think bulge bracket banks will even be recruiting analysts this year?

Inquisitor:

That seems to be the question of the hour - well, that and 2008 bonuses (I will write about my views next week).

Banks will almost certainly recruit in the fall, but I doubt that it’s going to improve much compared to 2007 - it will either stay the same or get worse. I hate to sound depressing, but people are getting laid off left and right and business is… slow… really slow. Most of my work lately has been pitching deals that will never happen.

Putting aside market concerns, many consultants do transition into investment banking and private equity. However, given your circumstances it’s more realistic to consider 1 of 2 options:

1. Go to a boutique or middle-market rather than aiming strictly for bulge bracket firms - it is extremely tough to come in with a non-traditional background in a bear market.
2. Go to business school and start banking as an Associate. By then the economy should have recovered (or else we’re all in a lot of trouble).

I’m not sure what you mean by “interviewing alongside undergraduate candidates” - you can’t do this since lateral hiring is a completely different process. If I were you, I would start networking and contacting friends in the industry right now and take advantage of any unexpected departures in the summer season - Analysts sometimes leave after their first year and you take advantage of this to land a job.

More Investment Banking/Finance Summer Internships

In other news, some other sites out there picked up my Summer Intern Success Guide feature on Tuesday and I saw many great contributions. Here are a few sites that featured my guide and some of my favorite tips:

Prince Of Wall Street - Advice for Summer Analysts Hitting the Desks

Besides linking to several of my posts in this post (always a good way to get my attention :), The Prince also goes into a few tips of his own - I think it’s a great idea to find the best analyst.  There is a huge difference between the top analysts and those who don’t know much, and befriending the smartest guy in the room is a great way to get ahead (as long as we’re not talking about Enron).

I also like his advice to develop relationships with your staffer and the higher-ups as well as with the Analysts - Analysts often decide who gets offers and who doesn’t at the end of the summer, so you need to heed this one.

Finally, working out and eating healthy food are critical - I’ll write a few more articles on how to stay fit as an investment banker since there’s a lot of interest in this topic.

Financial Rounds - Some Quick Tips For Summer Internships (Investment Banking and Otherwise)

Besides complimenting my name (another good way to get my attention :), Financial Rounds also offers up some other useful tips for summer interns.

I especially like his tip to avoid badmouthing the competition; I’ve seen this happen with summer interns and it’s never a pretty sight.  As I’ve mentioned before, summer intern competition is not nearly as intense as you probably think, so there’s no reason to badmouth others.

And never try to suck up to someone above an Analyst - we notice when you do this and will always find some way to screw you over, even if you’re not aware of it.

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Diluted Shares Outstanding In A DCF

“I’m confused about how shares outstanding work in a DCF.  When calculating the fully diluted shares outstanding using the Treasury Stock Method, we need the current share price.  But shouldn’t we use the “intrinsic share price” obtained from the DCF to calculate diluted shares?

I realize this would create a circular reference because the DCF depends on the diluted shares outstanding, but the diluted shares outstanding depend on the share price in the DCF.

Can you clarify?”

Inquisitor:

You’re talking about 2 separate issues here - what a company actually costs to acquire and what a DCF tells you it’s worth.

When you calculate a company’s fully diluted shares at a given share price, you take the basic shares outstanding and factor in the dilution from options (and warrants/convertibles) at that share price.  Then you multiply that number by the share price to get the company’s fully dluted market cap.

A DCF, or any other valuation technique like public comps or M&A comps, is used to tell you what a company should be worth, not what it would actually cost to acquire it today.

In other words, you would never use the implied per share value from a DCF to determine how much it would cost to buy a company.

If you’re doing a DCF the correct way, you do get a circular reference because the per-share price output depends on the fully diluted share count - but the fully diluted share count depends on the per-share price.

To do this correctly, calculate the fully diluted shares using the Treasury Stock Method and use the per-share price in the DCF as the input for fully diluted shares, then use the fully diluted shares output as input in the DCF.  Make sure iterations are turned on in Excel (Alt T + O + C + Alt M + Alt I) and let it iterate (F9) to calculate the correct number.

Career Switch: IT To Investment Banking

“I am looking for advice on how to proceed with my career, and am hoping you might point me in the right direction.  I am currently working in the IT department of a top 5 investment bank after having graduated from a top 10 university with a Computer Science degree 2 years ago.

The IT role hasn’t met my expectations at all and I have decided I would rather go into an investment banking front-office role.

For someone with my background, can I realistically switch over?  Would recruiters look favorably upon my experience?”

Inquisitor:

Generally it is quite difficult to transition from a back-office role (IT, for example) into a front-office role at an investment bank.  Since the firms are so large you tend to get pigeonholed into one area, and no matter how much interest/aptitude you have for front-office work, your requests to transfer will usually fall on deaf ears.

As I wrote in my article on how to get a finance job with an engineering background, there are typically 2 viable options:

1. Take advantage of your quantitative background and go to a hedge fund.  They like recruiting Computer Science graduates and other quantitative majors, and your experience at a bank gives you an edge here. They understand that if you’re smart and quantitative you can pick up anything finance-related along the way.
2. Go to an MBA program and come into banking as an Associate.  The only issue is that with just the IT role at the bank on your resume, you will probably need more experience to get into business school/get into a bank afterward.

I don’t mean to discourage you, but from what I’ve seen it is just incredibly difficult to “lateral” into banking from a field that isn’t closely related (e.g. consulting).  Going outside banking to the hedge fund world or going back for an MBA are higher-probability ways of getting in, especially in a bear market.

Corporate Finance At A Fortune 500 Company

“I was wondering what you thought of Corporate Finance training programs at Fortune 500 companies, such as GE’s Financial Management Program.  Are these at all useful for breaking into investment banking?  If I have the opportunity to do something similar this summer, should I take it?”

Inquisitor:

Corporate Finance at a large company can be one path you take to get into banking, but I would recommend only doing a summer internship rather than a full 2-year program if you do not want to ultimately work at a Fortune 500 company.

Although you do learn lot and will gain a useful skillset, recruiters do not view these programs in the same way they would view experience at an investment bank, private equity firm or hedge fund.  Those 3 are all seen as more “rigorous” - in other words you work a lot more, (perhaps) learn more finance and you’ll be better-prepared for the non-existent work/life balance of investment banking.

If you don’t have or can’t get an internship in one of those 3, it is definitely better to do Corporate Finance at a Fortune 500 than to do something in a completely unrelated field.

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-Failsafe Interviewing Techniques For Investment Bankers, The All Nighter

Continuing this week’s theme of “assessing strategic alternatives for your career,” or “how to survive and interview for other jobs, even in a bad market,” I wanted to cover one other question I’ve seen lately: how to find time to interview with 2 full-time jobs (welcome to the life of the investment banking analyst).

Even if you’re not in investment banking, but rather another professional field like accounting, consulting, or corporate law, finding time and making up the appropriate excuses will always be an issue.

While it’s easy (easier perhaps) to do phone interviews, you’ll never get an actual offer unless you do at least a few rounds of in-person interviews, and sometimes many more than that.

There are 2 approaches you can take when it comes to being out of the office interviewing for other jobs: deception and honesty.

Deception

The classic example here is the doctor appointment.  I’ve used this one before - probably too many times in fact.

Dentist is a little better, but still rather conventional.

“Family emergencies” can also work, but it’s even more unbelievable to have 5 family emergencies in one week than to have 5 doctor visits, so be careful with your usage there.

The main problem with using this strategy is that eventually you run out of excuses or you have 10 “doctor appointments” in one week, so it stops being believable.

And if you want to get a little more exotic, don’t even think about it.  Saying your pet giraffe needs to go to the vet is a sure sign you have multiple interviews coming up.  Variations on the ordinary are far better.

In general, though, I would recommend making up excuses in only 2 situations:

1. It’s very early into your time on the job - if you just started at an investment bank in the summer, think January or February - and you are even more on top of recruiting than the average person.  You don’t solicit meetings; the headhunters come to you.
2. You work at a firm/office where talk of recruiting is taboo and no one is open about it.  Or you’re in an industry where it’s not expected that people move on after a few years (surprisingly, there are other industries out there besides finance).

A lot of investment banking analysts think deception is always the best route, but I think this line of thinking is somewhat flawed.  If you just have 1 or 2 interviews, sure, it’s easy to write them off as dentist appointments, weddings or broken sinks.

But when you actually find a lead worth pursuing and you have multiple rounds of interviews, it’s pretty obvious to everyone what you’re doing.  And even if you don’t say anything directly, they’ll put the pieces together.

If you’re not in investment banking but are trying to break in from another field like accounting or consulting, you will probably have to use some made-up excuses to avoid raising red flags.

My recommendation: rotate among different excuses or come up with a series of events around one excuse.  If you go the family emergency route, you can always string together a more detailed account and relay the basics to anyone who asks.

If you’re not in New York or London and you actually drive to work, car accidents (real or imagined) can be another good source of multiple absences within a week or two.  You have to go to the hospital… go to the doctor for a follow-up exam… get your car fixed… find out it can’t be fixed… locate a new car.

It’s a gold mine.

Honesty

Honesty can be the best policy here - as long as your firm and office are reasonable.  I was upfront when I went to interview elsewhere and specifically told everyone on my team what I was doing (no, not where I was interviewing, just that I would be out for “private equity interviews“).

No one ever made an issue out of it.  The most I ever got was, “Ok, make sure someone else is covering your deals.”

(Forget about “good luck.”  This is finance.)

There are some offices where interviewing (or interviewing very frequently) is looked down upon; this actually happens more at boutiques and smaller firms than at bulge brackets, where most Analysts do in fact move on after 2 years.

Again, if you’re not an investment banking analyst, honesty may not in fact be the best policy.  Friends switching into private equity or banking from related fields like equity research or accounting have had to jump through some crazy hoops to get in their interviews without arousing suspicion.

Telling Co-Workers: Trust No One

If you are going the “deception” route, you need to be 100% committed to it.  You may think that telling fellow Analysts will be fine… that no one would leak what you’re actually doing.

But you would be wrong.

Somehow, it always gets out.  I remember once I had people from a completely different office asking me about my trip when I got back.  I had only told a few trusted co-workers so I was pretty surprised at first.

And then I realized that word about what you’re doing always leaks if even one person other than you knows.

So if you do have to be confidential for whatever reason, pretend it’s the mid-90’s and the X-Files is still the best show out there and trust no one.

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Every week I get questions like the one above. And my reply is usually the same: don’t bother. In most cases, lateraling is simply a waste of time and effort. Around this time of year, though, young investment banking analysts everywhere think about making the move.

Bulge Bracket To Bulge Bracket

This is what people are usually thinking of, and it’s almost always wasted effort. It doesn’t make much of a difference whether you’re at Morgan Stanley or JPMorgan; you’ll have access to the same set of recruiters at any bulge bracket.

You could argue that some groups/offices are “better” (like the former UBS LA) and that it’s therefore better to work for the more “prestigious” offices, but it’s still a lot of effort to switch banks for a marginal gain if you’re going from large bank to large bank.

Reasons To Make The Move

If you can’t stand your investment banking group and want nothing more than to end your misery in a violent way every morning when you wake up, then you might have an actual good reason to make a lateral move to another bank.

Even in this scenario, though, you should confirm there’s nothing you can do to improve your situation, such as switching teams or groups, before you decide to swing through the jungle of finance to another bank.

Another reason might be if your bank is collapsing, or your group is collapsing and everyone else is switching banks anyway; in that case you don’t really have any choice.

Issues To Consider First

If you make a lateral move you’ll have to start over at another bank, both literally and figuratively.

Depending on the banks involved, you may be forced to start over as a 1st year Analyst. This “demotion” is more common going from a smaller bank to a larger bank, but the real issue is not the demotion - it’s the loss of time in the recruiting process.

Since private equity firms and hedge funds conduct interviews a year in advance of start dates, you will have to stay in banking for 3 years rather than 2 if you switch to another bank. If you’re a masochist you might want this or you might be fine with it, but most people making the switch don’t realize this and are horrified when it hits them.

In addition to the harm done in terms of recruiting, you’ll also have to build “mind share” with senior bankers once again and prove yourself capable so that you work on deals rather than pitchbooks.

Boutique Or Middle Market To Bulge Bracket

This is typically the only lateral move that makes sense. While you can definitely get good experience at a smaller bank, you will have better access to recruiters and exit opportunities at bulge brackets.

So if you ended up at a boutique or middle market firm due to economic conditions, because you came into the recruiting process late, or because you made a career change long after graduation, going to a bulge bracket may be a good move.

Just make sure you are certain you want to stay in finance for the long-term. Otherwise, it’s once again a waste of time/effort because having Goldman Sachs on your resume vs. Piper Jaffray isn’t going to do much for you if you move back home to help out with the family farm business.

But You Should Still Think Twice

Even if you’re 100% convinced that you should move to another investment bank, I would still urge you to think twice before you do it. Make sure all of the following are true before jumping over to the other side:

• You are willing to be an investment banking analyst for 3 years rather than the standard 2.
• You are 100% certain you want to stay in finance for at least another 10 years.
• If you have a team conflict or can’t stand your current group, there’s nothing that can be done to remedy that at your current bank.

Be Wary Of Headhunters

Recruiters will always be looking to make lateral moves happen because they make a commission if they get you to move somewhere else.

So if they’ve told you that the other group you’re considering moving to has Aeron chairs made of gold, exit opportunities beyond your wildest expectations, and yes, even a daily allowance for not only meals but also models and bottles, you should be careful.

You’re probably being sold.

Sure, if you are interested in moving anyway and have some good recruiter contacts who can make it happen, go ahead and use them. But if they’re pitching you on moving from Goldman to Morgan or on moving from Gleacher to Revolution Partners, there’s probably something you don’t know.

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While this is a great strategy for reducing risk, it carries with it an additional challenge: how to decide on an uncertain offer vs. a certain but “lesser” offer.

Meanwhile, the usual questions on how investment bankers read resumes and whether advanced degrees are actually useful continue to come in.

Hedging Your Bear Stearns Summer Offer

“I got a summer internship offer with Bear Stearns during recruiting season this year. I was nervous about what would happen, so I started hedging my offer and talking to smaller firms and received a summer analyst offer with a regional bank.

Although the internship is unpaid, the office does have good dealflow and has a decent record of sending summer interns to bigger banks.

I still technically have an offer with Bear Stearns, so is there any way I can try to postpone a decision here and wait to see what happens with Bear? It’s not that I don’t want to work at the boutique, but all else being equal, I’d rather get paid a decent amount for the summer rather than earning nothing.”

Inquisitor:

First off, in general I wouldn’t be too concerned about the pay. You should be much more concerned over having an internship at all vs. not having one! Making $12K in one summer sounds nice but in the long run it’s not that much money, especially if you go into finance eventually. With internships you always want to be more focused on the experience rather than the pay.

It’s difficult to postpone your offer decision because they’ll know what you’re doing. So I don’t know how far you can push back the timing here.

It seems likely that at least some Bear Stearns offers will be honored, but I would lean toward going with the smaller bank and be assured of actually getting a banking summer internship rather than having it fall through.

Normally I tell people to avoid boutiques and smaller firms if possible, but it’s a bit different here because:

1. It’s just a summer internship, so it’s not as relevant for future opportunities as the bank where you’re a full-time analyst will be.
2. There is a chance that Bear summer offers will fall through (again, no one knows for sure) and it’s better to have an internship 100% rather than have the chance of losing one, especially at this late stage.

Who Really Reads Resumes?

“I understand that the people who read investment banking resumes are usually analysts who went to the school in question. However, are they usually recent graduates, or have been analysts for a couple years?

For example, if I send my resume in through on-campus-recruiting in Fall 2008, will it likely be reviewed by someone who graduated in 2008, or graduated in 2007 and been in the industry for at least a year?”

Inquisitor:

Analysts at all levels will review resumes - even back when I started a few years ago, I was reviewing resumes a couple months into the job and making interview decisions. Sometimes it’s actually 1st Year Analysts who do the bulk of resume reading since it’s a task that 2nd/3rd year Analysts tend not to want.

It may sound interesting to determine peoples’ fate and who gets interviews based on resumes, but it gets tiring when you have to read hundreds and only have 30 seconds to spend on each one. Reviewing resumes and helping people improve them is much more fun.

It may seem haphazard to allow recent hires to make interview decisions, but you don’t need a lot of deal experience to make interview decisions - you just need recruiting experience.

The Value Of A Master’s Degree

“I’m currently a non-business undergrad looking to get into trading. I graduate in one semester and have been trying to get a summer job at banks, but my best shot may have just imploded with Bear Stearns’ collapse. They probably have no time to worry about interviewing people at this point, even those who made it to final rounds.

If that happens and it falls through, I would be left with no internship and no other offers, giving me almost no shot of getting into finance.

Getting an MBA seems worthless post-graduation since only lower tier schools would even consider someone with no work experience. However, I was thinking a Master’s Degree in Finance or related major could serve as a segway into a finance career. I’m considering such a program at a well-known undergraduate business school currently - do you think this is my best option for getting into finance?”

Inquisitor:

As you said, it would definitely be a mistake to get an MBA without work experience first; it won’t help you get into finance at all if you go to a lower-tier school.

The Master’s program you mention will not give you a significant advantage; although it is at a good school, it’s not equivalent to an MBA.

The main advantage it would give you is time - you would have more time to find jobs because you could take advantage of the full-time recruiting cycle in the fall.

Before doing this, you should check on how many banks recruit there in the fall and how many people get jobs at banks via that program.

But if you don’t have an internship or full-time offer lined up currently, the Master’s program is probably your best option.

As the economy worsens and hiring slows down even more, I suspect more people will make this same decision and head back to school.

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Typically I stay away from explaining the actual job because I think it’s more interesting to write about how to break into banking or just how high investment banker salaries are, but feel free to send in more questions on what investment bankers actually do.

Nonprofit To Private Equity

“Hi there.  For the past 5-10 years, I’ve done nonprofit work, specifically in microfinance and international development.  I’ve done a lot of consulting and due diligence work and have worked with many international governments.  I’m trying to change careers now and want to work at a boutique private equity firm focused on emerging markets.

How hard is it going to be to transition into private equity, and will my background help me at all?  I realize this is a very nontraditional career path.  Also, how critical is it to develop financial modeling skills before starting?”

Inquisitor:

You certainly have a unique background.  It’s going to be tough to break into very large private equity firms, but it sounds like you’re not interested in them anyway.  The boutique PE firms you are targeting will definitely be your best bet, although you will still face an uphill battle.

The biggest issues will be your lack of financial experience and not being used to the lifestyle/environment at PE firms, so you should focus on how to overcome those and present a “story” that shows you can handle the hours and have studied some finance independently.

One advantage you have is your consulting background - many consultants get into private equity, so if you can spin yourself as being an “international/emerging markets consultant,” you can get your foot in the door more easily.

I don’t think they would expect you to be able to model like a bulge bracket investment banking analyst or anything, but it is important to develop some of those skills before you start interviewing because they will ask you to build models in interviews.

It’s not that difficult to learn how to build a relatively simple Leveraged Buyout Model, so you should focus on that as well as learning the necessary accounting/finance concepts (mostly how to link the 3 statements and how different items flow through the statements).

I would focus on using your alumni network and all the friends/contacts you have.  It’s probably not worth contacting headhunters for someone in your position as they’re most helpful for people with traditional backgrounds.

It’s going to take some time to get in and it will be an uphill battle with your background, but I would continue to focus your efforts on networking and developing a “story” that proves you can handle the work and know enough about finance to jump straight into the job.

For more on interviewing, networking and resumes, check out my posts on getting an investment banking job, networking into investment banking and private equity resumes.

Much of the advice in those posts applies to any job in financial services.

Good luck!

What Do Accounting Firm Do?

“I’m interested in M&A/advisory work after I graduate.  I’m curious to understand what roles the auditing firm (PricewaterhouseCoopers, Ernst & Young and Deloitte), the investment banks, and the strategy consulting firms (McKinsey, Boston Consulting Group and Bain) play in M&A work.  Who does the valuations, negotiations and integration work?  Is it spread out among the three or does each one compete for different parts?  I’ve talked to people on all sides and they give conflicting reports.”

Inquisitor:

Generally here is how it works for a sellside M&A deal:

1. The investment bank will do the upfront marketing work and prepare sales documents for the company, contact buyers and set up management meetings.  They will also do some valuation work to set price expectations.
2. The bank will conduct an auction process with multiple rounds of bids until the buyer is finalized.
3. As each buyer moves further into the process, they will bring on board accountants, lawyers and consulting firms to do diligence on the seller and look at the seller’s accounting, legal issues, market dynamics and pretty much anything else of interest.  Audit/accounting firms will be involved with due diligence and verifying that the seller’s financial statements are accurate.
4. The bank and the law firms involved will negotiate the purchase agreement with the buyer and seller.  Generally the accounting and consulting firms are not involved with this at all, it’s really just the investment bank and the law firm.
5. After the parties reach agreement and the deal gets done, the accounting firms will again get involved in deciding how to allocate the purchase price and perhaps with some of the financial integration work.

The likes of PwC would never be involved with the negotiations or the marketing/positioning of a company.  Even with valuations, they just allocate the purchase price and value intangibles like customer relationships, patents and intellectual property rather than valuing the whole company like bankers do.

The only exception occurs when an accounting firm is hired as the financial adviser on the deal.  Most of the big accounting firms have financial advisory practices, and in that capacity they act as the M&A bankers on the deal.  However, they are not as well-known or well-developed as the bulge brackets‘ M&A divisions.

Startup Business Development Internship vs. Marketing Internship

“I’m debating between two opportunities this summer, and I’m wondering which one will ultimately look better on a resume for applying to banking jobs next year.  My two choices are to either do Marketing / Public Relations for a large, blue-chip company and handle advertising and working with a sales executive, or to go do business development for a tech startup.  The blue-chip one sounds more prestigious, but the business development one could give me even better experience.  Which do you think I should do?”

Inquisitor:

I think it really depends on what the Business Development internship will offer you - specifically what you’ll be doing on a daily basis.

If it’s just going to be assisting the other people and you won’t learn much about making deals happen or evaluating partnerships/acquisition opportunities, I would go with the big company marketing opportunity.

However, if you do get a great deal of responsibility it would be better to just go with the startup.

From an interviewing / banking resume selection perspective, seeing the title “Business Development” in your work experience to me implies that you did something much closer to banking compared to a Marketing/Public Relations type role.

However, many startups are poorly managed and are not great learning opportunities.  Others, by contrast, are fantastic environments in which you can grow and develop, so it’s critical to do some diligence of your own and figure out what category this one falls under.

I would lean toward doing the Business Development internship because it is more similar to a banking job, but I would ask a lot of questions first and establish exactly what your role will be, because it’s often vague at startups.

If you get the hint that it’s poorly managed or you’ll just be doing menial tasks, go with the marketing internship.

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The investment banking internship recruiting season continued in full force in February 2008, and many readers asked questions on how to decide on summer internship offers and also how to get them in the first place.

I covered a good amount of investment banking lifestyle material as well, as including the perennial question of just how high investment banking salaries are.

Getting An Investment Banking Job / Getting A Private Equity Job

For those seeking investment banking jobs or summer internships, I wrote the most detailed, freely available guide to superday interviews out there. Why bother with an over-priced Vault guide when you have this? (Well, assuming Vault guide isn’t free for you anyway).

And for those struggling to get investment banking interviews in the first place, either because they are from non-target schools or are trying to break in from other industries, I wrote a guide on using networking to get into investment banking.

Beyond just investment banking summer recruiting, private equity recruiting for the summer of 2009 is also starting up. For those looking to break into the industry, I wrote a guide on how to write the ideal private equity resume and how to write about your investment banking and deal experience.

Finally, beyond just the usual resume advice, I also launched a resume review service at the start of this month for those who are looking to improve their resumes. Those who have used the service so far have been very pleased with the results and I’ll add some testimonials to the page eventually.

Deciding On Investment Banking Summer Internships

I also received many questions on how to decide on summer internship offers this month, so decided to run 2 reader Q&A columns.

One was focused on how to choose an investment banking summer internship, while the other focused on breaking into investment banking with a Ph.D. background, whether to choose a boutique or bulge bracket summer internship, and how to handle informational interviews.

I hope these have answered many of your questions in these Q&A features, but as always, contact me if anything else comes up.

Investment Banking Lifestyle And Investment Banking Salaries

I did not focus on lifestyle questions as much this month, but did manage to cover the worst time to be an investment banker: Friday at 4 PM. That’s when everything bad happens and when the investment banking analyst gets his weekend work. And if you’ve ever wondered why attention to detail is so important as one of the qualities a banker needs, I covered that as well.

I also settled a longstanding question over whether or not investment bankers or McDonald’s employees earned a higher salary. It turns out, contrary to popular belief and a widely circulated email several years ago, investment banking salaries are indeed higher than what you could earn at McDonald’s, even on an hourly basis.

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I continue to receive many questions on breaking into banking from other industries, so I feature one recent question on that topic here as well.

Breaking Into Investment Banking With A Ph.D.

“I am a Ph.D. scientist actively exploring a different career path. Do you think getting a CFA degree would help me break into investment banking? Also, you recommend going to a bulge bracket on your site, but would such firms even consider hiring me? I’ve gotten consulting interviews but have had trouble with finance interviews. Should I focus on smaller banks?”

Inquisitor:

A CFA may be helpful for you, but I think there are probably better ways you can spend your time to get an investment banking job. A CFA requires lots of studying, time, and preparation and your time would be better spent reading up on stocks, learning financial modeling, speaking to people in the industry and networking, etc.

I would strongly recommend going for boutique and middle-market banks with your background. It is very difficult to get into bulge brackets with an unusual history, and with the current market environment it’s even tougher, especially without an internship.

Smaller banks, by contrast, still hire even during downturns, and will be more accepting of someone like you.

In terms of other ways to stand out, some friends have worked at “finance-related” firms that are not necessarily banks - companies that provide valuation services, industry research or buyside research, for example.

These firms may be good stepping stones into investment banking.

Boutique vs. Bulge Bracket Summer Internship

“I have 2 investment banking summer internship offers - one from a top boutique in their M&A group and one at a bulge bracket that is not group-specific. I like the people at both equally and am very concerned over exit opportunities. Which one do you think is better for me?”

Inquisitor:

I don’t think you can go wrong with either choice, as both will have very good exit opportunities and prestige. For a summer internship especially, the specific bank you’re at doesn’t matter too much. Having a banking internship at all puts you at an extreme advantage in full-time recruiting.

I would consider the deal flow and banking culture at both when making your decision. Getting to work on good deals is critical to good exit opportunities, as deals are the centerpiece of your private equity resume and will be crucial in buyside interviews.

Personally I would lean toward the M&A-focused boutique. Since it has not relied as much on its lending capabilities to win M&A deals, the boutique will have good deal flow even in the face of the credit crunch.

[Note: "Top boutique" here refers to the likes of Evercore, Greenhill, Lazard, etc. which are basically comparable to bulge brackets in prestige. The bulge bracket in question suffered a lot of writedowns in the credit crunch.]

Investment Banking Informational Interviews

“I have an informational interview with a Managing Director coming up. Other than his career, is there anything else that I should ask him? Obviously, things about the firm - but what really makes MD’s like candidates and what do they like to see in candidates?”

Inquisitor:

Besides the typical career questions, I would talk to him about your school, activities, campus happenings, and classes and see if you have anything in common. Alumni connections can be very powerful so you should definitely take advantage of them.

MDs like to make personal connections with candidates and will focus on fit questions rather than going into details on accounting and finance. Make sure you have a really good story about why you want to do investment banking and M&A specifically.

I would also try to come up with a few insightful questions - more than just career goals and background. Maybe ask him how the business has personally affected him, what he learned over the years that he did not expect going into it, and anything else tailored specifically to his own background.

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Well, maybe not easy. But getting investment banking interviews is relatively easy.

You go to the career website, check a few boxes, upload your resume, and wait to hear back on which banks have selected you for interviews.

If you don’t go to one of these schools, though, or are trying to get into investment banking from a different industry, the process is not so simple.

If recruiters don’t reach out to you and solicit resumes, you have to be proactive; reach out to them, and find any way in you can.

You have to network.

Networking With Friends And Acquaintances

Your best starting point for getting investment banking interviews are your friends and acquaintances already in the industry. If you went to a 4-year University in the US, chances are you know at least a few people in the financial services industry.

A long time ago it was difficult to stay in touch with everyone over the years, but today social networks like Classmates.com (and of course Facebook) make it easy to re-connect with old friends and see what everyone is doing career-wise.

If you’ve been out in the real world for awhile, chances are you’ve met at least a few people in financial services. If you work in consulting, business development, or anything even remotely related to banking, this is definitely the case.

Also note that you don’t necessarily need to know someone specifically in investment banking - it’s fine to know people at hedge funds or in private equity, and you may actually be more likely to have connections in those if you’ve been out of school for awhile.

Anyone in financial services should be able to ask around and see if there are any open positions in the field.

Who knows? You might even end up interviewing for traditional “exit opportunity” jobs rather than investment banking jobs.

Going Through Friends Of Friends

If you don’t know anyone in the field directly, I would make a list of all your friends and acquaintances and figure out who is most likely to know someone in the field. Fields like technology, consulting, and anything “business-related” are more likely to have people with connections in finance vs. non-profits, medicine, the arts, etc.

Yes, I realize that is a generalization and may not always be true, but finding a job is a sales process.

You’re selling yourself.

When you sell, you have to start with high-probability leads, and those in business-related fields generate higher-probability leads than others.

Networking With Alumni

Once you’ve exhausted your supply of friends and acquaintances in finance, or those likely to know someone in finance, it’s time to move on to your alumni network.

Sometimes I get emails from readers saying, “But no one from my school does finance!”

My reply is always the same: “Are you sure? You’ve checked on every single person from your school, what they’re doing, and whether or not they might know someone in the financial services industry?”

Even if you did not go to a well-known University, it’s likely that at least a few alumni are in finance, if not investment banking specifically.

Go through your alma mater’s career center, and get a list of alumni (recent is better, but older alumni have the advantage of being more senior and thus more able to actually get you a job) in finance.

Email them to introduce yourself, explain that you’re interested in moving into the field, and would appreciate a chance to speak with them about their experiences.

Don’t expect to hear back from many of them. This is something you have to get used to when breaking into investment banking - expect a good amount of failure on your way to success.

Why try this if most alumni won’t even reply to you?

Because all it takes is one.

All you need is one alumni to pass on your information and get you interviews, and that could result in a job.

What To Do With Absolutely No Connections

Sometimes I get emails asking, “My school has no alumni in the field and I have no friends in the field (or no friends at all). How can I get in?”

Well, if you have no friends that is a problem and could be indicative of larger issues outside of getting investment banking jobs (I’m sure all my readers do have friends though :)).

If you hit dead ends on both of my recommended tactics above, you’ll have to cold-call investment banks directly and try to get in like that. I wouldn’t even bother with email or the Internet as most banks discard anything received through their websites.

This method is unlikely to have a high success rate, but it’s all you can really do if you’ve hit dead ends everywhere else.

The Banks To Focus On

With cold-calling in particular, I would not even bother with a single bulge bracket bank. You need to focus on boutiques and middle-market banks, as they are far more likely to take someone from a non-standard background or someone from another industry.

Yes, I’m sure there’s the odd person out there who got into Goldman Sachs by calling them repeatedly, but finding a job via networking is a sales process. If you were a salesman, would you focus on customers with a 1% probability of buying or customers with a 20% probability of buying?

For alumni, friends, and acquaintances you pretty much have to focus on the banks and firms that they work at, regardless of whether they are bulge brackets or boutiques.

Again, you’ll have a much higher success rate at smaller firms, so if given the option you should focus on those.

Why Headhunters Are Probably Useless For You

Sometimes people ask me if headhunters are a good way to break into investment banking or financial services.

The answer is almost always, “no.”

Headhunters get paid by placing people in jobs. Just like Ari Gold, headhunters are salespeople who only get paid if they successfully “sell” potential employees to firms.

So they have no choice but to focus on those who are most likely to get jobs.

There are plenty of people already in the industry looking to switch firms and plenty of investment banking analysts from bulge brackets trying to get into private equity, so headhunters focus on those candidates over someone from the outside trying to break in.

Sure, contact headhunters if you like, but don’t expect much in the way of results.

What To Send Once You’ve Made Contact

Once you’ve made contact with any of these groups via networking or cold-calling, they will generally ask for a resume. I don’t think this even needs to be said, but make sure your investment banking resume is as good as possible so you get their attention and so they take you seriously.

When you send it, write a brief (no more than a paragraph long) email introducing yourself, giving your background and stating why you’re interested in investment banking and their firm specifically.

I’m not going to give a sample paragraph here because I don’t want everyone to start using the same paragraph in their introductory emails.

Just try to make this email short, courteous and to the point. Don’t write a page explaining your life-long desire to be an investment banker, but also don’t write an email with 1 sentence reading, “Do you have jobs, my resume is attached.”

For more on the proper resume, you can refer to a few previous articles on writing investment banking resumes, how investment bankers read resumes, and if you’re really in a pinch you can even use the resume review service.

The Interview Process

Typically the interview process is not tremendously different for those from non-target schools vs. those who go to targets and do on-campus recruiting.

Both processes will usually start with a single initial “screening” interview where the bankers interviewing you decide whether or not you should move onto the next round and meet more people at the firm.

The difference is that for non-target schools and for people outside the industry, the investment banking interview process will be more of an extended affair and your initial interview may be a phone screen.

Instead of one superday interview, you might have multiple days of interviews with different bankers. And you might end up meeting more bankers and doing more interviews than you would in a normal superday.

You will need a much better story about why you really want to do investment banking. You’re more likely to be tested on accounting and finance concepts to see just how motivated you are and how much you learned independently.

For more on investment banking interviews, refer to the superday interview guide, our guide to closing investment banking offers, and our guide to how investment bankers decide who gets offers.

Anything Else?

There you have it, my guide to networking your way into investment banking. I’ll have more to say on some of these topics in the future, but for now email me with any questions.

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Tailoring A Resume For Sales & Trading

“Found your website through ibankingoasis forums and it has definitely helped me shape up my resume. Before I read this site, I did not have any of the “bankify” qualities you mentioned. Definitely top notch.

I’m currently a junior in college and am still deciding between investment banking and sales & trading. I’m wondering, do you have any expertise on what a more sales & trading oriented resume should include? I am reading through my resume now and it lacks numbers. Most of the work I have done in the past cannot be quantified.

Finally, would you recommend a resume editing service such as the one provided by Vault?”

Inquisitor:

Thanks for your comments - I’m glad you have found my site helpful.

There’s not much of a difference between sales & trading resumes and investment banking resumes for entry-level positions. If you are just out of school and have only had internships for work experience, sales & trading recruiters would look for the same qualities that investment banking recruiters look for: leadership, ability to work hard, and interest in finance/business.

The key difference is that sales & trading is more numbers-oriented than investment banking is. When I interviewed for hedge fund jobs they all asked me if I had experience gambling, playing poker, etc. because the gambling and trading skillsets are very similar. In sales & trading interviews they will ask probability questions, whereas in investment banking interviews this is rare unless you get a brain teaser.

If you can’t quantify much of your previous work experience, I would either think creatively for a way to do so, or get across your comfort/familiarity with numbers and finance in some other way, using either your interests or coursework.

You also want to express that you can “think like a trader” - e.g., weigh risk and reward properly. This is another big question that will come up in interviews. Even if you can’t quantify your previous work, is there a way you could express your ability to properly consider risk and reward? If so, I would add this theme to your resume.

In my experience most resume editing services are not worth it - they can make very generic/basic improvements, certainly, but the best way to improve is to contact your friends in finance and ask them to review your resume and offer suggestions.

That said, my own investment banking resume review service is definitely worth it, and comes with a 100% money-back guarantee.

Breaking Into Investment Banking From Pharmaceuticals

“Thank you for a wonderful blog. It is a tremendous resources and I really appreciate you taking the time out to answer everyone’s questions. I have a question that is more specific than those covered on your blog, and I would really appreciate your thoughts on the matter.

My short-term goal obviously is to enter investment banking. I love to read about deals. I want to do deals. My background is in Biochemistry and Biotechnology, and I have 2 years of experience doing Business Development in the pharmaceutical industry. I do some valuation work and deal structuring, similar to what investment bankers do, but not to that scale.

What is my next step to enter investment banking or private equity? Should I get an MBA or do I already have enough experience? Thanks in advance!”

Inquisitor:

Thanks for your kind words. I think you have a good background to break into investment banking. Having done Business Development, you understand valuations and forecasting, both of which are very important in finance.

However, since you’ve already done the job for 2 years, banks may be hesitant to hire you as a 1st year investment banking analyst, but may not be ready to hire you as a 2nd or 3rd year given that you haven’t worked in the industry before.

With your background, getting an MBA and then going into banking from there is definitely one route you could take - you would be out of work for 2 years, but could come in as an Associate instead.

If you want to work at a bulge bracket, you should probably do this and get an MBA. However, if you want to get into banking as soon as possible, I would recommend starting to contact headhunters and friends in the industry and focus on getting hired at a middle-market or boutique investment bank, for several reasons:

1. It’s easier to work at one of those places and they hire far more people from non-standard backgrounds.
2. They haven’t been affected by the credit crunch as much as the bulge brackets and are still hiring people.
3. You can easily lateral from one of these to a bigger bank after a year there if you’ve done well. Or you can stay if you like it there.

It’s a tradeoff between time and prestige - do you wait for a few more years of experience plus an MBA to have a good shot at getting into a bulge bracket, or do you jump in now at the risk of not having as prestigious a name?

That’s one that I can’t answer for you because it depends on your goals and background.

Do Investment Bankers Place Importance On International (China) Experience?

“Thanks very much for all your helpful and informative posts. I’m looking for summer internships at bulge brackets, but it’s tough because my GPA is only around 3.5. I’m really worried that I’m not going to get first rounds as a result. This past summer I worked in China and it’s clear that I know the language and Chinese business well, but I’m not sure if this is enough to help.

I only want to work in New York, not Asia. I know that for NY, Chinese doesn’t really matter. I’m just wondering if there’s any need to play up my Chinese background in order to get interviews for summer internships.”

Inquisitor:

Hi there, I’m glad you have found my posts helpful.

I think you’re overly concerned about getting first-round interviews for summer internships. Your GPA is fine - the bigger concern is the market this year, as many firms have slowed down on hiring with the looming recession. Investment banking summer internships should stay relatively safe, though.

That said, your international experience in China will help you a great deal in the recruiting process - you need to play up your China background with everything you’ve got. Make sure everything on your resume says “China”, “Chinese business,” “fluent in Mandarin/Cantonese” in some shape or form.

Bankers, just like anyone else, follow trends and do whatever’s hot at the time (witness the massive LBO boom in the first half of 2007). Right now, China is the hottest area internationally and if you can convince them you’re the expert, you will stand a much higher chance of getting interviews/offers.

One of my friends at work was similar to yourself - he was born and raised in China, came to the US when he was young and is fluent in written/spoken Mandarin. He has used this background to get a whole host of positions he didn’t really deserve based on his own merits, all because he played the “China angle” successfully.

Even if you want to work in NY, it doesn’t matter because any language and international experience is a positive and Chinese is a HUGE positive right now.

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