One of the most common questions I get goes like this:
“I’ve read all the usual interview advice. Every guide cover-to-cover. Message boards, Mergers & Inquisitions, and anything else I can find online. But I’m worried that interviews now (2009) are different and that the standard advice doesn’t apply.
How have investment banking interviews changed in recent years? And what can I do to prepare?“
Some of what you see in investment banking interviews doesn’t change much from year to year – but a lot does change in a recession.
And interviews today are definitely different than they were 5 years ago.
So here’s how you prepare:
What Hasn’t Changed
Some things never change…
It doesn’t matter whether it’s 1985 or 2005 or 2025: your “story” is always critical – whether you’re selling something, you’re becoming a celebrity, you’re networking, or you’re trying to ace your interviews.
And when the economy is bad, it’s even more important to get this one right because the standards are much higher.
So don’t think you can waltz in and say, “I’m from [Insert Name Here] prestigious school / job, have xx GPA, and therefore I deserve this.”
It doesn’t work like that – you need well-thought out points for each part of your story.
The Usual Technical “Testing” Questions
In 1st round interviews, they’re trying to assess who knows something about finance vs. who is completely clueless.
So if you can’t walk through a DCF or you can’t explain how to link the 3 statements together, forget about banking.
Even if you have finance experience, you could still get very basic questions like this in interviews – because they know a lot of people with “finance experience” are actually BSing about what they did.
Structure & Format
Most interviews are still around 30 minutes long, usually with 1 banker but sometimes with 2. And to get an offer at a bank, you have to go through multiple interviews on your Superday.
These are not your same old interviews anymore…
They’re More Technical
In bubble times, you might be able to spin and BS your way through interviews with marginal knowledge of finance – especially if you don’t have a finance background.
But when banks only need 10 Analysts or Associates rather than 100, their standards go up.
If you have banking experience, you will get lots of advanced technical questions… but even if you don’t, you could still get these types of questions.
What do I mean by “more advanced?”
In a normal interview you’d be expected to walk through a DCF – but more advanced questions might ask about the mid-year convention, how different capital structures affect the output, or how buying a factory in Year 4 affects the Terminal Value.
So you have to think on your feet and understand the concepts as opposed to just regurgitating answers.
They Focus Heavily on Transaction Experience
If you’ve had investment banking, private equity, hedge fund, or even corporate development experience, expect the interviewers to focus on any transactions on your resume.
- Introduction: A few sentences on the company’s financials (revenue, EBITDA, market cap), what they did, and why they wanted to sell or buy another company.
- Rising Action: What kind of sell-side or buy-side process did you run for them? How many buyers / sellers did you approach? What did they like / not like about your company?
- Climax: What was the crux of the deal? Did it come down to price? An IP issue? Synergies? Lack of faith in the market? And did you create any unique models or contribute to solving whatever the key issue was?
- Dénouement: Did the deal close? Is everything still pending? Sometimes it’s better to pretend the deal is still up in the air rather than admitting that it collapsed.
Along with all this, interviewers will also re-frame technical questions in the context of your transactions.
So you won’t just get “Walk me through a DCF.”
You’d get “Walk me through how you completed a DCF for this company and the key challenges with the model.”
They Expect You to Know About Restructuring and Distressed M&A
You might expect these questions for Restructuring groups – but you will also get them even if you’re not interviewing with a group that works with distressed companies.
Don’t believe me?
“With the recession and many companies going bankrupt, how would you modify the usual valuation methodologies for a distressed company?”
That’s a very standard valuation question that you might get in any investment banking interview during a recession – and you need to know how you change a DCF, public comps, and transaction comps appropriately.
Then you need to know the basic options available to a distressed company – refinancing, selling itself, restructuring its debt, filing for bankruptcy – and the advantages and disadvantages of each.
And you’ll need to go well beyond these basic questions if you’re actually interviewing for a Restructuring group.
They’ll Give You Case Studies
This one’s more common if you’re interviewing for more senior positions, if you’re recruiting off-cycle, if you have more experience, or if you’re in a region like Europe where assessment centers are common.
Much of what you learned about private equity case studies applies to these as well: focus on communicating simple points clearly rather than giving a lecture on advanced finance topics.
What’s a summary of this company’s current situation? What options do they have available? What’s the advantage and disadvantage of each one? What should they do, and what numbers do you have to back it up?
Sometimes these case studies will be combined with the interviews themselves – so the interviewer might spend 15 minutes presenting you with a company and its financials and then asking about what their best option is and how they should execute it.
They Can See Through Your Fabricated Stories
Even with the standard “fit” questions you have to make sure you can back everything up – because interviewers can easily detect the sniff of a fabricated story.
But you may not know what qualifies as a “good” story or “good” support for an answer unless someone in the industry tells you directly.
The best solution: go through practice interviews with anyone who’s willing to help you and who knows what interviewers look for.
The next best solution: look at sample interviews and the responses that interviewees give and see what they do right, what they do wrong, and how you should change your answers based on that.
So What’s the Solution?
You already have a better idea of what to expect and how to prepare – but I can’t possibly cover all these topics in-depth in a single article.
So what should you do?
As AJ might say, “Just give it a few hours.”
Except in this case you need to wait a few days – and you won’t be getting overpriced bottles of Cognac at a club, but rather a completely revamped interview guide that covers everything here and more.
But hey, if there’s enough demand maybe I’ll throw in some free bottles as a bonus…