VANDERBILT INVESTMENT BANKING Meeting 4: Researching Companies

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VANDERBILT INVESTMENT BANKINGMeeting 4
Researching Companies
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How an Investment Bank Operates

• Lender Clients
• Exchange cash for security interest in the
  capital structure of the debtor
• Fixed Return
• Levered Return

Debtor Clients Invest cash in projects that
produce a return Pays fixed return to creditors
Owners receive residual profits
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Investment Bank Organization
Investment Bank

• Corporate Finance
• Product Group
• Industry Coverage
• Strategic Advisory

• Lending Bank
• Balance Sheet
• Syndicated Finance
• Deposits

• Sales Trading
• Fixed Income
• Equities
• Proprietary

• Research
• Coverage
• Economic
• Strategic

• Wealth Management
• Institutional
• Retail
• Distribution

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Company Research

• Your objectives
• to identify and target investment banks that
  offer the position you are seeking
• to weave into your story the reasons why you are
  the right person for a particular company
• to speak intelligently on the strengths, recent
  deals, etc. of a target bank
• to eventually speak intelligently on the
  activities of a target group within the firm
• to identify topics for on going dialogues with
  investment bankers

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Company Research

• Your tools
• Owens Library
• Hoovers.com
• up-to-date news
• Deal announcements
• corporate filings
• Others
• Vault.com
• Bloomberg Terminal
• WetFeet.com
• Yahoo Finance
• Wall Street Journal
• New York Times Deal Book

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How to Begin

• Begin researching target companies
• Organization design
• balance sheet?
• functional structure
• product/industry groups
• Clients
• Size
• Type of deals
• Strengths / Weaknesses
• Geographic presence
• Top groups
• Lending?
• Identifying recent alumni
• Culture

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Structure

• Universal vs.

Non-Universal

• More conflicts of interest
• Gives monopoly power to banks
• Examples Goldman Sachs, Merrill Lynch, Morgan
  Stanley

• Combines Commercial I-Banking
• Extended Balance Sheet
• Allows bank to take on more risk
• Greater economic efficiency
• Examples Citigroup, JP Morgan, Banc of America

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Structure (cont.)

• Full-service vs.

Boutique

• Concentrated in MA, Corporate Finance, or
  Restructuring
• Small deal teams (2-4 people)
• Goes for niche markets
• More responsibility
• Less-comprehensive training (learn on the job)
• Examples Lazard, Evercore, Greenhill

• Combines Corporate Finance, Sales Trading,
  Research, and many times Asset Management under
  one roof
• Large deal teams (5)
• Less responsibility
• More in depth training
• Examples Goldman Sachs, UBS Investment Bank, JP
  Morgan

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Product/Industry Groups

• Organized by industry groups, product groups, or
  both?
• Recent deals (value, multiples, background)
• Target groups
• where is the action?
• what industries do you like?
• generalist program

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Clients

• Large, Middle, or Small-market clients?
• Large 500 Million Deals
• Fortune 500, Governments
• Middle 50-500 Million Deals
• Companies in Russell 2000 index
• Small 10-50 Million Deals
• Mom Pops Stores

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Culture

• Varies slightly from firm to firm
• Larger banks will have different cliques
• Research by networking, going to info sessions,
  and doing the dinners/open bars

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Ongoing Activities

• Continue researching target companies
• new developments, new deals
• Look for opportunities for continued dialogues
  with Bankers

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Rankings

• 1st Tier (Bulge Bracket)
• Goldman Sachs
• Morgan Stanley
• Citigroup
• JP Morgan
• Merrill Lynch
• 2nd Tier
• Lehman Brothers
• UBS Investment Bank
• Credit Suisse First Boston
• Deutsche Bank
• Banc of America
• 3rd Tier
• Bear Stearns
• Jeffries Co.
• Wachovia Securities
• SG Cowen
• CIBC World Markets

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(No Transcript)
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QA/DISCUSSION