TOP 10: General Investment Banking Interview Questions (with answers).
Updated: May 14, 2022
1. WHAT IS INVESTMENT BANKING?
The investment bank performs two basic, critical functions: acting as an intermediary for capital raising, and as an advisor on M&A transactions and other major corporate actions. As an intermediary, it connects companies that need capital with investors who have capital to spend. It facilitates this through debt and equity offerings. As an advisor, an investment bank counsels companies on such corporate actions as mergers, acquisitions, spinoffs, and restructurings.
2. WHY DO YOU WANT TO BE AN INVESTMENT BANKER?
Responder #1: As I have grown in my career, I have had the opportunity to work in various jobs and have been able to converse with people involved in a variety of career tracks in different fields. Among these are law, education, entrepreneurship, medicine, non-profit organizations, investment banking, and sales and trading. Based on these experiences and contacts, I decided that the most appealing field to me was investment banking.
In particular, I believe investment banking offers the best environment for growth and development in the areas of finance, economics, and accounting—all important areas for business. Banking offers a tremendous amount of training, a steep on-the-job learning curve, a competitive work environment, and talented people to work with. As a result, I believe it offers the best opportunity to enhance my skill set and apply it on a real-life and current basis. Furthermore, I enjoy situations that involve analysing strategies, environmental conditions, structure, and future opportunities. There is no other industry that I know of that offers a first-year graduate with the amount of responsibility that investment banking offers. I can’t think of a better way than to hit the ground running right out of school.
Responder #2: The best advice my father gave me was “whatever you do, put yourself in a position to succeed.” And I think right out of college, investment banking offers the best experience available for people who want to work in the corporate arena, hands down. I know the work was going to be tough and the hours excruciating, but I enjoy the pressure and challenge to deliver that seems to come up on a daily basis. Also, in my view, finance is unpredictable and exciting; I enjoy the fact that there is never a typical day.
Responder #3: I think for me the work is rewarding. Nowhere else out of college will you get a better corporate experience. The work will always be challenging and you’re going to be working with some of the brightest people. This fosters a competitive environment in which you are almost forced to grow professionally on a daily basis.
I think that’s one of the main reasons I want to come to New York: the competition. One of the great advantages working out of New York is the networking opportunities available with so many bright, hard-working young professionals around. Chicago will always be my home, but New York is the centre of the financial world and I want to get the best experience possible.
3. WHAT EXACTLY DO INVESTMENT BANKERS DO?
Investment banking is the business of raising capital for companies and providing advising services on financing and merger activities. Thus, for example, a company will approach an investment bank when it needs to raise capital or when it needs advice in negotiating and structuring an acquisition of another company. Here are examples of some of the different functions a banker will perform, as well as some other important basics to know about the job:
Underwriting: an arrangement whereby investment bankers raise investment capital from investors on behalf of corporations and governments who issue public securities (“public offering”). These securities can come in the form of equity (IPO, secondary equity issuance) or debt (high-grade debt, high yield bonds, government securities, etc). Investment banks make money by securing underwriting fees (% of the capital raised) from the public offerings.
Financial Restructuring: provide advisory services including recommending the sale of assets (corporate divestitures), potential bolt-on acquisitions and merger opportunities, or even working with M&A bankers to sell the company entirely.
Investment Banking Job Hierarchy: Analysts → Associates → Vice Presidents (VPs) → Directors → Managing Directors (MDs)
General Pitch Book: Created by the bankers and used to guide introductions and presentations during a sales pitch. Pitch Books contain general information and include a wide variety of selling points, such as an overview of the investment bank, including details of its specific capabilities in research, corporate finance, and sales & trading, and usually provides updates on industry/market and recommendations on the optimal capital structure strategy for the company.
Deal-Specific Pitch Book: Highly customized depending on the situation; includes valuations, comparable company analyses, and industry analyses, as well as the bank’s reputation, prominence and acumen of its research analysts, performance on past/similar work, and information on rankings/expertise.
4. WHAT QUALITIES DO YOU THINK WOULD MAKE YOU A SUCCESSFUL INVESTMENT BANKER?
I can be successful in investment banking because I have a “whatever it takes” attitude. In many ways it can be inconvenient and draining to do so, but it’s been ingrained in my head to have an entrepreneurial mindset and to do whatever it takes to get the job done.
I had my first work internship with a paint company, during my freshman year of college. During the spring semester, interns were expected to go to their hometown once a week or once every two weeks in order to have enough time to do marketing and sales work. Obviously for freshmen in college, this can be very taxing. I knew it was going to be tough, but I tried to dedicate as much time to the program as possible. Some weeks I went home twice a week if I had to get marketing work done for the company. It was through this experience that I learned how hard I can work when I’m put to the test. I believe I can be successful in investment banking because I’m a grinder who will do whatever it takes, whenever it takes.
Importantly, as I to go into banking, I know what I am getting myself into. I know the gruelling hours; I know what level of work is expected of me. This isn’t a position I am applying for simply because I “see the dollar signs.” I know banking could be an invaluable experience that would help set me on the right course for professional success in the future.
OTHER IMPORTANT QUALITIES FOR A BANKING ANALYST:
· Being a fast learner
· Being energetic
· Having a “Work hard/play hard” attitude
· Good attitude and a team player
· Not being afraid to ask questions nor to be wrong occasionally
· Strong attention to detail
5. WHY DO YOU WANT TO WORK FOR THIS BULGE BRACKET BANK?
I like the prospect of getting the exposure to many professionals, industries, products, and concepts in a bulge bracket firm. I know that in that environment I’m going to get access to the best learning experience possible. Also, I like how (this particular bank) has both a more casual and entrepreneurial environment than many other banks. I also think that being in an Industry group, I will be able to get more exposure to a multitude of products. This is an important consideration for me.
(IMPORTANT RELATED NOTE: Make sure you know about the culture and philosophy of the bank you’re interviewing at! You want to express that you understand the firm/group’s view on this idea, and that with them you’ll be “working for the smartest people in banking, who will challenge you to learn more.”)
6. WHY DO YOU WANT TO WORK FOR A MIDDLE MARKET BANK?
My #1 priority is to be in New York. My view is, “if I’m going to be working 90-100 hours a week, I want to be near my family and friends in NYC.” In addition, (this Middle Market bank) offers a unique experience, an opportunity to gain exposure to higher-level executives, and also more opportunities, if I work in the M&A group, to work on both buy-side and sell-side deals. That’s definitely something that is a key consideration for me. I want to work on deals that are important to the people involved because it will give me the pressure to perform to the best of my ability—this is an important factor in the role I am seeking. Finally, I feel that with the long hours I am going to be working, I want to be working for a firm that I enjoy. The fact that (this bank) is rated as one of the “Best Companies to Work For” is a plus.
7. TELL ME ABOUT A DEAL YOU’VE WORKED ON?
NOTE: Attention! If you have prior investment banking experience the interviewer will be much more likely to want to spend a lot of time talking about your experience in detail. The most important thing to take away here is: Do not write down deal experience on your resume unless you are very confident you understand everything that happened in the deal process (within the obvious limitations of your rank within the company). If an interviewer starts asking you questions you don’t know, then it could mean the end of your interview process with that bank.
The interviewer will also want to know if you did any sort of valuation modelling for the deal. If so, you’ll need to really understand how the company functions (the economics of the industry, how the company makes money, how investors value the industry) and how you valued the company (DCF, multiples, etc.). Make sure you know why the company wanted to sell itself, raise debt or equity, acquire companies, or be bought by other companies. Be able to connect corporate valuation with corporate strategy.
8. WHAT IS ONE CONCERN YOU HAVE ABOUT INVESTMENT BANKING?
One possibility: Honestly, my biggest concern with investment banking is the politics that come along with the business world. I had a first-hand experience with this problem during my internship. It was complicated by the fact that I had to move locations and, on top of that, change groups. I currently have an offer with Bank of America Healthcare, and it’s the offer I wanted since it’s arguably one the strongest groups at BAML, but it wasn’t one of my favourite experiences of the summer.
Another possibility: One concern I have about investment banking is the balance between work life and family life. Family and friends are an important part of my life because they have shaped the person that I am today. That is why my #1 priority is to stay in New York. If I’m going to be working 90-100 hours a week, then I want to be as close to family as possible.
9. WOULD YOU PREFER A PRODUCT OR INDUSTRY GROUP? WHY?
Personally, I would prefer an industry group, simply because I think it would give me more exposure to all types of deals and investment banking products. Also, I enjoyed the Technology, Media, and Telecommunications space that I worked in this summer. But honestly, I’m not too worried about what group I am in, because I have confidence that each group will offer relatively similar experience overall.
10. WHAT ARE 4 OR 5 SKILLS THAT YOU BELIEVE ARE ESSENTIAL FOR BANKING?
· Strong work ethic
· Positive, courteous attitude
· Strong attention to detail
· Ability to learn quickly
· Not afraid to ask questions when stuck
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