It seems that the investment banking industry has narrowly escaped Armaggedon and the survivors are waiving the bonus flags again. Intern classes are getting bigger and Business Week reported that Goldman Sachs has reclaimed the top spot as the most popular employer among elite MBA students again. If you are a career switcher and one among many MBA applicants dreaming of joining Goldman Sachs or another bulge bracket investment bank for the summer internship, this article is for you. Below we provide an overview of an investment banking interview and explain why it’s important to prepare in advance. This is especially true if you are a career switcher.
There are several types of questions which you are likely to be asked in your interview. They include career questions, educational questions, competency questions, fit questions, technical questions and industry questions.
While it’s difficult to predict which questions exactly you will be asked, there are four questions which will appear in any investment banking interview:
- The WMTYR (Walk me through your resume)
- The 3 Why's (Why investment banking? Why our bank? Why (should we hire) you?
The answer to the first and the second questions may be quite similar to those you provided in your MBA admission interviews. Answer to the third question is a little bit more complicated and will require specific preparation.
The usual reason for interest in any specific investment bank include: (a) a strong platform, which means strong coverage teams, diverse offering of advisory and financial products, many interesting deals and opportunities to learn (b) a strong presence in specific markets or industries (c) and the most important, tons of wonderful and smart people with whom you talked with during your recruiting process and whom you really made a connection with. Networking is a critical component for your interview preparation but we will discuss this area in one of our
future postings.
Why (should we hire) you? To answer this question you need to reiterate your main strengths, interest in a specific bank and a great fit you feel for the bank you are interviewing with.
You should prepare for this question especially well as a bank’s approach to this question will usually be that a person who cannot sell himself cannot sell the bank’s products and banking is definitely a sales job.
Good to know Other challenging fit questions examining your understanding of the
investment banking can be:
- What does an investment banker actually do?
- What is the role of an associate in the investment banking?
The answer to the first question will usually go in the following way:
• An investment bank serves as intermediaries between their clients
who need capital in the form of debt and equity
• It provides strategic advisory services by structuring transactions
that meet clients needs and objectives
• Overall, Investment bank works with companies on the transactions
that will enhance their value. This may include accessing capital
markets to find growth or expand operations, as well as investing in another
company through merger or acquisition. Banks are not only the
matchmaker between parties involved in a transaction, but also the primary
architects of the deal.
A typical answer to the question about the role of an associate will
go like this :
• Analyzing industry and company data related to the transaction
• Building excel models to valuate companies
• Joining strategic meetings
• Performing due diligence meetings with the clients
• Creating, editing client presentations
• Monitoring, paying close attention to documentation associated with
the deal (prospectus, internal memos)
• Managing relationship with an analyst
The most important attributes that an associate should have are:
quantitative skills, the ability to learn quickly, discipline, a strong work ethic, the ability to
work in teams, detail orientation and dependability.
While answering competency and behavioral questions you should be structured and succinct. Banks like well organized and structured thinking and will quickly dismiss candidates who ramble or cannot distinguish important points from the less important ones. We recommend creating 3 bullet points for each of your answers and putting them on the paper in advance. Practice your answers with friends and be sure that your story is consistent and flows well before the interview.
The technical part
The technical part of the interview will test your familiarity with the accounting and financial terms. This will definitely require thorough preparation even if you study at one of the top MBA programs . First of all you will need to be familiar with the financial statements and their analysis. The profit and loss statement, the balance sheet and cash flow statements are all fair game in the interview.
Secondly, you will need to have a basic understanding of the company's valuation methods. You should be very familiar with terms such as cost of capital, cash flow discounting, multiples, accretion and dilution, LBO, CAPM, WACC and Beta.
You also may be asked how M&A and IPOs work and even be given a case study on a business situation. It is strongly recommended that you start b-school having at least a basic understanding of accounting and finance.
Here are some books that can help you.
• VAULT Guide to Finance Interviews by D. Bhatawedekhar, Dan Jacobson,
and the Vault Staff
• Vault Career Guide to Investment Banking by Tom Lott, Derek Loosvelt
and the Staff of Vault
• Heard on the Street by Timothy Falcon Crack.
• Valuation: Measuring and Managing the Value of Companies by Tom
Copeland, et al, John Wiley & Sons Inc
• Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
• Financial Modeling, 3rd Edition (Hardcover), Simon Benninga
In the industry part of the interview the interviewers will test your understanding of the industry and your professional interests.
You will be asked about financial news and trends, current articles related to investment banking, discussions of the economic environment and economic trends, trends in M&A and definitely about specific deals.
To be prepared for this part of the interview it’s advisable to start reading financial and economic newspapers and journals. The Wall Street Journal, FT and Economist are good sources to gain relevant knowledge.
A couple of additional hints:
- Know recent interesting deals executed by banks with which you are interviewing.
- Talk about deals with passion – the interviewers will test not only your level of knowledge but also your passion for IB
- And finally, always read the news in the morning before your interview
Some additional books to better understand investment banking before your interview include:
• The Business of Investment Banking: A Comprehensive Overview , by K.
Thomas Liaw
• Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley , by
Patricia Beard
• The Last Tycoons: The Secret History of Lazard Frères & Co. , by
William Cohan
• The Accidental Investment Banker: Inside the Decade that Transformed
Wall Street , By Jonathan Knee
More entertaining books include:
• Barbarians at the Gate , By Bryan Burrough and John Helyar.
Bombardiers , By Po Bronson
• Monkey Business: Swinging through the Wall Street Jungle, By John
Rolfe and Peter Troob.
• Liars Poker: Rising Through the Wreckage on Wall Street , By Michael
Lewis, Norton Books.
Good luck with your interview!
While it’s difficult to predict which questions exactly you will be asked, there are four questions which will appear in any investment banking interview:
- The WMTYR (Walk me through your resume)
- The 3 Why's (Why investment banking? Why our bank? Why (should we hire) you?
The answer to the first and the second questions may be quite similar to those you provided in your MBA admission interviews. Answer to the third question is a little bit more complicated and will require specific preparation.
The usual reason for interest in any specific investment bank include: (a) a strong platform, which means strong coverage teams, diverse offering of advisory and financial products, many interesting deals and opportunities to learn (b) a strong presence in specific markets or industries (c) and the most important, tons of wonderful and smart people with whom you talked with during your recruiting process and whom you really made a connection with. Networking is a critical component for your interview preparation but we will discuss this area in one of our
future postings.
Why (should we hire) you? To answer this question you need to reiterate your main strengths, interest in a specific bank and a great fit you feel for the bank you are interviewing with.
You should prepare for this question especially well as a bank’s approach to this question will usually be that a person who cannot sell himself cannot sell the bank’s products and banking is definitely a sales job.
Good to know Other challenging fit questions examining your understanding of the
investment banking can be:
- What does an investment banker actually do?
- What is the role of an associate in the investment banking?
The answer to the first question will usually go in the following way:
• An investment bank serves as intermediaries between their clients
who need capital in the form of debt and equity
• It provides strategic advisory services by structuring transactions
that meet clients needs and objectives
• Overall, Investment bank works with companies on the transactions
that will enhance their value. This may include accessing capital
markets to find growth or expand operations, as well as investing in another
company through merger or acquisition. Banks are not only the
matchmaker between parties involved in a transaction, but also the primary
architects of the deal.
A typical answer to the question about the role of an associate will
go like this :
• Analyzing industry and company data related to the transaction
• Building excel models to valuate companies
• Joining strategic meetings
• Performing due diligence meetings with the clients
• Creating, editing client presentations
• Monitoring, paying close attention to documentation associated with
the deal (prospectus, internal memos)
• Managing relationship with an analyst
The most important attributes that an associate should have are:
quantitative skills, the ability to learn quickly, discipline, a strong work ethic, the ability to
work in teams, detail orientation and dependability.
While answering competency and behavioral questions you should be structured and succinct. Banks like well organized and structured thinking and will quickly dismiss candidates who ramble or cannot distinguish important points from the less important ones. We recommend creating 3 bullet points for each of your answers and putting them on the paper in advance. Practice your answers with friends and be sure that your story is consistent and flows well before the interview.
The technical part
The technical part of the interview will test your familiarity with the accounting and financial terms. This will definitely require thorough preparation even if you study at one of the top MBA programs . First of all you will need to be familiar with the financial statements and their analysis. The profit and loss statement, the balance sheet and cash flow statements are all fair game in the interview.
Secondly, you will need to have a basic understanding of the company's valuation methods. You should be very familiar with terms such as cost of capital, cash flow discounting, multiples, accretion and dilution, LBO, CAPM, WACC and Beta.
You also may be asked how M&A and IPOs work and even be given a case study on a business situation. It is strongly recommended that you start b-school having at least a basic understanding of accounting and finance.
Here are some books that can help you.
• VAULT Guide to Finance Interviews by D. Bhatawedekhar, Dan Jacobson,
and the Vault Staff
• Vault Career Guide to Investment Banking by Tom Lott, Derek Loosvelt
and the Staff of Vault
• Heard on the Street by Timothy Falcon Crack.
• Valuation: Measuring and Managing the Value of Companies by Tom
Copeland, et al, John Wiley & Sons Inc
• Valuation: Measuring and Managing the Value of Companies
by McKinsey and Company
• Financial Modeling, 3rd Edition (Hardcover), Simon Benninga
In the industry part of the interview the interviewers will test your understanding of the industry and your professional interests.
You will be asked about financial news and trends, current articles related to investment banking, discussions of the economic environment and economic trends, trends in M&A and definitely about specific deals.
To be prepared for this part of the interview it’s advisable to start reading financial and economic newspapers and journals. The Wall Street Journal, FT and Economist are good sources to gain relevant knowledge.
A couple of additional hints:
- Know recent interesting deals executed by banks with which you are interviewing.
- Talk about deals with passion – the interviewers will test not only your level of knowledge but also your passion for IB
- And finally, always read the news in the morning before your interview
Some additional books to better understand investment banking before your interview include:
• The Business of Investment Banking: A Comprehensive Overview , by K.
Thomas Liaw
• Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley , by
Patricia Beard
• The Last Tycoons: The Secret History of Lazard Frères & Co. , by
William Cohan
• The Accidental Investment Banker: Inside the Decade that Transformed
Wall Street , By Jonathan Knee
More entertaining books include:
• Barbarians at the Gate , By Bryan Burrough and John Helyar.
Bombardiers , By Po Bronson
• Monkey Business: Swinging through the Wall Street Jungle, By John
Rolfe and Peter Troob.
• Liars Poker: Rising Through the Wreckage on Wall Street , By Michael
Lewis, Norton Books.
Good luck with your interview!
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