Explore Careers. Learn Stuff. Make Connections.

Zrive Investment Banking

Investment banks from the inside
Eduardo Riera

Enero 2023
Today´s Session

1 Types of banks – a reminder

2 What different teams do?

3 Why different deals are done?

4 Real investment banking deals

5 Tasks, skills & exits

1 Types of Banks – a reminder
How to classify banks?
Role as financial Commercial Banking Investment Banking
intermediaries
Deposit taking, credit giving. Main business is collecting Transaction advisory & execution for corporates. Very
Description money from families & corpos and lend it to borrowers low balance sheet involvement/ risk in most activities.

Accepting deposits, lending money, issuing cheques, cash Capital markets, M&A, Restructurings, S&T, Asset
Services management, treasury management Management

Retail clients, small & medium companies HNWI, médium & large corporations, institutional
Clients investors, PE/VC
How to classify banks?
Role as financial Commercial Banking Investment Banking
intermediaries
Deposit taking, credit giving. Main business is collecting Transaction advisory & execution for corporates. Very
Description money from families & corpos and lend it to borrowers low balance sheet involvement/ risk in most activities.

Accepting deposits, lending money, issuing cheques, cash Capital markets, M&A, Restructurings, S&T, Asset
Services management, treasury management Management

Retail clients, small & medium companies HNWI, médium & large corporations, institutional
Clients investors, PE/VC

Is commercial banking an easier business?

Is commercial banking an easier business?

Not for Goldman…

How to classify banks?
Services offered Universal Banking Pure Investment Banking

Description Both comercial & investment banking operations Only IB services – not deposit taking

Competitive One stop shop Specialization & focus

Advantage No conflicts of interest

Some Names
How to classify banks?
Services offered Universal Banking Pure Investment Banking

Description Both comercial & investment banking operations Only IB services – not deposit taking

Competitive One stop shop Specialization & focus

Advantage No conflicts of interest

Some Names
Universal Bank Balance Sheet (BofA)
Universal Bank Income Statement (BofA)
Pure Investment Bank Balance Sheet (Jefferies)
Pure Investment Bank P&L (Jefferies)
How to classify banks?
What´s the competitive advantage of…

UNIVERSAL BANK – one stop shop!

PURE INVESTMENT BANK – no conflicts of interest!

How to classify banks?
What´s the competitive advantage of…

UNIVERSAL BANK – one stop shop!

PURE INVESTMENT BANK – no conflicts of interest!

2 What different IB teams do?
A What do different teams do?
M&A Advise on corporate deals (mergers, acquisitions, spin offs/divestments…)
Investment Banking
Financial Advisory Advise on financial restructuring (debt re-sizing, liquidity management, new money)
Restructuring

Equity Capital Markets Raise money in the stock market (IPOs, SPOs /Follow-On, Private Placements…)
Investment Banking Debt Capital Markets Raise money in the public debt capital markets (IG, HY, Convertibles…)
Capital Markets
Leverage Finance Raise money in the high yield market (public/private markets, loans & bonds)

Research Issue reports on stocks, bonds & macro themes. Both fundamental & “quantamental”
Markets Sales Keep investors updated on research reports, trade ideas and what´s going on in the market
Public Side
Trading Executes client trades (brokerage) or generates general liquidity in the market (dealer)

Public Markets Raise money from institutions and individuals through a portfolio of funds
Asset Management
Institutional Investors Private Markets Typically called merchant banking, same as above but in the private markets

Wealth Management Advide wealthy individuals on how to manage their net worth – broad range of products
UHNWI
 A What do different teams do?
M&A Advise on corporate transformational deals (“maximizing asset value”…)
Investment Banking
Financial Advisory Restructuring Advise on financial challenges/issues (“fixing the balance sheet”…)

Equity Capital Markets Raise money in the stock market (IPOs, SPOs /Follow-On, Private Placements…)
Investment Banking Debt Capital Markets Raise money in the public debt capital markets (IG, HY, Convertibles…)
Capital Markets
Leverage Finance Raise money in the high yield market (public/private markets, loans & bonds)

Private Side of the Banking Business

As described by GS
B M&A – Why acquiring a company?
A M&A – Why acquiring a company?

Product-line Deal with industry

Cost Synergies
extension overcapacity

Eliminate Acquire key Increase supply-

Competition personnel chain power

Revenue (Cross- Access to Acquire R&D and

Selling) distribution channels Patents
B M&A – When acquiring a company?
C M&A – Payment Options
C M&A – Payment Options
Cash Stock Earn Out

• Does not dilute ownership of
the acquirer
Advantages
• Clear value for the seller
• Aligns the interests of buyers • Aligns the interests of buyers
and sellers and sellers
• No need from external • Intermediate point among
financing expectations

• Need to take into account the • Only public companies at the • Seller needs to keep
cost of debt expense of dilution monitoing the company
Disadvantages
• No upside from future • Valuation unclear • Seller might depend on new
perfomance management
C M&A – Payment Options
D M&A – Types of Buyers
Financial Buyer Corporate Buyer

Transaction
Focus • Focus on cash flows & capital gains • Unlock synergies

Investment • 3 – 5 years (reality longer) • Long term, no exit date

Horizon

Type of Deal • Full acquisition & consortium • Full acquisition, merger & JV

Leverage • High if available • Depends but tipically not high

Management
Involvement • Presence in Board of Directors • Management of both corpos integrated

Valuation Focus • Multiples, cash flows, CoC • Synergies, growth, LT evolution

E M&A - Real Deals
ACQUISITION (public vs. private) MERGER

DIVESTMENT / DISPOSAL (vs. acquisition, why doing it?) LEVERAGE BUYOUT (MBO vs. MBI, majority vs. minority, public vs. private)
F Restructuring – Typical Reasons
F Restructuring – Typical Reasons

Product
Industry Decline Bad investments
Obsolescence

Lack of Innovation Bad Management Bad M&A deals

General
Excessive Leverage Fraud
Inneficiencies
B Restructuring – Real Deals
B Restructuring – Real Deals

1 Liquidity Provision
B Restructuring – Real Deals

1 Liquidity Provision

2 Amend & Extend Debt

B Restructuring – Real Deals

1 Liquidity Provision

2 Amend & Extend Debt

Full Balance Sheet

3 Restructuring
B Restructuring – Real Deals

1 Liquidity Provision

2 Amend & Extend Debt

Full Balance Sheet

3 Restructuring

4 Liquidation
 C M&A – Tasks, Skills & Exits
Tasks
• PPT building, formatting & update
• Internal compliance tasks (e.g. approvals)
Analysts • Deal admin tasks (invites, open calls…)
(2-3 years)
• Easy technical analysis (industry, comps…)
• Taking notes, news updates & Adhoc stuffc
• PPT execution & design. Review analyst
• Deal day to day management, team goals
Associates • Run DD & technical calls
(3-4 years)
• Point of contact for the client work-team
• Modelling responsable, advanced valuation
• Project manager, for pitching & live deals
Vice • Creates & designs the product and is the
Presidents ultimate responsible for its quality
(3-4 years)
• Senior client day-to-day relationship
• Winning mandates, thinking of deals
Director /
• High-level, strategic convos with clients
M. Director
• Presentation BoDs, investors…
Skills
• Attention to (even stupid) details
• Quick with excel & PPT
• 24/7 on top of the email
• Organized, can-do attitude, multitasker
• Perform well with no sleep, keep focus
• Need to know CF, accounting & modelling
• Good a reviewing and giving feedback
• People management & client skills
• Need to know to delegate to escape the hell
• Need to bring ideas & participate in meetings
• People manager with finance accumen
• Responsive to clients but manages expects.
• Creative with deal execution and brings
value-added ideas to meetings
• Social skills and lots of patience
• Industry expertise & anticipate trends
• Shark-attitude to win deals
Exits
• Between year 2 &3, most exit
opportunities than at any other point
• Typically PE but also HF, VC, Corporate
Development. ANYTHING really.
• GOAL: Work-life balance, intelectual work
• Still lots of opps up until 2nd year.
Specialization already plays a role
• A lot of PE also, but more “management”
roles (growth tech, m&a in corporates)
• GOAL: Exit before is too late
• Worst time to move: too late to become
an investor (buy-sider mindset) and too
early to become a senior leader
• ISSUE: most likely you will loose money
• Lots of lateral moves to other banks ($$$)
• Finance roles in corporates, BoDs or
senior leaderships in funds
C Restructuring – Tasks, Skills & Exits

Very similar to M&A but it gets more complicated in a number of ways…

• Need to learn a lot of legal concepts and understand restructuring & liquidation mechanics
• Must dominate debt insights – leverage, credit metrics, seniority, covenants…
• Deal structuring can get REALLY complicated, lots of stakeholders with opposed interests
Analyst / • Company is in a critical situation, negotiations get really tense, everyone is in a bad mood
Associate
Level • Modelling is even more detailed because liquidity is very tight
• Much more contact with a broad range of investors – real money /par guys, credit funds,
distressed hedge funds
• Lost of exit opportunities in special situation funds & distressed hedge funds
• Best companies: Houlihan Lokey, PJT Partners, Moelis, Lazard, Rothschild, Perella, FTI
A What do different teams do?
M&A Advise on corporate deals (mergers, acquisitions, spin offs/divestments…)
Investment Banking
Financial Advisory Advise on financial restructuring (debt re-sizing, liquidity management, new money)
Restructuring

Equity Capital Markets Raise money in the stock market (IPOs, SPOs /Follow-On, Private Placements…)
Investment Banking Debt Capital Markets Raise money in the public debt capital markets (IG, HY, Convertibles…)
Capital Markets
Leverage Finance Raise money in the high yield market (public/private markets, loans & bonds)

Research Issue reports on stocks, bonds & macro themes. Both fundamental & “quantamental”
Markets Sales Keep investors updated on research reports, trade ideas and what´s going on in the market
Public Side
Trading Executes client trades (brokerage) or generates general liquidity in the market (dealer)

Public Markets Raise money from institutions and individuals through a portfolio of funds
Asset Management
Institutional Investors Private Markets Typically called merchant banking, same as above but in the private markets

Wealth Management Advide wealthy individuals on how to manage their net worth – broad range of products
UHNWI
Q&A