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0:00
If you want to break into banking, this video will be without a doubt one of the most important videos you will ever watch on YouTube in your life and I'm not kidding. Today I'm going to give you everything you need to break into investment banking completely for free. In case you're new here, my name is Ben and I worked at JPMorgan at the firm's top coverage group in healthcare. I closed over 15 deals worth 15 billion dollars in transaction volume, ranked at the top of my
0:27
analyst class in North America and most importantly for you was a recruiting captain of JPM UC Berkeley recruiting for two years. This means I've been on both sides of the recruiting process. I know what it's like to recruit for banking and I also know what it's like to actually make the hiring decisions and send candidates to super days. I get so many questions every day about networking, resumes, and interview prep and I realized I needed to just create one comprehensive resource that covers
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everything because there's nothing like this video on YouTube and the entire internet. And so that's what this is. Over the next six hours or so, I'm going to prep you for the entire banking recruiting process, which I always simplify into three key components, networking, behaviorals, and technicals. That's it. Recruiting is tough, but there's really nothing complicated about banking recruiting, and I'm going to help you become a master at all three components through this video,
1:23
which is broken down into five parts. The first will be on recruiting fundamentals that will provide a thorough breakdown of how recruiting works and how to build a banker-friendly resume. Both of these are foundational and super important so you can network effectively and build relationships with bankers. We'll then dive into component two, behaviorals, which is a huge differentiator for the best candidates. We'll go over how to brainstorm by doing some deep self
1:48
reflection and how to answer questions that make you a compelling and unique candidate. Parts 3 to 5 cover the most important technical topics including accounting, equity and enterprise value, and valuation. Being technically sound will literally make or break your candidacy and there are very specific topics that come up over and over again that we'll be covering. Lastly, be sure to watch the bonus section after part 5 where I'll tell you how to turn everything you learned in
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this video into a concrete action plan. Breaking into banking is extremely competitive with acceptance rates hovering around 1-2% at top banks. But if you watch this video in full, take good notes and implement all the advice I give you that by the way has worked for the over 100 plus candidates I helped break into top banks like Goldman, Morgan Stanley, Evercore, and more, I promise you will be massively ahead of your peers because this is exactly the video I wish
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I had when I was recruiting for banking. Also just so you know this video includes excerpts from the video content in my mentorship program The Banking Accelerator and also from interviews I held with former bankers so the audio and video won't be consistent. The last thing I want to mention is that I'll be referring a lot to something called the Resource Pack which has free recruiting resources I made that you can download completely for free using the link in this video's description.
3:07
Alright, with that said, let's jump into part one, recruiting foundations, which tackles the first key component of banking recruiting, networking. In this section, I'll be giving you the real unfiltered truth about what banking is really like, an inside view into how the banking recruiting process works so you know exactly what bankers look for, how to build a strong banker-friendly resume, and using
3:28
all this knowledge, how to network strategically and effectively with bankers. This section is super important because you'll learn about what banking is all about and how recruiting decisions really get made. There's also a networking tracker in the resource pack, so be sure to download that. And now let's jump into recruiting foundations. So let's first jump into what is investment banking. And we're going to start off with the basics. And generally speaking, investment banks are
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comprised of four main divisions that you may have heard of, asset management, equity research, sales and trading and investment banking. And of course, it's kind of weird because an investment bank is called that, but investment banking itself is normally referred to as something different versus if you work at sales and trading or equity research. So you can say I work at an investment bank while working in some other divisions, but what you're recruiting for since you're watching
4:20
this video is investment banking, which is often considered the most intense and quote unquote prestigious. So investment banks, as we've defined it, focus on two main types of transactions, And they charge an advisory fee that's a small percentage of the total transaction volume. So if it's like a $1 billion M&A deal, the bank may be paid sub less than 1% of that deal, which could end up being tens of millions of dollars for that bank. And they typically work on two types of transactions.
4:49
First are capital raises, which are equity deals, such as IPOs, which you may have heard of, follow-on offerings, which is when a company is already public and issuing new shares to raise money, convertible bonds, and then there's also debt deals. So this is where a company will come to a bank in order to raise funding through debt. So kind of raising funds, that's one type of transaction that banks help with. And then the other is M&A mergers and acquisitions. There's two
5:14
sides of the M&A deal, the sell side and the buy side. The sell side is where you as a bank are trying to sell a company. And on the buy side is when you're hired as a bank to help purchase another company. And then investment banks always prefer to be on the sell side. The main reason for this is because when you're hired as a banker, you are paid fees when you actually get a deal announced and it's closed versus if you're on the buy side, there may be 10 other potential
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buyers in a given M&A process. And if you don't actually end up acquiring the company, then you may be paid like some kind of retainer fee. But the big bucks is really paid for the banker who's able to get the client across the finish line actually purchase the company. So on the sell side, you're guaranteed if you sell the company to earn a fee versus on the buy side, it's a little bit harder. And so these are the two types of transactions that bankers primarily work
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on. In terms of investment bank structure, there are product and coverage groups. So product groups focus on one type of product and service clients in a variety of different industries. So if you work in the M&A group or equity capital markets group, then you work on just that type of transaction. And then you service a lot of different clients in various different industries. So the benefits of this is you get a lot of expertise in one type of transaction,
6:33
and you also get exposure to a broad variety of industries. And so this can be very beneficial, especially if you're a bit younger, you don't know what industry you're really interested in. And then the drawbacks are you can start to get a little bit dull. You're also pigeonholed a little bit and limited to some exit opportunities if you're in a particular product group. More specifically, if you're like in equity capital markets or debt capital markets, then you're a
6:57
bit more pigeonholed. If you're an M&A, then pretty much the world's your oyster because there's a lot of really good exit ops for M&A. So for example, like equity capital markets, debt capital markets, a lot harder to break into the buy side and private equity than if you were working in M&A. Next are coverage groups, which I was a part of. I was in the San Francisco healthcare group at JP Morgan. This is where you focus on serving clients in one industry. So I had
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biotech, med tech, pharma, digital health clients, all healthcare related, but we worked on a variety of different types of transactions. For me, typically adjustment M&A and equity because our clients didn't really need to raise debt, at least for the clients that we covered in San Francisco. And the benefits here, you get a great overview of the industry's landscape overall, because you really get to understand an industry.
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So if you're really, really interested in tech or consumer or oil and gas, then this is a great option for you. You also get exposure to a broad range of different types of transactions, like M&A, like equity. And then drawbacks are that you likely won't enjoy all transaction types equally. I personally didn't really enjoy the equity deals I worked on as much as the M&A deals because the M&A ones had more intense modeling and were just more interesting to me.
8:09
And then you also end up being in charge of most of the presentation making and pitching to clients that don't always end up in deals versus for the product teams. While you do still help out with the pitches, make pages and stuff like that, you are not as in charge of the client relationship, right? Most of the client relationship is held with the coverage teams versus the product teams.
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Now, this said, a lot of banks don't have this structure. So some bulge bracket banks pretty much just have coverage groups. So let's say Goldman Sachs, for example, they don't really have a like a strong M&A group per se. They do have one that does things here and there reportedly a little bit more for like activism and different like special situations. But each coverage group just handles their own M&A and modeling and all that.
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JP Morgan has a separate M&A group. And then elite boutique banks like Evercore, Centerview, they just primarily focus on M&A deals. And you join either as a generalist at these kinds of banks, or you focus on a specific industry right when you join, or you start as a generalist, end up specializing later on. So banks vary a lot. And I did want to show you that there are kind of this breakdown of product and coverage groups. So that's something you do need to look
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into more as you look into each different bank because all of them operate slightly differently from one another. So investment banking hierarchy should be pretty standard. And a lot of you guys may know this, but you start off with the analysts who are like the workhorses. They do 60 to 90% of the underlying work, the grunt work, I'd say, but not necessarily bring that much of the value, right? A lot of the values really, as you go up in the hierarchy, as I'll talk about, the associate
9:46
is really in charge of double checking the analyst's work. And sometimes they do help out with models here and there, or they will build presentation pages. But for the most part, literally, I remember my associate double checking every single cell in my Excel, reading through every single page that I produced and making sure that there's no grammatical errors and all of that stuff. So you still do end up doing a lot of grunt work per se,
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but you're checking more as opposed to doing the actual work from scratch. And you're also starting to attend client meetings more and more in order to become a vice president where this is a little bit of a nebulous type of role, just like VP of like, let's say the United States or any given country, because there's a little bit of a gap where you're not really sure exactly what you're doing for a lot of the times. What I mean by that is that you are still giving general direction to
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analysts and associates and you're present at client meetings, but you're not yet in control of those relationships with the clients yet. So it's very like a middle middling type of role That's necessary, though, in order to next become either senior VP, principal director. We used to call them executive directors at JP Morgan. So different titles depending on the firm. This is where you actually start to form client relationships.
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And then you're really not touching the models or presentations at all. Pretty much at this point, you're just kind of reviewing materials given to you. And if you have a really good managing director or partner, they will start to give you some of the client relationships. If not, then you're going to have to start actually sourcing and building those relationships yourself, which is really, really tough unless you're really good at it.
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The managing director, these are the rainmakers that bring truly probably 80% plus of the value because they're the ones that have the relationships with the clients and the clients are the ones bringing in the money, giving them the deals, right? So as a managing director, you're reviewing pitch books, going through meetings with clients, hopefully bringing in M&A equity debt deals to bring revenue to the actual bank. Next thing I wanted to do is talk briefly about how banks actually add value.
11:48
This is something that you can also kind of start to think about and incorporate as you think about your why investment banking question that's asked in a lot of interviews. So first is maximizing financial outcomes. So banks are there to help companies raise equity at the right price, take the right amount of debt, because if you're over levered, then you may not be able to service your debt. You know, that's obviously very, very important.
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They help companies sell at the highest pulse companies at the most reasonable price. And so when a company, to speak upon M&A a little bit, you may wonder why wouldn't a client or company just want to sell by itself? Why do they have to hire a bank and pay like potentially millions of dollars fees? And the main reason is because they're able to create something called competitive tension. So when an investment bank starts an M&A deal, they'll reach out to 20, 30 buyers, contacts
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and companies that the client may not even think about as having as potential buyers in the first place. But banks are doing this all the time so they know and have their relationships. And then they'll send out like an initial type of kind of teaser presentation to see if anyone's interested. If anyone bites, let's say that those 30 companies shrink down to, let's say, 10 companies that are putting in bids in the first round.
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And then when they put in their first bids, they don't have any idea what the other companies are bidding. So they want to bid as high as possible to move on to the second round of bids, but not so much that you're overpaying for the potential asset or target company. So then after the first round, there's a second round where let's say the list shrinks down to five potential buyers. And then there's another submission of bids. Usually that's higher than your previous one. And then amongst
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those five, a company is selected to be the buyer, usually the one with the highest bid, but there are other considerations as well. But throughout this process, you can imagine if you're blind bidding against other companies, then you're going to keep raising the price of the actual company ultimately when it's sold. And banks are able to, let's say a company would normally buy itself, sell for a hundred million, but through this competitive process, sell the company for 125
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million. So they'll create this value of $25 million for the company. And then, you know, even if the company has to pay 2 million in fees or something like that, that's well worth it if you're able to get an additional 23 million, right? So that kind of relates. Everything I discussed is a bit too related to the second reason as well, which is like process management. When you think about trying to sell a company, there's so many different factors and processes
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that go on. There's like due diligence where you have to upload all of the important documents into like a data room. There's a lot of legal things that you need to take care of. And it's just not a company's expertise to be able to sell itself, right? You only typically really do that maybe once, maybe twice in your life as like an executive. And so you do need that expert type of advice to kind of run the entire process. Next is understand the market climate. So investment banks know what
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the market, how it's functioning. They have a pulse on the market at all times. And so if a company wants to IPO or raise debt or sell itself, you know, all these different types of transactions, bankers will know when the right timing is to the best degree possible. I've worked on a lot of where we'd be working on it. And then all of a sudden the IPO that we were working on dies because the markets tank just that week. And literally we could have been working on it for weeks to months.
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And then all of a sudden we just shelved the IPO because it's not the right time anymore. So things move really fast when it's the right time and everything set up will launch like right away. If not, we'll postpone it until it's time to maximize the potential value the company and client can get. Next, as I kind of mentioned earlier, connecting companies. So investment bankers at the highest levels have relationships with all of the top executive teams at all the
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top companies. So an example I can give is Michael Grimes, who heads Morgan Stanley's tech office in the Bay Area. He knows Mark Zuckerberg, Tim Cook, you know, all of the important CEOs. And so if any of the important tech companies need to do deals, then he has all of the relevant connections. And so if you're a small company that's, you know, maybe 500 million, even like a billion dollars in value. And you are a large company in your own right. But maybe if like a Google or Apple or
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Amazon wants to acquire you, you may not necessarily have the connections to actually try to contact and sell to them, right? Or they may not take you seriously. So by hiring an investment bank, you gain those connections in a potential transaction. And then lastly, you build a lot of industry and product knowledge as you grow up the hierarchy as an investment banker. So at the lower levels, you're doing a lot of grunt work and all that. But over time,
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whether you're in a product or coverage group, you really are building a lot of expertise. So when a new M&A transaction occurs and it's a situation that is very hairy, an M&A banker will have gone through very, very similar types of transactions or know about certain transactions that could best benefit the company. So for example, one of my clients did a spinoff, which for the parent company would spun off
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an asset. And then that asset, actually, we were deciding we were running a dual process of whether it should IPO or if it should sell the asset. It eventually ended up winning off an IPO. And so knowing what the best transaction is for a company, that is an example of expertise knowledge. I also remember there was something called like a reverse Morris trust, which I had never heard of before, but that was like a potential offering that we were saying that the client could also
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take on. You can Google that if you want. But point is you gain a lot of industry knowledge, product knowledge. Once you are at the senior levels for banks, you also just really understand an industry super, super well, or you should. Next up, let's go into banks and offices. So for types of banks, there are bulge bracket banks. These provide a wide array of services, usually all types of transactions, equity, debt, M&A across all types of industries. And they're
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just more worldwide and well-known. And if you ever need a visa or sponsorship or something, if you're like working in the US or UK or something like that, the bulge bracket banks are typically the ones that are most lenient for that. And also, if you're thinking more long term in your future and you have plans to work across different industries or geographies, then working at a bulge bracket bank like Goldman, Morgan Stanley, JP Morgan, Bank of America, these companies will
17:59
be more well known. So that's something to consider. Next are elite boutiques, which are smaller banks that specialize on non-capital intensive services. So usually what that means is M&A, though there are elite boutiques that do have some like equity arms and debt arms and stuff like that. But usually they can't compete as well as the bullish bracket banks, but they are super, super elite when it comes to M&A. So elite boutiques will work on just as large, just as large of transactions for M&A
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as bullish bracket banks. And the great thing about elite boutiques is that you're paid more and you also work mostly purely on M&A. And so if that is your goal of working in M&A, then elite boutiques just provide you a lot of really good experience. And for the most part, I would also say that the interview processes of elite boutiques are more intense and more technical because they care a lot about your technical knowledge. So those are elite boutiques.
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And then middle market, these are similar to both bracket firms, but they target smaller firms with less revenue. So Jeffries, Pepper Jeffery, Raymond James, these are examples of some middle market banks that do still provide services across all different types of industries, all types of transactions, but just for smaller deals. With that said, they still do work on up to a few billion dollar transactions. Bullshit market banks, it can be up to like, honestly, any amount,
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maybe even like 50 to 100 billion if it ever came down to it, really. But those are very, very rare. Middle market banks, maybe a few billion would be the max and as low as around like 500 million. Elite boutiques, they've worked on 20 plus billion dollar deals a lot in the past. By the way, a lot of elite boutiques and middle market banks have their roots in bulge bracket banks. A lot of elite boutique founders are from bulge bracket banks or from other elite boutique
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banks, middle market banks. A lot of them come from elite boutique and bulge bracket banks. And then there are the small boutiques. These are just ones that focus on really small companies, focus on usually one industry or one type of function. And so they're just, as you can tell, just as you go down, smaller deals and a little bit less in variety.
20:03
Next, when it comes to bank rankings, this is obviously something that is not super set in stone. This is just kind of my view on it. So you have tier one, Goldman Sachs, Morgan Stanley, JP Morgan. These are the bulge bracket banks. All the rest are elite boutiques. I would pretty much consider offers in any of these firms pretty much on par ish with each other, although it really depends on what you're looking for and the group.
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So for example, PJT restructuring is a very, very hot group that a lot of would-be bankers would choose over like Goldman, Morgan Stanley, JP Morgan, or any of the companies on the list. If you're interested in tech M&A, then Catalyst, you would choose over any other bank because you purely only work on tech M&A on the largest M&A deals. And then in general, a lot of these boutique banks, as I mentioned before, pay more than your bulge bracket banks.
20:51
So a lot of different reasons why you would choose one over the other. And then there are tier two companies here. These are a mix of some bulge bracket banks like Barclay City, Deutsche Bank, UBS, and then some boutique banks. And then tier three, not exhaustive, but kind of a lot of middle market banks. And then tier four, I would call regional small boutique banks.
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Basically, though, if you get an offer at any of these companies on this list, you'll probably be making at least like 125K in your first year out of undergrad. and all offer pretty decent experiences and also give you the opportunity to lateral to other banks as you become more and more senior. So I think any, I don't want to downplay anything because we have a tier, but this is kind of just my view of bank rankings. Next, when it comes to offices.
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So New York is the heart of the finance industry, offers the most classic IB experience where the senior bankers are kind of the hardos for the most part. And they are a little bit more buttoned up. They're also in New York, they have like pretty much every single industry, every single type of group versus in other offices like San Francisco. So typically you have the second most activity in terms of deal flow and headcount, but a little bit more limited in industry groups
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with a large focus on tech and healthcare. A little bit more chill culture and people are a little bit more laid back. Similar in Los Angeles, but the focus is on media, real estate, and financial sponsors. And there's a lot of hedge funds and private equity firms that are a lot more relaxed and chilled, more chill. And then London, which is the heart of finance, international students without visa, US visas a lot of time go
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there. And then there's not as much deal flow, but slightly better hours with a caveat there that a lot of times because you're in London, you're still at the center of a lot of financial activity. So you may work with clients that are all over the world. So hours can actually be pretty bad in across any bank that you work at. It's just that the culture might just be a little bit more chill depending on the industry. And then for Asia, you usually need to be a fluent speaker in the
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country's language, unless maybe you're working in Hong Kong or Singapore. And then there are usually a bit more of a tougher work culture in terms of hours, just because Asia is just kind of like that. And most commonly people work in Hong Kong, Singapore or Shanghai. So that's about the banks and offices in investment banking. Okay, next up, let's talk about compensation. So this is primarily focused on the US. So if you're in Asia or the UK, depending on your office and all of that,
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things can change. And also this is more on the higher end. Just wanted to give you guys some numbers though, because of course, if you're going into banking, compensation I'm sure is a factor for you. So at the analyst level, first year compensation is around 110. Bonus could be as little as 30 to 75K. So all in about 140 to 185. And then at elite boutiques, all in around 175 to 200. So as I was mentioning earlier on,
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in this module elite boutiques pay more than bulge brackets and so that could definitely be a huge reason to join an elite boutique because as you get more senior and senior the pay just increases more and more so at bulge brackets you basically see about a 20 to maybe sometimes around like 40k increase in terms of all in comp and then similar for elite boutiques as well for some bulge bracket banks they have a third year analyst program but a good number don't at that point you
24:06
also see compensation rise a bit at elite boutiques you typically will not see a third year analyst and they go straight into associate so at this level at bulge bracket banks you're earning 175k base 100 to 150k bonus and you're also given like something called a stub bonus you join as an mba associate because your full year of working just ends up being january to december but you start august right so you get like a bit of a bonus there as well or if you're going from analyst to
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associate you also get like a 50k bonus or something like that and then but it could be more generous depending on the bank, especially at an elite boutique, where companies like Centerview offer like 100K plus bonuses if you stay on as an associate, which is pretty enticing, right? Elite boutiques could pay 325 to 500K in your first year. In your second year, everything bumps up around like 50K or so, depending on the firm. Third year, again, bumps up around 50K. But in the elite
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boutiques, especially if you work at like Centerview, Catalyst, basically the top performing investment banks and they're really good years. You know, I have heard of third year associates making close to a million dollars at a firm like Catalyst directly from a friend who works there. So there's a lot of variability. And these are just some numbers that you can hopefully shoot for if you're working in the US and in Asia. I know sometimes the numbers are pretty comparable.
25:21
In Europe, probably or definitely less than this because Europe just generally pays less, but still a pretty good comp. Then for VP, these are kind of more ballpark numbers now because There's not as much good data on this, but you can expect somewhere between 475, 675k in your first year as a VP, even more at an elite boutique, half a million to close to a million. Second year, 550k, 650 to about a million at an elite boutique. Third year, 600 to 800 and 750 to a 1 million as a VP.
25:54
And then directors, again, more guesswork. At this point, getting close to the $750 to $1 million at a bulge bracket, Boutique's $900 to $1.something million plus. And then you just kind of increase it more about like $100K or so depending on the bank. And so these are, again, rough estimates, but I think it's basically fair to say that if you are working at an investment bank for, let's call it six to eight years,
26:21
you'll probably be able to save something like a million dollars if you're saving all your money well. So obviously a huge reason as to why you would want to work in banking. And hopefully these numbers are somewhat motivational and helpful for you to look at.
26:35
Can you, you mentioned like the unglamorous parts about banking, which I'm very well aware of as well. A lot of times people in the comments actually from these interviews, they want to know kind of the nitty gritty details of those unglamorous moments. And I was wondering if you could share one of your experiences in banking that you felt like, oh, man, this is really tough. Yeah, there's a lot of moments that test you.
27:01
I'd say that even when you're working with very thoughtful people, like I mentioned, I was fortunate too. It's just the job is unpredictable. So I'd say what is really hard is having your entire day be free, for example, where you're like twiddling your thumbs or going out to coffee with people because you're just waiting for comments or waiting for a task. And then having that come in at 7 p.m. when you had plans to hang out with friends after. I think that can be really frustrating.
27:28
And then all of a sudden it's 3 a.m. and you're still turning these comments because it was a very heavy turn. It can feel like I would have been much more efficient had I just gotten this at 9 a.m. when I walked in rather than at 7 p.m. So I think that part can be a little bit hard to handle. And as I mentioned, you do things where you're like, they need to be done, but you're not necessarily immediately getting or seeing the value out of them.
27:51
So I think in those cases, it's very important to be surrounded by people who, again, tell you the why for why a certain task is important to the overall process. So it can feel very isolating if you're just asked to do something without understanding how it plays into the larger picture. And I think that's another aspect of the job where you can be a little bit proactive and ask about why don't we do it a certain way?
28:14
Why does it need to be done this way? Or take a little bit more agency in the work that you're doing. And I think that you'll find that it's pretty well received by people. Sometimes they're just too busy and they don't think to explain that part. But if you show an interest, I think it can, again, help you connect with the work that you're doing a lot better. Yeah, that's actually a really great career tip throughout all aspects, whatever level you are, like asking your supervisor the why.
28:40
Definitely in my first six months, I never asked why. But then I think, especially in my second year, when I had more of an idea of what I'm doing, I definitely started to sometimes question why a VP or an ED or MD sometimes would be asking for certain things. In meetings, I didn't actually directly tell them, ask MD or personally myself being like, hey, why are we doing this? But sometimes I'd ask my associate, we'd talk about it.
29:05
My associate would try to like push back a little bit and make the ask a little bit more reasonable. Yeah. At Evercore, as an analyst, did you like speak a lot during meetings or did you not? Because I mean, at my time at JPM, I hardly spoke during meetings or some client calls I did chat here and there, but it kind of a lot of times be like an intro, like, hey, guys, this is the call. Like, let's get started, some stuff like that.
29:31
But I'm wondering at a boutique, like, do you guys do analysts have a little bit more, I guess, say during meetings?
29:38
Yes, actually, I'd say you you develop that over time. You earn it based on the quality of your work and the level of trust that more members, more senior members on the team, I should say, have in you. So it's right off the bat, you probably won't. I think once you're familiar with the nature of the job, familiar with the technical aspect of what you're doing, because you ultimately do own the quantitative analysis or the model on a process, whether it's in banking or in investing.
30:06
So that's your domain and you should be able to speak to it. So I found that and I was on a smaller team towards the back half of my time at Evercore. So I got a little bit more autonomy and a little bit more responsibility with that. And I was able to present an analysis we'd done in terms of what were the considerations we were looking at and how we'd modeled them out. And then the partner kind of came in and took over with, so based on the conclusions derived from this analysis,
30:37
we recommend so-and-so. So I think you slowly work up to being able to speak to the work that you've done. And I found that very helpful.
30:45
- I also wanted to just broadly ask, how was your experience in banking? Did you enjoy it? Did you hate your life? Like, what was your takeaway? And especially now looking back and you have this like whole picture of the experience,
31:01
how was banking for you?
31:03
Yeah, I think my candid response is that it was a great learning experience. It was by no stretch of imagination, a fun experience.
31:14
And, you know, I don't think you're ever going to meet someone who went through investment banking will tell you that it's, you know, a very easy, relaxing job. Um, and it comes with its trade-offs, right? I, I worked very hard. I had very long hours. Um, but at the same time, I think I took away quite a bit in terms of technical skills, in terms of work ethic, um, and in terms of building a really strong network. I mean, a lot of the people that I, that I worked with, um, in
31:39
investment banking, I'm still very, very close friends with, and you build some lifelong bonds with those analysts and associates that you're in the bullpen with many hours of the day. And those are some of my best friends. So what I take away from investment banking, are the skills, the network, and just the experience and work ethic that you kind of build throughout.
32:03
On the note of compensation, I guess, kind of on the note, I wanted to ask you about your favorite part of banking
32:12
and your least favorite part. Okay. I'll start with my favorite part. I think my favorite part was just feeling like I was always learning something or doing something different. I didn't really have expectations for my first job. I'm kind of just like someone who just walked in the door, didn't really know what was happening and just took it for what it was. I think that's kind of my approach to a lot of things is just take things that, what your experience is and figure it out from
32:37
there. When I got to banking, everyone's like, "Oh, the long hours, me, so tough." But I I didn't know any different, right? It's your first real job out of school. And so you had nothing to really compare it to. And I think because of that, I was just so excited to work on interesting deals or cool deals and things that maybe might hit the news or wouldn't hit the news, or just have some ownership over these things and make them feel like they're yours.
33:04
So that was really fun for me. I just feel like in the TMT space, obviously maybe less than the telco space, but in the tech and the media space, You just are around names that you've heard of. And that's just like kind of fun to imagine like what if.
33:16
And I also just think like the people are fantastic.
33:20
One of my friends in New York who I still like catch up with, like with someone I met through my banking group, for example.
33:27
And he actually now works in sports, which is really funny. He works for the Mets. So, you know, just you have friendships that you hold on to. And, you know, you're buoyed by like the bullpen and that camaraderie and having dinner together and things like that. And so I'd say that was like my favorite part. My least favorite part was definitely like the randomness of the hour sometimes
33:49
and also how lonely can feel. I think like there were times when my group overall was not that busy, but I was really busy. And it sucks to be in the office late when it's just you. Yeah. And maybe like one other person.
34:03
I think like those times were really brutal or just like feeling like you just never knew when you could plan things or not plan things and I think that was like really hard on my relationship at the time um someone who I'm no longer with but um I think it was just like really tough because you're like can we get dinner together or not and things could just change on a whim um and you just didn't know when it was going to change like it could be 7
34:26
p.m you might think that like you're good for the night make dinner plans and like 7 30 hits or like 7 15 hits and all of a sudden your entire weekend is gone um and I think that was like really really tough on like friendships and you know talking to people and things like that yeah I mean I think definitely I'm thinking back to the times when I was also in banking and one funny thing was during our weekends our AC would have to be like turned on and I think the worst times that I kind of
34:58
felt I remember like some summers like the AC wouldn't turn on properly or it would take a while for like everything to get warmed uh to get uh turned on and so sometimes during the weekends on saturday or sunday i'd be there and it's like super hot by myself and that would just be like so miserable yeah yeah i don't know if you guys had protected weekends or saturdays we did not at the time so as the other thing we didn't have any protected days um or weekends so it was like
35:26
truly what years were you in banking um 2017 through 2019 oh okay that's that's surprising then because i i was in at jpm from 2015 to 2018 and 2015 was the first year that i think we started introducing protected weekends so for those who don't know at least at the time it was you get one weekend off per month for us and then also we had pencils down which was like after 6 p.m friday then there's no work until 8 or 9 a.m saturday which didn't always happen but at least like it generally
35:57
Yeah, we did not have any of that. I was part of a committee when I was on the junior banker development committee that tried to institute something along the lines of like protected weekends or protected time off or maybe like Saturdays every weekend or something like that. And I obviously did not stay long enough to see like how it shook out in practice.
36:19
But it was something that Lucas definitely talked about, but also got a lot of pushback.
36:24
Yeah, interesting. I remember a lot of the senior bankers and even some of the associates would just be like, oh, they don't make bankers like they used to because we had protected weekends and all this stuff. It was actually a very confusing time because a lot of times I would want to take this protected weekend, but then my associate would be like, okay, but I understand you need this weekend off, but then you also have this live deal.
36:51
So I remember for three months, like I had a protected weekend, quote unquote, but I was still working. And so, yeah, I think now, though, most banks, I do I do think that they have implemented something for work life balance. But anyway, one last question I have for you about banking is what do you think makes for a good investment banking analyst?
37:14
Okay, really tough because I do think that like being a good analyst is obviously very different from being a good associate. But I do think they are blended in some ways together.
37:25
Because I think part of being an analyst is like being able to put your head down and just crank. It's really unfortunate. But part of being good is like you can just take on the work and it's going to happen and people trust that it's going to happen and be done well.
37:38
And you're going to do it like pretty quickly. I think speed is kind of of the essence when you're an analyst because it just helps out everyone and saves everyone's life. But I think what also separates really good analysts who like have that down from really great analysts is like, can you think ahead and can you anticipate what an associate wants? Like I remember when I was like a second year, like writing my own pages and putting that
38:01
together and just anticipating what an associate or VP or an ED or an MD would want to see. And I got enough responsibility to just create my own deck sometimes and then run it by a VP or ED who'd be like, oh yeah, maybe also include this or this. But they would just throw out ideas and the pages would just be up to you.
38:23
And I was really lucky that I was given the opportunity to do that and think like an associate and think like an investor and put pages together in that kind of way. But I think that's kind of what separates the really, really good analysts from, you know.
38:37
So first off, let's go into an overview of recruiting. So most banks are going to have two rounds of interviews covering behavioral. So who you are, why banking, previous experiences on your resume, et cetera. And then market knowledge. So recent financial events, industry trends, recent deals that banks have worked on, technicals, accounting, equity, enterprise value, valuation, accretion, dilution, pay studies. So you're presented with a situation to analyze and
39:04
present findings. A little bit more on the rare side, unless you are recruiting in the UK where cases and group presentations are also more common. Starting off with first round interviews, typically these are digital interviews, three to five recorded questions. They'll also potentially include online tests, which are again, a lot more common in the UK versus the US. And then phone and Zoom calls. So these will be 30 to 45 minute interviews with behavioral and technical questions.
39:35
So these are typically what can be involved in first round interviews and any mix of these three. There's also a difference between bulge brackets and elite boutiques slash middle markets. So a lot of bulge bracket firms are shifting more and more towards digital interviews where you just asked a few questions that you record and submit and sometimes it leads straight to the final rounds. Other times it'll be a part of the entire recruiting process for each bank.
40:01
And then elite boutiques and middle market banks, for the most part, kind of stick more to phone or Zoom interviews because having these like digital interview processes, I guess it probably doesn't cost that much, but at least for bullish bracket banks, they're the first ones to really pioneer it and have more resources to kind of implement all that. It could be true that in future elite boutiques and middle market firms do this more and more as well.
40:23
Next, it depends on if you're an undergrad or an MBA, there's different processes. For undergrads, you typically experience a lot of variability that I've just stated here. When it comes to MBA and also lateral hires, so if you're going from a smaller bank to another one, potentially also if you're out of college already or undergrad or master's program and you're going from a full-time job to investment banking,
40:46
then typically there'll just be more straight up interviews over Zoom or over the phone versus having like a digital interview or something like that. Next are super days, which are basically the final round interviews. They call it super days in the US. And then also in the UK, it's more like called assessment centers, but the structure, it tends to be a lot less variable. Usually you have four to six 30 minute interviews with senior bankers. It could be as little as three sometimes
41:12
though. And then you're for the most part going to the office with some exceptions. Also at times, some super days will actually be held over Zoom as well. In terms of content, anywhere from behaviorals to technicals, you really need to be prepared for everything. And then the chances of success if you get to this point are really high. It usually means that you're on a very short list of candidates and the chance of getting an offer at that point is around 25 to 50%.
41:37
So at that point, you've passed the first round. You probably have what it takes to get the offer. It's all about execution and kind of being better than your competition. And since super days are usually in person, it's really important to be confident and poised in interviews. And one of the things we'll discuss later on in terms of like what bankers look for and stuff is make sure at any no point are you ever
41:59
like arrogant. You always want to be humble and seem like you have a great attitude. So we'll go into that stuff a little bit more. Next up, let's go into what bankers look for. So it's very simple because it can seem very much like a black box in terms of what banks look for in candidates. But I like to really distill it down to three main things. The first is that you're technical. So obviously tested in your technical interviews. If you can't, if you don't have the financial
42:23
knowledge, you don't need to know how to model. But if you haven't shown that you're genuinely interested in finance, then it's going to be hard for you to actually get the job, right? You got to be reliable. So when you are networking, interviewing, you want to be able to showcase that you are reliable. We'll kind of go through this in the networking portion of how to do that. And then the reason that this is so important is that when you are a junior banker, it's
42:46
really, really important that as an analyst, the associate feels like they can rely on you over time. You don't have to be perfect on day one, but over time, the best analysts, the way that all associates talk about the best analysts is that I give them something and I don't have to worry about it too much. I know it's going to be the best effort. I just need to check for small mistakes here and there. And then last but not least, personable. Bankers work extremely long hours.
43:08
as you know, if you work in banking, you will see your coworkers and colleagues more than you see your family members, your friends, your dog. And so it's very, very important that you just enjoy being in that person's company. And that's tested in a lot of ways. Let's kind of go into each one of these. So first off, technical matters because when the vast majority of your job is based on financial concepts, so they want to see that you have the skills and have genuine interest,
43:35
which is innately kind of understood to be had from an interviewer's perspective when a candidate knows the answers well to the technical questions, right? And all the concepts can later be applied actually to modeling and all that. Bankers test for this quality through technical questions and interviews, prior finance internships, which lend credibility if you can get them. Very, very important, especially for a screening through resumes. Or it can also just be through academic decisions
44:01
for your major coursework activities that you have held in finance clubs, investment clubs, and all those kinds of things. Those are some of the ways bankers test for it in terms of reliability. It matters because transactions are high paced. Everyone needs to be an A-level player in order for transactions to go well. The worst situation a banker can be in, in terms of just like work chemistry, is when there are
44:23
people that you just don't feel like you can really rely on. And so you either have to do extra work, or you're not really sure about anything that they submit. That's kind of like the worst kind of bankers to work with. Bankers will test for reliability through behaviorals and interviews. You know, what have you done in these kinds of group settings? How are you as a leader? What kind of challenges have you overcome? Academics, your GPA shows your work ethic. It shows that
44:44
over a consistent period of time, you've been able to study hard, do well on exams, handle the pressures of tests and all that. Also, sometimes they'll look at your coursework. It's not a huge thing that moves in a lot, but if you take a more technical major or if you take like an economic or business major, then it clearly shows that you will have some level of business acumen. And then responsiveness during networking. It's going to be really, really important that
45:09
throughout all interactions you have with bankers, you want to act like a banker as much as possible, right? And what this means is when you're a banker, you have to respond to emails within a few minutes for the most part, even if you can't give the full answer to your MD or a VP who's mess emailing you or a client, you at least need to tell them that you're on it right away. And so when it comes to networking or any interviews that you have with bankers, then
45:33
you want to make sure you're sending thank you emails within 24 hours. You want to be responding very, very timely manner. You don't need to be responding in minutes, although if you can, then of course, that's good if it's like a really, really short response. But in general, basically, responsiveness during networking, all those things really, really do add up. And then lastly, your level of confidence, your hustle and preparedness during the actual
45:53
interview, all of which we are going to be working on together throughout all of the modules. And then as you keep learning, I'll keep going into more and more about how you really showcase throughout the recruiting process. So next, in terms of being personable, as I mentioned, you're working 80 to 100 hours a week. So it's really, really important to enjoy the people you're working with. And there's something that sums this up well called like the airport test,
46:14
which you may have heard of, which is if you were stuck at an airport with someone and there was like a two hour delay on your flight, would you enjoy speaking with that person? Right. And the answer that bankers want to feel after they talk to you is yes, like I could speak to this person and be stuck with them in an airport and it would be perfectly fine because we would have a lot to talk about or at least find something to talk about. So bankers test for this through behavioral
46:37
questions. So through your answers of like how you acted in group settings and in previous internships, also just starting off with your tell me about yourself, you know, all of those answers really do showcase your personality. So very, very important that you make sure that you are memorable And then your overall vibe during networking, emails, interviews, if you send out really thoughtful thank you emails, and if you are just very personable in actual conversations
47:04
and in interviews, then those are huge, huge pluses that are very, very important. I would say doing well in the interviews is probably, you know, like the technicals and behaviorals overall is really, really important. But the overall kind of vibe that you present to any interviewer is really, really important as well. And, you know, the word vibe is not like super prescriptive, but I think you get what I mean. And then last but not least, the interests that you have.
47:26
So this is a really, really small thing. But I do want to mention that when I whenever I reviewed resumes or all bankers, when they look at your resume, they always do check what's on your interest. So if you're super, super into World of Warcraft or like some, I don't know, some really like if you put like sleep or something in your interest, then obviously that's something that will cause alarm for your bankers, right? And I have heard people through during networking conversations say like,
47:54
oh yeah, I really like enjoy sleeping. Like, I don't know why they brought that up to me, but small things like that can really result in like these tiny negative impressions. So you really want to make sure you're kind of buttoned up, really personable, show that you are really excited for the job.
48:08
Next, when, so one of the attendees asked a question that I thought was interesting. So I'll just kind of read it because it's a little bit long, but interesting. So apart from the official requirements, what's one less obvious personal trait that made you really want to hire an internal analyst
48:27
or maybe like that really impressed you? On the other hand, are there any certain qualities that make you hesitate, even if the candidate is technically skilled?
48:36
So kind of like opposite ends of the spectrum. Do you guys have any thoughts on that?
48:41
I'll start with the one that makes me very hesitant to hire someone, and that's, call it like cockiness or arrogance, and it comes off so easily in interviews, especially when, if it's like a first round interview and there's any level of technical pushback, or if I'm giving some level of feedback and they just can't take that well, it's, you can't do it. So much of this job is being wrong and being told you're wrong and having to correct your mistakes over and over and over.
49:09
And if you can't handle a slight, you know, correction in a first round interview, you're not going to be successful. And so that's the one I'd start with. On the other hand, traits that I really do value, I think Caroline mentioned, you know, like a quiet confidence, but almost like maturity, which does come across, being able to not only have a great conversation, being personable, but also recognizing where you stand and there is like an inherent power dynamic
49:36
and you don't know everything and almost deferring to the interviewer, not in a passive way. If you know your stuff you know your stuff but also understanding your limits and so if you're talking about you know pitch me a stock and and someone raises oh i actually worked on this deal like you should you should immediately understand there's something for you to learn here as opposed to just spewing off the response that you had ready so yeah as a candidate that's your worst
49:57
nightmare like oh tell me about a deal like you see a deal like oh i worked on that deal and you're like oh man but if you know your stuff it can be a great asset i had someone talk to me about
50:07
I had someone talk to me about a stock that I used to own in college, and we had a very good 10-minute conversation. It was awesome.
50:22
when they're recruiting, I think people outside of banking, when they look at the industry have this notion that bankers are type a can be cocky and all of that but once you actually start working you realize that those people quickly are disliked at the firm no one likes working with them and the best like the best bankers i worked with were all the the people that you guys would describe like they're very helpful willing to learn but at the same time like have their own confidence in
50:51
what they what they believe they can bring to the table like what do you think makes for a truly successful analyst? You know, are there traits or habits that set top performers apart from others? And I was wondering what you guys thought about that. Yeah, totally. I think it actually, you know, sort of connects nicely to the last topic we were talking about. At the end of the day, this is an advisory role. You have to keep your client in mind, but your client as an analyst is not just
51:16
the end client, the, you know, the corporate client. It's also your boss, which means the partner, MD, BP, everyone above you, because your work product has to go to their hands first. And so thinking a step ahead and thinking about what their questions and comments might be, and then just proactively answering them and giving them extra information and keeping that in mind in everything you do. So I know there's a lot of like tricks of the trade where you just
51:42
end up like any company you have ever worked on as you continue to be at a firm, just add it to whatever screener you have or like a watch list. And then if there are news, if there's an 8K You just send it to the people that are relevant because they have so many other things going on. You're probably the best person to keep on top of those things.
52:02
I would say some of the interns that really stood out were the ones that they might not have been the most technically skilled, but they were willing to put in the work. But not put in the work in terms of, hey, I'm going to ask you to show me how to do something 17 times, but give me a little bit of direction, and then I will take it really, really far. And then we'll check in. I'll have questions. It'll be barely baked.
52:22
and then I'll go back away and I'll spend the time that I need to, to get this to a perfect place. And I prefer that much more to someone who doesn't check in at the start, you know, goes and does something. It might be good, but it's in the wrong direction. And then we're just sort of lost in the woods. And again, at that point, taking feedback is very important. So there are many, I think there are many ways to stand out as an intern. There are a few ways to really be a terrible intern.
52:56
really stand out, like for sure, no brainer, they should get an offer. Like, what do you think are some of the qualities and things you've seen from the people and the candidates who are just extremely good. Like, and, you know, hopefully people are watching this can kind of think about as well, like, what are things I can take away to improve my interviewing skills or how I come off in interviews and whatnot in order to hopefully secure an offer? Yeah, totally. I would say the
53:23
very almost basic or easiest place to start is your technicals. You need to be able to get every question right and get it right quickly and have a logical way of walking through your answer. So especially on questions that are multi-part or require you to do a couple of calculations, a great example is all those tell me about how a change will flow through income statement, balance sheet, cash flow, having a system for that and that way not missing anything and
53:50
essentially making sure that the interviewer is never lost. Those were fantastic sort of giveaways that this person prepared very well. The other part would be knowing or almost going above and beyond, where if I ask an open-ended question, it's not a two-word response. It's here, I will give you 50% of what I know. And I'll say, I'm happy to go into detail. And if I do push into that detail, you actually can tell me more, or you can continue to elaborate on this topic.
54:17
And again, that doesn't come from memorizing M&I 400. That comes from spending the time learning finance and knowing what banking is about. And then on the behavioral front, I would say certainly knowing a story and being able to have convincing answers to some of the basics. Next, let's go into an inside look of what the banking recruiting process is like. So in terms of how banks structure recruiting, there's typically target school teams and then
54:46
non-target teams or also called non-core teams. And these, so basically what happens is that, let's say we'll use JP Morgan as an example, we would have a list of target schools, usually somewhere around the top 25 ish schools. And some are slightly, of course, like higher priority than others. But you would have recruiting teams, basically bankers who are from that school and are leading recruiting. And they typically are people who just volunteer to be part of the
55:14
recruiting team. I was part of the recruiting team my first year. And because I was just super into recruiting and wanted to take more part in the process, I was eventually the recruiting captain for my second and third year. And what it entails is basically, usually it's around five or so in a core recruiting team for that school. Although there could be a lot of different people or bankers from that school who are helping out with the recruiting process, mainly helping out with
55:40
taking coffee chats with interested candidates from that school and or conducting interviews.
55:44
And so these recruiting teams will be in charge of collecting resumes from those schools by reaching out to organizations or running the recruiting processes by holding information sessions, just like keeping a log of all the students or candidates and then taking down notes for what their performance for first round interviews were like and for digital interviews and for networking, what they're like in coffee chats and all that stuff.
56:09
And so they will be in charge of basically moving people onto the final round. And then for non-target teams, this is kind of like a catch-all for all other candidates. There'll be some kind of team at the banks that have a really, really large pool of candidates. And the way you really stand out here is making sure that you're networking, especially in the US, because if you go to a non-target school, the odds are a little bit more stacked against
56:31
you, but it's still very possible if you have a solid set of investment banking internship experiences and are able to connect with bankers. And this is a lot more geared towards undergrads, master students, and then for MBAs. For lateral recruiting, it's a little bit more similar to a non-target school where whenever there's a need, there'll be usually a job posting and some kind of recruiting team that'll be recruiting the lateral hires.
56:57
And you go, you think about your recruiting process.
57:00
And can you walk us through a little bit about how you're feeling about coming from, I guess, like a non-target, like what are some obstacles that you felt like you faced compared to maybe others who are coming from target programs? And then I have some follow-up questions to that. Yeah, totally. So I'll throw another caveat in there. I was on the F1 visa. I was an international student at school. So that sort of complicates the journey into finance even more. But broadly
57:29
speaking, the non-target experience boils down to having to be better prepared than someone who isn't in a non-target position, if you are studying at institutions that have long-term relationships with many of the banks on Wall Street, you can afford to be less polished. You might get a couple more chances. I think the approach that I took to my preparation was, if I get an interview, I would like to convert that into an internship and then a full-time role,
57:54
and there's really not much room for an error. I think the saying is, hungry dogs run faster. And so within my preparation, it was really putting in extra effort and understanding that there will be obstacles. Many of them you can assume. You don't have as many connections. You might not know people that have done this. You don't have that sort of first-person recollection of what the job is and what you say in interviews.
58:21
And so you really have to treat yourself as the ultimate resource and put in extra time and put in extra effort. And I, not to slight my program, I was fortunate enough that the University of Florida as a whole is less of a target school. But this program, the MSF program, has connections on Wall Street. And so ultimately, my Evercore internship, I was not the first person to get it. There have been many folks to have done that for me, but there are two spots out of a program of 50.
58:50
And so you really are in a hyper competitive situation. And the couple of shots that you get, you have to execute on. And I'm happy to dive into details there.
58:59
I'm also curious to kind of transition more into kind of parts of your career and I think a lot of times people are really curious about how they can kind of break into investment banking from a non-target school and so you kind of mentioned a bit about like the different programs you entered into so I'm could you dive a little bit more into how you first decided and recruited for Goldman and then how you were able kind of to transfer to New York. Yeah absolutely. So it's not easy.
59:30
And I'd say it's a combination of doing a lot of things right, as well as kind of getting a little bit of luck and being in the right place at the right time. So banking is really hard to break into for anybody for a couple of reasons. One is it really starts early. So to get a banking job, you generally have to have the banking internship the summer before. And to get that internship, applications are usually closing before your junior year classes begin.
59:59
So regardless of where you're at, you really need to be cited on this path by the time you're two years into college.
1:00:08
And then on top of that, then you need to actually be prepared for the interviews. And banking interviews aren't just, let's get to know each other and I'll give you a job. Banking interviews are math questions, finance questions, brain teasers, because it's highly competitive. And so getting two questions wrong during an interview is generally like you're done here. So it's a very competitive field. And on top of that, you kind of need to be at the right school.
1:00:34
So really, banks target the top 20 schools, which common terminology for this is called targets. So these are your University of Pennsylvania's, your Harvard's, your University of Michigan's, University of Texas. And if you don't go to one of those schools, the bank doesn't even recruit at your school. So then on top of all those barriers, you now need to figure out how to just get an interview and get your name in front of the recruiter. And so I'll dive into a little
1:01:02
bit of my journey, but I couldn't even get an investment banking internship interview. I applied probably 20, 25, 30 places, never got an interview. So my journey at a so-called non-target was different because I needed to kind of take a different way in and take an internship at one of these banks that was not in banking and then use that internship to basically crush it and then mobility my way into banking. So that was my journey was getting an internship in the research
1:01:35
group in Salt Lake City, Utah at Goldman. And, you know, very fortunate to have this internship. I worked very hard to get it and at that internship. And then from there did a lot of the same networking to then have the opportunity to interview for a full-time banking role. I was able to successfully do that and then kind of get into banking from there. So it was definitely a journey and had a lot of, you know, I had a lot of advice, had a
1:02:03
lot of people help me out, but definitely very fortunate to have that opportunity. Got it. So then to clarify, did you go into your senior year and then you recruited for the full-time banking position or did you do a year of research and then recruit? Nope. So I did my summer in Salt Lake City, Utah in the research group. And that summer Goldman had an internal mobility program where, so it was a very structured thing.
1:02:32
And about every summer at the time, it was 4% of interns had the opportunity to go to other So obviously you had to be very good at your current internship. You had to have good reviews. People had to like you. And then you had to generally, I think, really network around and find the right people to talk to and give you that opportunity. But that summer, I was able to kind of interview ahead of the process of where regular people would interview.
1:03:00
And I was able to kind of secure that full-time position before I started my senior year classes. Oh okay. So I never had any banking interviews outside of that structured program. Got it. So then I'm kind of curious about this part of this kind of recruiting process. Then how many interviews did you go through? And were they, in your opinion, kind of typical type of banking interviews where you had kind of technical questions, behaviorals?
1:03:27
And then did you have like a first round and super day or did it look pretty different? Yeah, it was pretty similar to what once you got in the internal mobility interview process, it was pretty similar to what the actual interview process looked like. You did a higher view, which, so for Goldman, I don't know if they still do it, but it's essentially a video interview where it's just automated questions that get asked to you. You answer them to the best of your ability.
1:03:53
That video goes to be reviewed by analysts and associates, and then they decide if you even get in the actual interview process. You then do one, two, sometimes maybe three kind of screener interviews. That'll be a combination of behavioral as well as some technical. And then you get invited to the super day. And the super day for me, I think consisted of four or maybe five kind of back-to-back-to-back interviews. It's your typical, you know, here's
1:04:21
some tell-me-about-yourself questions. Walk me through the DCF. Here's an LBO kind of brain teaser type question. So once you're in that process, it's pretty similar.
1:04:33
The next thing I wanted to go into that I think people are really, really curious about is an inside look into what the recruiting process is like at Evercore and at Goldman. And, you know, there's a few things that we'll go through sequentially. But if you could first kind of go through the recruiting process in terms of like how your recruiting teams are structured. So, for example, at J.P. Morgan, when I was there, it was very like school based.
1:05:01
And so we would have like a, for the target schools, especially someone kind of in charge, like leading recruiting, and then a group of around like five bankers from that school who would be focused on all the efforts for the people interested. And then we would direct them to like the SF team, do the SF process and the New York process.
1:05:22
So how are the recruiting teams structured at each of your banks?
1:05:27
Yeah, I can start there. So it's similar to what you just described. We have a human capital group team that those are not bankers and they sort of facilitate the process. But much of the review, if not all of the review, is done by people that actually do the job and know what the qualifications are that you need. It is school based in some respect. You have the targets like Penn, Western, Cornell. they will run their own processes. And then for what we call BeyondCore, which are a subset of
1:05:58
schools, UF falls into that category, where you have had some people hired in the past, perhaps there's a partner or someone senior enough to like push for folks. So this BeyondCore team, all of those bankers work together to review what ends up being a very large pile of resumes and allocate first round interviews and eventually super days. And then there's a non-core team, which are schools that don't have a heavy presence or any presence at the firm,
1:06:24
but those are still reviewed and allocated spots. And effectively, it's self-selected. So much of the work falls on first-year and second-year analysts who do the first-round interviews because they're, again, closest to the age of the applicants. It's the most natural process. And then actually for super days, it's associates and above. Typically, a couple SMDs, maybe an MD and an associate, some mix of folks.
1:06:50
And then the actual process itself, you submit an application. It's on a rolling basis, so you're always encouraged to submit as early as possible.
1:06:59
You get at least a couple people reviewing your resume, basically saying, is this someone who seems impressive enough on paper where we would want to give them a first round interview? And then if you do get a first round interview, it's typically 30 minutes with one person. If they feel that you deserve to go to the next round, you will move on. And then super days are typically allocated, again, on a rolling basis. And there is a quota. And once it's reached, that's sort of it.
1:07:30
times like over just over the phone? No, no. So it's over Zoom every time. It's a 30-minute slot. I think they do tend to run over. We have a standard list of questions that we try to get through. And obviously, depending on how skilled candidates are, we might cut it short. If we're in a technical portion and someone's just not getting the questions there's no reason to sort of uh torture anyone um and then the super
1:07:56
day process are four interviews 30 minutes each uh back to back to back in person um and so we fly candidates in for that you have a morning mid-afternoon or late afternoon slot and uh effectively
1:08:10
um you know you like typically stay the night before in a hotel um so that you're not just like off the plane but i do think you fly out the same day so we had someone book their travel really really close to a super day and then effectively just be extremely nervous the entire time and i remember sitting in a in a debrief call and all they all the interviewers were just mentioning how this person was so nervous the whole time about missing their flight it's like they chose
1:08:35
it this is such an unforced error yeah oof um and then for goldman do you did you guys have like kind of standard like merrick mentioned that they had kind of a standard list of questions which i imagine you also deviate a little bit from interviews by interview eric like do you yeah so and and i'll also caveat that uh depending on which sort of bucket you fall into core non-core beyond core um you might get a completely different questions so i'm i was heavily involved with the uf
1:09:05
recruiting and we effectively run our own process where we screen everyone from the school and then submit forward to candidates that we think are deserving of a super day and potentially a spot at the firm. And our question bank is, I would say, much tougher than what we see broadly distributed, just because we know we need to do the legwork to really screen for the best candidates so that
1:09:27
there's a limited chance of them not getting a spot. And then there's a bank A, bank B, and it differs somewhat in the first rounds. We're banking on folks not sharing questions and interviews happening so quick after each other that there's really not much benefit to anyone doing that. During the super day, though, it's a very extensive question list and partners love to just go off script and ask things that are not even in their section.
1:09:57
Welcome to the resume module. And this is going to be one of the most important ones, because as you probably know, the resume is the most important tool that you have for so many different parts of banking recruiting. Everywhere from getting interviews, networking with people and having them get a first impression of you. And then also during actual interviews as well, when the interviewer is looking at your resume. So we're going to first be discussing what bankers look for.
1:10:24
And then I'm going to go through a lot of thorough tips about how to really make your resume as banker friendly as possible. So starting off with what bankers look for, when it comes to your resume, you really need to strive for perfection. You want to build a strong resume that will take time, but it's really worth the investment of time you put up front because you make it perfect once. And unless you have another experience to add or something, then you send it out to hundreds
1:10:50
of people potentially or submit your application to hundreds of different companies. And then having a really, really strong resume is going to help you stand out versus the rest of the competition, because I've seen a lot of resumes that are very not good. Let's just put it at that. So a resume will include education, work experience, leadership, activity, skills, and activities. So very, very common knowledge for this. And I'll give tips for each section.
1:11:14
The resume is also the first impression that bankers will have of you when you're networking, when you're being considered for an interview. So back when I was at JPMorgan reviewing resumes, literally everything from how it's formatted, if there are any mistakes, depending on whether it had certain types of banker-friendly type a verbiage or sections, like all of that stuff would take into play as I was reviewing resumes.
1:11:37
And then when you're interviewing, the banker will take a brief look right before the interview. I remember when I was interviewing candidates, I would print out their resume, look at it for about 30 seconds, walk into a conference room and then do the interview. Then last but not least, in all of these situations, your resume is reviewed really, really quickly in 30 to 60 seconds. And so that means that you need to really quickly be able to highlight your best achievements. And if the
1:12:00
interviewer or banker's eyes should be drawn to them. It should stand out from the crowd, be formatted aesthetically with zero errors. There should be literally zero errors on the resume because a banker is trained to look for every single mistake on a piece of paper when it comes to their own presentations. And so if I look at a resume and there is a period where there shouldn't be, or if the font sizes are a little bit different or their spacing is inconsistent,
1:12:25
I am a hundred percent going to notice that. And so literally your entire resume needs to be perfect. So in terms of what bankers look for in terms of undergrad versus full-time, so professional experience. So if you're an undergrad, look at the number on the left, basically. If you're a full-time working professional already, then look to the right hand side. So in terms of undergrad, professional experience is around 60% importance. And then
1:12:48
if you're working full-time, since you're already out of school, 80%. And so bankers really want to see prior finance experience and bankers are a bit more risk averse. Let's say they're closely against consultants. Consultants care a lot about overall excellence in any field, and they want to bring together a lot of people with different perspectives who are excellent at what they do, and then put them together in a team, right? And that's why they hire PhDs, people from all
1:13:13
different types of backgrounds. When it comes to bankers, they actually are a lot more risk-averse. They just want to purely hire people who show interest in finance. And that's primarily driven because of the culture with banking, where you're working 80 to 100-hour weeks. The last thing you want to do is hire someone who doesn't really know what banking is about. They get onto the desk and then they're like, what the heck? I'm working so many hours. I'm just going to quit. You know,
1:13:37
something like that. Right. So that's why bankers really like to see a lot of prior finance experience. If you know, if you're recruiting for your junior summer and I saw something like two boutique investment banking experiences or one private equity internship, then it's almost guaranteed that you're going to get an interview. Next brand names, of course, are very helpful as well. They lend credibility to your experiences. So to the extent that you can't get a boutique
1:13:59
banking internship, let's say, and you instead could get an internship on say like Uber or Spotify, then that definitely is a plus as well. Next, your GPA, around 35% importance if you're an undergrad, 15% if you are full-time. Now, when it comes to the top banks, for the most part, if your GPA is under a 3.3, it's going to be really hard for you to land any interviews. If you're between 3.3 and 3.7, then you're within striking distance, but it is still
1:14:27
going to be a little bit challenging or you're not as well positioned as someone who has a 3.7 or above. But with that said, you know, not all hope is lost. If you have a strong set of professional experiences that can more than make up for a bit of a lower GPA. When it comes to your major, you are given a little bit of credit if you take a more challenging major.
1:14:45
But with that said, it's still not enough where if you have like a CS major or a math major in here with 3.0, I totally understand that that it's a way harder major and it's really hard to do well in those classes. But if you compare that with someone who has maybe like a 3.5 in a business, that 3.5 business is probably going to be looked upon more favorably. So just an FYI for you. And then leadership experiences, about 5%.
1:15:08
And bankers do like to hire future leaders and experience in finance clubs as a leader is a plus. But generally speaking, not really given that much credit compared to the other things we have here on the slide. And then additional things that really can help a lot case competitions. If you place well in them, then that's a huge resume booster.
1:15:28
If you attend any conferences or if you're in Europe, any of the spring insight programs, those kinds of programs added to your resume also really helps add more brand names. If you were at JPMorgan Winning Woman or Credit Suisse Leadership Symposium or something like that, if you have those on your resume, then you're already able to add a brand name at a top bank and it's kind of finance related. So those are great. And then awards, scholarships, those are helpful as well.
1:15:51
So generally speaking, this is what bankers will look for in a resume. Just to kind of cap things off, what we used to do at JPMorgan when we reviewed resumes was give resumes a ranking from one through five. And then we would literally before ranking the resumes, we would discuss, okay, professional experience is most important. If they have one to three finance experiences, usually two to three finance experiences, then most likely an interview.
1:16:16
Here are our GPA cutoff, like below 3.3, unless you have some kind of insane resume. Otherwise, we're going to throw them in the trash. Anything above a 3.3 to 3.7, let's look at their experiences and like everything I just discussed right now. So this is pretty much what bankers look for when it comes to resumes.
1:16:33
Next, let's go into resume tips. And this is going to be extremely important. I always give tips when it comes to resumes. And then people tend to not follow every single piece of advice that I give. And they send their resume back to me. And I say, hey, I gave you all this advice. Like, why didn't you take any of the advice that I gave you? Right. So please, please, please, for this next section, it's really important that you pay attention and adhere all the advice that I give you, even if it sounds really small, because a lot of things are going to sound very, very small.
1:17:02
and nitpicky. But overall, if you do everything that I discussed in this video, then you are going to have an outstanding banker friendly resume. So what we're going to do is we're going to dissect the sample resume, which is a real one that I helped edit for a candidate when they were recruiting for summer analyst positions. And they received a top three bulge bracket bank offer to elite boutique internship offers. I also do have more resume examples and templates in Circle. So
1:17:33
you can check those out in the resources section. But starting off with one of the basics, the header and education, you can see, you know, this is typically very commonplace. And so what I would recommend is just kind of following a very similar format or using the same information that you kind of see here where you have the name, contact info, LinkedIn link, university, major, minor, graduation, your GPA, all that stuff. And I would include a hyperlink for your LinkedIn profile. So
1:18:01
that's easy for bankers to just kind of go onto your LinkedIn. If you do have a major GPA, that's a lot higher than your cumulative GPA, then I would suggest adding that as well. And then relevant coursework, this can be used to show if you, especially if you are, let's say, for some reason, like a literature major, history major, and you want to show that you have finance coursework, then it's more important for you to add. Generally speaking, I think coursework is not a game changer
1:18:27
because so many people who are interested in banking have done finance coursework. So that's one of the first things I would actually remove if you have too many experiences eventually and then need to take out something in your resume. Next, honors and awards can be academic, scholarships, conferences, sports, or club related. As I talked about in the previous video, you can see here there's like BlackRock, Leading Woman, There's first place in credit space, investment banking competition.
1:18:52
These kind of things really do add to your resume on a first glance. Next, test scores, relevant coursework, honors and awards. All of these are optional. If you have good ones where you place in competitions or you have brand names you can put, then I highly recommend. Besides that, these are the things that I'd probably recommend taking out first. Maybe not test scores. You can always have add space for it like you see here on the right hand side.
1:19:15
But for relevant coursework, I would take that out. Honors and awards, you know, if you, for this person in particular, let's say that they add in another experience, then maybe it's worth making this into two lines instead of three. Next, professional experiences. This is extremely, extremely important what we're going to be going through. So obviously you have your internships and jobs you've held, role location dates. You really want concise and result-oriented bullet points.
1:19:38
We're going to go more into that. And only include what you can defend in an interview because you will be asked about things. Last thing you want to do is be asked a question and be unsure as to whether or not you can answer the questions appropriately. Right. So let's go into some tips. These are extremely important. And when I talked about before, it's very, very important for you to follow everything I say. This is really the crux of everything.
1:20:01
The first thing is to quantify as much as you possibly can. And generally speaking, I try to encourage everyone to have at least one number in every single bullet point. And I know that sounds like it may not be possible, but if you really put some thought into it, it's really, really possible. So quantify as much as you can. The reason this is important is that it shows right away once you look at a resume that the person is comfortable with numbers and are data driven.
1:20:26
Estimations are totally fine, but must be believable. And then next, have comprehensive and impactful bullets. So the template that I want you guys to think about when you're creating your resume bullets is the impact you made and what you did. So if you're able to combine those two things in a bullet point, then that means your resume is golden. We're going to go through examples for all these tips I gave in this slide. So I'm just kind of walking you through this verbally for now.
1:20:52
But do this for as many bullets as possible. And if you're able to have the impact you made plus what you did, and then you're able to quantify that impact, then that is a golden resume bullet, let's say. Next, use industry and finance lingo. So I have some examples here. When it comes to your resume for finance, you want to include as much of the financial modeling, research, financial analysis that you're able to do, because obviously you're recruiting for
1:21:17
banking. So when someone looks at your resume, they want to see all those buzzwords. And then you want to order your bullets from most to least important. So the most relevant ones to banking are financial modeling. And then I would include any other kind of financial analysis that you did where you can maybe use finance and go like cash burn analysis or that you were tracking like rates and EBITDA margins for a certain company or something like that. And then after that,
1:21:40
things like due diligence and any kind of research. And then after that, I would include kind of all the miscellaneous bullets that you might have had at your internship. Last thing is I would highly recommend limiting each bullet to just one line. If you think about it from a banker's perspective, they have very limited time and they don't want to be looking at a resume and see every single bullet run two to three lines each. And they're just going to
1:22:04
look at that and probably only read the first line or something like that and not going to want to read the rest. So what you want to have is a very concise, punchy resume where every single line has the impact that you made, what you did. It quantifies your impact and it's just one line. And if it's punchy like that, wherever the banker's eye goes, where they're looking at your resume, they're going to immediately be able to see that you are comfortable with numbers,
1:22:30
that you make an impact wherever you go. And they're going to read through that entire responsibility that you had. So let's go through what this actually looks like. So emphasize results and impact and quantify your impact to make the bullet stronger. So you can see here, evaluated the $400 million external spend in the intercontinental region. That's what the candidate did with the goal of reaching 10% savings by 2018. That's the impact made, right? Another example,
1:22:54
develop the commercialization strategy to obtain, well, I guess develop the commercialization strategy is the, what the candidate did. And then the impact it was to obtain a projected 26% market share in a new therapeutic class. So you can see here, there's numbers in almost every single bullet point. And that's what you want to go for. And the reason, again, like if you look at this, imagine if you're looking at this right now and there are no numbers versus right now,
1:23:18
you're looking at it and there are a bunch of numbers everywhere. Then it's clear that this person is able to quantify their impact. And it just seems like intuitively that they're more comfortable with numbers. Right. So that's why that's so important. And you can talk about your impact first and then what you did. So you can have something like projected 26% market share in a new therapeutic class by developing a commercialization strategy. So you can do
1:23:41
impact first and then what you did or what you did and then the impact made. I do think that either works depending on what you want to focus on a little bit more. But I will say that for the most part, you may want to err on the side of impact first because that kind of draws the person's attention more quickly. And then you can explain how you achieve that impact a little bit later on. Right. And then when it comes to, you know, oh, I have like a bullet point. I don't know
1:24:07
where to add numbers. It can be something as simple as let a team of four analysts and one alumnus advisor. Right. Evaluated the one hundred eleven billion dollar United States gaming industry. Right. This could have easily just been evaluated the U.S. gaming industry. And someone could have said to me which candidates have in the past. Oh, I don't know how to quantify this, but you just add a number to the gaming industry market size. There are a lot of ways where you can just add
1:24:30
numbers. Even here, source company partnerships with three biotech and pharmaceutical companies. Just add a little bit more specificity by quantifying. And I promise you, if you put some thought into it, very, very possible. Next, relevancy is key using industry lingo and ordering bullets from most to least relevant. So there is here built a financial valuation model. That is super, super relevant for banking, much more than develop the commercialization strategy.
1:24:55
And this candidate was recruiting for healthcare banking. And so it was important to have some of this more kind of healthcare industry related responsibilities and bullet points. But you can see here clearly, you know, compared to having the second bullet here first versus the first one, it's much better that the financial modeling is the first bullet as opposed to the second one. Next, make the location dates formatting consistent.
1:25:19
I can't tell you the number of times where I've seen people put like June J-U-N-E 2017 to AUG A-U-G 2017 and or they'll have it June to AUG like this and then here they'll write out February to May they'll have the dashes here be like a long dash versus like a short dash I've seen it all really and basically what you want to do is just pick a format and then stick with it generally speaking I do recommend that you have three letters for the month and then the year in full so pretty much
1:25:49
what you see on this resume because that just makes it really, really easy. Whatever you decide, just make sure that it's consistent. Next, use different action verbs and phrases. So there's variety. So as you go down the list here, you can see there's built, developed, evaluated, compared, led, recommend there. You can repeat a little bit here and there. It's totally fine. You know, you see developed here, developed here, but at least for each experience, I would have
1:26:11
different bullet points. And then this is what I talked about before as well. Make each bullet one line and ensure they reach the right hand side margin of the page. So you can see all of these bullets are just one line each and they reach this right hand side margin. And if you were to see this resume, let's say just hypothetically, all the bullet points were just reaching this halfway point. I've actually seen resumes like that where a lot of the bullets are just halfway. You can't
1:26:35
really explain that much with just eight words or so, right? And if a banker looks at a resume and sees that a bullet is only like halfway, then they're going to think, is this responsibility even important or impactful? And so that's one thing. The second thing is the resume is a lot more aesthetic in terms of formatting when everything just reaches the right-hand side and is one line each though. As you can see in this resume, everything is just very symmetrical in a sense.
1:27:02
And it may sound like this is not really important, like who cares about symmetry for a resume. But when a banker is looking at your resume for the first time and everything is just formatted correctly, no mistakes. All of these things that we're discussing right now are implemented where you're emphasizing your results and you have your impact. If you have all of that and it's all formatted well, plus you have strong finance experiences and a solid GPA, you are a shoe-in for an interview.
1:27:28
Or when you're networking and you're attaching your resume, people are gonna want to speak with you. So that's why all these things I'm mentioning is super, super important. Highly, highly, highly encourage you to make all the changes that I've discussed your own resume as well. So next for professional experiences, there is a way to make your resume even more banker friendly by adding a selected transaction experience. So a few things for this
1:27:52
is in the essentials portion, you know, you don't want to include any company names if transactions are in public. You want to include the company's involved, size and nature of the transaction, your responsibilities, and if you conduct evaluation analyses. I'm going to show you in a bit what this all looks like. But for now, let me kind of give you some high level tips again. So if you are, if you have investment banking or private equity experience, then adding a section detailing your
1:28:16
transaction experience, it will really, really, really help you stand out. Like if you have this, you are going to almost for sure be getting first round interviews. And then it's a matter of you actually doing well in your interviews. So you're also certainly going to be asked about these deals during interviews. So you make sure you need to make sure that you are very familiar with the deal. And also, by the way, even if you don't have boutique banking or private equity experience
1:28:39
right now, this section of the video is very important because you do want to ideally have this kind of experience eventually, right? You may get like in semester internship or in the future, you may get a banking internship and then you're going to need to adjust your resume as I discussed. So in terms of some quick tips, you want a headline bullet should include the company names and size. And if you're on the M&A or an LBO deal, you want to include you on the buy side or sell side.
1:29:03
If it's an IPO or the financing, include your firm standing like lead or left, right, book runner. And then if the transaction hasn't closed or been announced publicly, use generalizations. So sale of a small cap financial services software company or IPO of a large consumer products company. Let me just show you exactly what I'm talking about here. So this is an example of my old resume. And you can see that this section that I'm is what I'm talking about here, the selected
1:29:28
transaction experience. Now, obviously I worked at JP Morgan for a few years and so I have a lot of experiences here. But for you, what it would look like is basically just have two or three kind of broader bullet points and then select a transaction experience, maybe one or two experiences on your resume. If you work at a boutique bank or if you worked at a private equity firm on a transaction, or I've also seen if you work in consulting or audit where you have work on some projects
1:29:58
and you can have like selected projects. And basically this format that you see here is extremely, extremely banker friendly where beyond just having one or two boutique banking experiences, if you can have a section where it has selected transaction experience and you list out like the different responsibilities you had, then your resume is going to be extremely banker friendly. So that's what I recommend. If you're able to get those like boutique banking experiences
1:30:27
or for any other experience that you have, highly recommend the selected transaction experience slash projects section. And then next, when it comes to leadership and activities, the advice I have here is pretty much the same as your professional experiences. So quantify as much as you can everywhere, have impactful bullets where you're talking about the impact made and what you did. So formatting should be consistent with your professional experience.
1:30:51
Again, if you're going to bold your organization name and your company name, like make sure it's bolded. Like don't make it like italicized for one, bold for another. You should have your titles underneath and then you should make it italicized everywhere. Just make sure everything is consistent, different action verbs, as we discussed in the professional section, emphasize the results and use your numbers to quantify your impact. So again, here sourced three large tech companies,
1:31:16
you know, that's what you did. Impact generating a 40% one year increase in revenue. Next, we're going to talk about skills and interests And the essentials are any languages you speak, computer skills, interests and hobbies. And this section is actually a little bit more important than most candidates actually know or think about. So first of all, you can call this line skills or technical.
1:31:37
So it just really depends if it's mostly all pretty much technical skills, then you can have it be technical. I actually like to err on the side of calling it just skills because, you know, you see technical here. You have all these like technical things and then you see French, which is a language, not really a technical skill. Right. So I do recommend calling the skills and then extensive experience with Excel or financial
1:31:57
software is not necessary because during the actual internships and on the job, you're going to learn. So I wouldn't worry too much, but if you have experience with them, then I would just add them. And then the interest line is where I think it's more important than most candidates give credit for. So a lot of times during actual resume screens, pretty much what every banker will do is look at education, look at GPA, look at professional experiences, skim through the leadership,
1:32:21
and then look at interests. Right. It's not like they ever really ignore the interest, because at the end of the day, we're all humans and we want to see what other people are interested in. So when you are creating your interests line, I would really recommend that you try to think about things that are kind of more interesting.
1:32:37
So and you want to stay away from things like, oh, I enjoy like sleeping or napping or I enjoy like Dungeons and Dragons, like video games or whatever, like something that stereotypically, maybe let's say a banker may not find as interesting. and you know that doesn't mean that you can't be who you are during an actual interview and whatnot but you do want to try to play the game as much as possible right so bankers really like sports
1:33:00
they like outdoor activities they are interested in things like poker you know like those kinds of things i would err more on those side of interests as opposed to the other things i mentioned so super super important i would also recommend thinking about trying to have really thoughtful interests where it can be fewer number, but you can have like a parentheses that talks about like what is unique about that. So for example, you can set up thing like running, you can set like
1:33:25
running open parentheses, ran 23 marathons, or for mine, I have like that I enjoy playing pool. And then in parentheses, I have like can play with one hand, you know, things that could add more specificity is a good thing to have for the interest. Next thing you want to do is make sure that you formatted everything correctly. As I mentioned, it's super, super important. So if you're working full-time, put your work experience at the very top. Because this resume for someone
1:33:50
who was an undergrad, you put your education at the top. This is unless you're going to MBA then for MBA students, you want your education at the top. Same with master's students. Next, spacing between the sections should be consistent. So this is a mistake I see very commonly where the section, there may be like a 10 space line here and then like 13 space line here or something like that. Just make sure that everything is consistent throughout your entire resume.
1:34:14
Use the same bullet point shapes for all bullets. So sometimes I'll see like a square here, sometimes people put like a circle up here or something like that. I personally like this square and I've always liked it. So I do recommend it, but you can use a circle if you'd like. But just make sure you're consistent. Next, make sure that the bullets are taking up the full line. So it looks like everything's pretty much right aligned.
1:34:34
So you can see when you look at this full resume, everything is just reaching the right hand side. There's a lot of numbers everywhere. This is just pretty much a really solid resume where you'll have a really good chance, given your set of experiences, to get an interview offer, right? Because this person, for example, does not really have boutique banking experience, but everything is structured as well as possible to showcase finance experience. There's a lot of financial figures.
1:34:59
There is some clear interest in banking because there are some blue chip names for some of the case competitions and for the conferences and stuff like that. So this really puts this person at their best shot for banking recruiting, even despite not having any banking experience. Next, make sure that everything is consistent. That's really one of the keys for the entire resume for banking. You want to make sure that your font size, your bolding, italics, everything is consistent
1:35:30
in your resume because I promise you, bankers have insane attention for detail and they will notice when you have any sort of mistakes.
1:35:39
From both of your experiences, like what exactly would make resumes stand out for you to kind of push them to either want to speak with them and or give them in a first round interview? Totally. So again, I'll bifurcate it like the UF process. We know all the orgs on campus. We know which ones are legitimate and are not. We have people that are still on campus, either as folks that have already interned and are finishing their time or incoming interns.
1:36:07
So there's a ton of sort of reconnaissance that we can do. And those resumes are very easy to screen. And then for, you know, more broadly, if it's a school that I don't have any touch points on or I can't ask anyone about this person, it's your standard, you know, GPA. Are they in a relevant field? If not in a relevant field, have they taken coursework that is relevant? Have they done internships or some work that either is relevant to banking or just shows relevant skills or attitudes?
1:36:38
So, for example, during high school, I used to clean rental properties and like that's gruesome work. I don't recommend it for anyone. But since then, I have an appreciation for the kind of effort that goes into it. If I see someone was a caddy or someone was someone I think worked on like a boat, you know, those are like they're not flashy jobs, but they show that you've put in effort and you can take really hard work, which is what banking is.
1:37:04
And then for things that you highlight in sort of your, you know, clubs and activities section, again, it should be relevant and you should have some level of impact. If you're a member of 17 orgs, that's great, like good for you, but you have no ownership. You're not showing me any skills through that. I was a member of two organizations. By the end of my first year, I was a member of just one organization, but in a meaningful capacity.
1:37:25
I think that shows much better than sort of spreading a wide net and also being able to speak to those experiences. Because I will say sometimes people resume pad and they just put as much as they can on there. And if you ask them about it, they can't speak to it in reality. So I don't think that's groundbreaking news. I will say I've seen some very strange people put like interests as the last line and people
1:37:49
really crazy with it. I, you know, there are certain activities you should probably not
1:37:57
How did you reach out to these companies? Like, how were you able to secure these internships? Like, was it mostly at BYU,
1:38:04
at like job postings and stuff like that? Or did you cold reach out to a lot of people when you're reaching out to the boutique banks? Yeah, so at the beginning, I kind of call it the friends and family approach. You need to go to your neighbors, your friends, your family, anyone who has a job in finance from that you want to work and see if they'll give you an internship. And oftentimes these were, you know, unpaid internships. I kind of raised my hand and said,
1:38:24
hey, you know, I'm really interested in learning about this industry. Can I come, you know, hang out for lack of a better term for a few weeks this summer? And that was really, you know, I think well-received and it was helpful for me to kind of start to build my resume and ultimately kind of preparing myself for when I applied to the more kind of robust and, you know, established internship programs such as JP Morgan's. Got it. Yeah.
1:38:46
Cause I, I know based on your previous experiences it seemed like you had, was it like two, was So two boutique investment banking and two private equity internships before JP Morgan, is that right? Yeah. So in my undergrad, so before I graduated, after I graduated high school, I worked for a mutual fund company. I did that. And then I took a two-year break and I served a mission, a religious mission for Church of Jesus Christ for Latter-day Saints or colloquially known as the Mormon Church.
1:39:16
So I was in Tokyo for two years. And then when I came back, I interned for kind of a search fund. There was a BYU alum who was looking for interns. It was an unpaid internship, did that. And then I also interned for kind of two, I'll call it local investment banks that were both had ties to BYU. And then I also interned for another local private equity firm my senior year that had kind of ties to BYU as well. Got it. Okay. Okay.
1:39:41
The reason I just wanted to double click on this is that I think a lot of times what is not as obvious until you're actually really in the heart of recruiting for banking and learning more about the process is how important it is to have previous internships because, you know, we both worked at JP Morgan. I was the recruiting captain for a bit. And whenever we were looking at resumes, we would always first see if that person had previous experience in
1:40:05
investment banking, or like at a boutique shop or private equity firm, anything kind of finance related. And I can just imagine if your resume came along with all those experiences, I probably would have been like, yeah, let's give this person an interview. So it seems like you kind of did it the right way. So first off, for networking strategy, everyone who networks knows that it can kind of be a pain and no one really loves doing it, but it's really, really important,
1:40:30
usually for almost all processes for investment banking recruiting. Now, there are some processes and times when networking is not as important, but in general, you want to be as strategic and effective with your time, right? So in general, let's go through an overview. Networking is important in banking because it allows you to step beyond the bounds of what's on your resume. So your GPA, your professional experiences, your school, it really helps you connect with people
1:40:55
on a personal basis. And this is super, super important because whenever a banker has a resume, I've looked at resumes where the person seems great on paper, but then just does not really seem like a culture fit or is not very personable. And so that means that that person is probably not going to be considered as strongly. Whereas the flip side is if you maybe don't have as strong of a GPA or you don't have the professional experiences that other candidates have, if you're
1:41:22
able to really connect with bankers, then you're able to kind of get a leg up. So it can work to your favor. So a lot of bulge bracket banks are streamlining recruiting processes through digital interviews called HireVue's. But a lot of other banks and also if you are recruiting full time, you're a lateral recruit, or if you're in the MBA recruiting process, all of these still really rely on networking so that bankers can actually see what candidates are really like. So the typical
1:41:49
networking flow, if you're not used to it, I cannot stress how important it is to do all these parts because it may seem that some of these are not important, but in order to really be on the top of your game as a banking candidate, you want to follow all these steps. So first, find names and emails, then send an email request to chat, send a confirmation email. So this is typically sent around the day before the actual meeting. So whether it's over Zoom or coffee. Now, my general rule is
1:42:16
that if you have a call that you schedule like the next day or like two days later, then maybe you don't need to send a confirmation. But anything more than that, you do want to send a confirmation email. And it's just a nice courtesy. Bankers, a lot of times, very, very busy. There have been times when I was so busy at work that I would just completely forget about and a coffee chat that I had, even though it was like on my calendar. So confirmation emails, very helpful. Then what's
1:42:40
really important, we're going to discuss later in the second video of being a memorable candidate, make the chat that you have a conversation instead of just like a straight Q&A, then send a thank you email just as a nice courtesy. And then lastly, stay in touch. So all of these emails types are also going to be available in the email templates in case you're not too familiar with any of these.
1:43:00
Now, in terms of making the best use of your time, the strategy for networking effectively is very simple. You want to maximize your chances of receiving a response and you can spend so many hours reaching out to people. And if you don't follow like this particular funnel, I guess, then you're going to kind of be not using your time as well as possible.
1:43:20
So first, reach out to people you personally know. So this I would completely exhaust this to the absolute max that you can. So your friends, alumni in the organizations you're a part of in college, friends of friends, family, if you happen to have anyone, family, friends, just really look for those those warm leads because those are going to really maximize your chances for getting a response.
1:43:42
The vast majority of times, bankers are so busy that they're not going to reply to a request unless they happen to know you. So I've spoke with multiple bankers who literally have said to me, I'm so busy that I don't really respond to requests from candidates unless there's a really good reason or if I know the person. Let's go into some of those other potential reasons they may reply. But second, attend company events like info sessions and virtual events.
1:44:05
A lot of times, especially if they're in person, they'll give you business cards. Sometimes for the virtual events, they'll give you emails of people you can reach out to, bankers you can reach out to. This, of course, is another really, really good way for reaching out to bankers who are already part of the recruiting process, probably, and are willing to speak with you. And I would attend as many of those as possible. And then cold email slash LinkedIn message alumni from your school.
1:44:28
So if you don't have a direct connect to getting an alumni's email or something like that, then cold email slash LinkedIn message. This is super important because most recruiting teams at banks are organized based on school. And the people who go to your school are the most likely to want to help you because they want more bankers from their school. Right. So that's what I would go to next.
1:44:50
And then as a very last resort, this is when you start cold email LinkedIn messaging a bunch of bankers and have some tips for that as well. So first of all, when you are kind of cold messaging people on LinkedIn, you search filters to find where people work out for each firm. So you can go into LinkedIn and then filter by JP Morgan or Evercore, etc. And so that should really help.
1:45:11
It should also help you see maybe people you've added in the past that are already working there or are only like one connection away. And maybe you can contact the maybe like you look through your your filter and then you search for Evercore bankers. You find that there is someone who's like just one person away from you. You find like, oh, that person actually knows my close mutual friend. You contact that friend. Maybe that person can introduce you.
1:45:33
Right. So I would do kind of things like that. There are also plugins such as LinkedIn Sales Navigator, Apollo Hunter, Rocket Reach to find the emails. So you can do that as well. And then for initial outreach, I would focus on analysts and associates, unless you have some kind of connect to hire more senior bankers, because the analysts and associates are a little bit more likely to speak with you. But at the same time, I wouldn't limit yourself because there are a lot of candidates
1:45:56
who I've worked with who just emailed or messaged a senior banker who just went to the same school as them or just reached out to them. And a lot of times they are just willing to speak with you. And I think there's somewhat of like a psychology with a lot of times the more senior bankers, sometimes they are more willing to speak with you because less people reach out to them because people are scared to write if you're like, I mean, I can I can tell you when I was recruiting,
1:46:20
if I had reached out to like a managing director, and then we scheduled a call, I would be pretty nervous. And so a lot of people don't even reach out to them. So it could be to your benefit, actually to reach out to some more senior bankers. So I guess all in all, you can reach out to everyone. For the most part, I'd maybe focus a little bit more on the junior bankers. But if you do see a potential connection with a more senior banker, then I would reach out to them as well.
1:46:44
Some additional tips, always attach a resume when reaching out, especially after you guys revise your resume, make it super banker friendly, then your resume will be an asset to you and help bankers convince them to want to reply to you and then aim to speak to two to five bankers at each bank ideally. But it's really important that you focus on the quality of your conversations versus the quantity. And so it's more important that you have one or even two bankers really pounding the table
1:47:11
for you and saying that they want you to get like a first round interview or a super day or something like that versus trying to talk to a bunch of people who would just kind of like you a little bit. The ideal kind of scenario is you talk to one banker who really likes you. You ask them to refer you to another banker, talk to a second banker who really likes you. They refer you to another banker. And so by the time of your interview, you've hopefully spoken with at least
1:47:33
two to five bankers at that bank and they already kind of like you. That's what happened with me with my JP Morgan recruiting process. And so I will say that that is really effective. I know that could be a little bit hard to do and not possible to do with all banks. Also, when reaching out to bankers, especially when you're cold emailing, I would also focus more on quality over quantity. So let's compare two different types of emails. So as a preface, there's a lot of intense
1:47:58
competition, a lot of people reaching out to bankers, a lot of candidates interested in banking. And so with bankers working 80 plus hour weeks, you really, really need to send out personalized messages in order for you to really get a chance of a reply. So let's compare this first email, which is more generic. So it says, my name is John. I'm a student interested in pursuing a career in banking, hoping to learn more about you and your experience. If you have the time,
1:48:23
we would appreciate an opportunity to speak, right? Very, very just generic. And what someone might send if they're trying to message 200 bankers in the hopes that a few reply to them, right? First of all, that takes a lot more time. And it's more unlikely that the banker is actually going to reply to you because again, they're working super, super hard. Why would they even want to speak with you unless maybe you had some crazy good resume, right?
1:48:45
Now let's look at this one that's more personalized. So hope you're doing well. My name is John. I'm a freshman at USC. I came across your background and saw you're also fellow Trojan and it's always inspiring to see USC alums succeeding in their careers. I also noticed on LinkedIn that you're a part of the tennis club, which I am as well. Did you take lessons from Coach Lee? I think something like this, you can't do with everyone, but if you're able to kind of add something
1:49:06
that creates some kind of similar experience and you have like a question or something like that, then I think that will really capture someone's attention. The next paragraph, really interested at interning at Morgan Stanley, and we'll be grateful for the chance to hear about your experience. I know you have a busy schedule, but would you be free for a chat, etc., etc. Please find attached to my resume. Thank you in advance for your time.
1:49:26
So this is how I want you to be making all your messages and emails to bankers, especially for cold emails. Even if it's more of like a warm intro, still you want to be on the top of your game and send a really thoughtful email because that'll make a really good impression, right? So it's gonna take more time, but I promise you it's gonna be worth the effort when you are reaching out to people. And I would look at their LinkedIn's, try to see what, you know, in the past,
1:49:52
I will say when LinkedIn kind of first came out, it was kind of weird to be like looking at someone's LinkedIn and messaging something you hadn't seen. But now it's so normalized that I think it's totally fine for you to say like, oh, I saw on your LinkedIn that you did blah, blah, blah. And this is how I would really be reaching out to bankers.
1:50:07
So make sure you're focusing on quality over quantity. Last thing for this section in terms of staying organized. So I would use a spreadsheet with the following columns, name of the firm and group, name of the contact, email, important notes. The reason the notes part is probably the most important, because when you are speaking with a lot of bankers, like in an ideal recruiting process, you're going to be speaking with multiple bankers across the 15 to 20 different banks that you're potentially applying to.
1:50:35
And it doesn't mean that you're going to be able to speak with bankers from all the different banks. But if you do have 10 or so banks that you are speaking with or in the process with, then it's going to be a lot of people and you want to kind of remember what you talked about with each banker if you can. So I would also include checkboxes for all these things here just to kind of show you what it looks like. You have the bank, group name, email, all this stuff. I will leave a link where you can download this tracker if you'd like.
1:51:00
But if you already got your student doc, if you're part of the Banking Accelerator program, then your coach will have sent this to you already in your student doc. So that is an overview for networking strategy. And in the next video, let's talk about how you can actually be a memorable candidate.
1:51:17
Yeah, I think one thing that going into what Caroline kind of mentioned, and I think for both of you, Caroline mentioned you had to network really hard coming from the West Coast. and then recruiting for the East Coast. I had a bunch of my friends do that as well. That's tough. Merrick, I know given your background, maybe you could share also a little bit. I guess the topic I want to go into is how important networking was for you when you were recruiting.
1:51:45
And let's start from there. What kind of steps did you take and how impactful do you think it was for you ultimately getting your offer?
1:51:54
I guess we can start with Merrick first for this one. Yeah totally. I can take that. So I think, first of all, being international sort of limited the pool of banks that I could look at, you know, not to get into it, but Evercore was one of the places that had a very lenient policy. A ton of the firm is international. And so early on, I identified that firm as somewhere I would like to end up. And then it became a game of, OK, who do I know that has any sort of connections?
1:52:21
Who do I know that isn't a cold reach out, but I can somehow make this relevant to them?
1:52:27
And really, that was the biggest hurdle, just essentially screening out for people that would talk to me. Luckily, there are a number of folks that have gone through the program from UF. We have a steady, not expansive, but steady pipeline.
1:52:42
If you are in the right organizations and you excel and just essentially grind your butt off for a year and a half and then do well during interviews. And then I was lucky enough to work under one of the sort of at that time incoming interns in a student investment fund, did a very good job for him. And so he had a good reason to recommend me for internal hiring. And then, you know, sort of after the resume drop, it's really out of everyone's hands and you have to perform.
1:53:13
So I would say my process was fairly streamlined once I've identified who can help me and gotten those things rolling. But the sort of uncertainty of figuring out, okay, where do I even want to land and who do I know? That's where a lot of the effort was.
1:53:27
And I think it's just man hours. You just have to sort of go through it and see who the list is.
1:53:36
So then it sounds like if I were to kind of hear or kind of distill what happened is you were working with someone. And did you say that they directly referred you to someone at Evercore? or like kind of push your application along in the process? Yeah yeah. Essentially, I mean, like a direct referral is the best thing you can have. And so it was identifying who those people are. And then it was some luck involved. I happened to be on their team in a finance club on campus
1:54:07
and had a very candid conversation about, listen, this is my situation. I can't recruit for every firm out there. Evercore is one that I'm very interested in. Based on the last, at that time, year of work that I've done for you, do you think that it makes sense? And luckily they were, you know, they were inclined to do that for me. That being said, it's certainly not the only path forward. And we review a ton of resumes that
1:54:31
just stand out from a pile without any referrals. And, you know, that path is totally fine. Got it. So then kind of going into a question that a lot of people have been asking is,
1:54:43
you know, obviously if you have this direct path, then that's very, very helpful. But if you're coming from like a non-target school, what advice would you give to those candidates?
1:54:57
We're really busy people. And most, I mean, maybe I'm brutal, but like most of it just goes through a spam filter. Like it doesn't even get to us. So if you can find people that you have some level of connectivity with, you know, your neutral connections through a different person, or you get like a very high level referral from someone who's not even in finance, but happens to know this person, like that will go miles further than just sort of cold emailing 100 people.
1:55:24
And then on the point of being a person, like, yes, you're selling yourself. You want to prove that you are this sort of perfect candidate, but also it's not an interview yet. And you need to establish that you are likable and you can talk to a person because so much of this job is face-to-face and based on interactions. And so if you go into a meeting with someone and just sort of spew facts at them or try to, you know, bravado your way to a referral, it won't really go well.
1:55:53
Yeah, this is all really validating for me, too, because in the next session after, you know, our session is done, I'm going into networking and behaviorals. And a lot of what you guys are saying are what are on my slides. That's great. And I wanted to ask about each of you, if you could provide an experience kind of going off of this. I think, you know, Caroline, you provide a great example of, you know, the shoes from Vegas and then like naturally bringing that into golf and all of that.
1:56:23
And then but I was wondering if you guys could provide another example of maybe when you guys spoke with a candidate when on the flip side, you're now a banker speaking with a candidate. Is there anyone that comes to mind, an example, a way they reached out? It doesn't have to just be the conversation, but someone that stood out and kind of share like why they stood out.
1:56:43
Yeah, I've got a person in mind just because it was an interesting conversation. They did come through a soft referral, so it wasn't a cold outreach. It was a former analyst on the team who went to high school with them and they somehow got in touch.
1:56:56
So again, like, you know, soft referral means various things, but the conversation was totally fine. We did introductions, we talked about the group and the team. And then I had asked him what he was doing at college. And he mentioned he's working on a new dating app. And then the conversation just went in that direction, both because that's tangential to the space that I cover, but also because he seemed very passionate about it. And honestly, he was very well informed.
1:57:26
And so I just remember that conversation stood out, and he's going to be joining the firm next year. So it, again, very random, but it worked out.
1:57:41
they're networking or trying to find bankers that they can speak with. So a lot of the questions are asking right now, if you personally were in a situation where you can't really reach out to people you know and or if you think about your own personal experience and whoever called outreach email to you like what really stood out that actually made you reply if at all do you guys have any tips for people in those situations um i'm the wrong person to ask i feel like
1:58:14
i have almost never replied to a cold outreach um again i've gotten like thousands of them and in If I get something in the middle of the day and then I'm looking at it at 3 a.m., there's no inclination for me to do it.
1:58:28
I would really implore people to think about the connectivity of their network. And I do believe that everyone has someone, whether it's one or two connections removed. You can find someone. And if you are going to outreach, I think I saw a question about whether a crazy headline will catch my attention. Don't do that. I mean, it could be funny, but I'll laugh at it. I won't respond.
1:58:57
more the harder it comes off as you're trying the worse your outcomes are probably be but you need to be trying hard but trying hard as naturally as possible all right so now that you understand the industry it's time to learn how to explain to bankers in interviews that you're a great fit for the job and also how to differentiate yourself from other top candidates through a compelling story behaviorals are the second key component of banking recruiting and we'll be going over some of the key
1:59:25
questions that you're guaranteed to be asked about. And for a list of the highest probability behavioral questions, be sure to download the resource pack in the description below. With that said, let's jump into behaviorals. Hey everyone and welcome to the behavioral module, a very important one because it is a super important part of the recruiting process in banking and pretty much any recruiting process. Today we're going to be going over an overview
1:59:53
of what bankers are really looking for and some tips on generally how to prepare for behaviorals. Then I'm going to go into how to brainstorm, which is a key important part because I think people underestimate how much you actually need to reflect and know yourself in order to have really solid behaviorals. And then lastly, go into the different types of behavioral questions. And then I'm going to provide a lot of answers and specific tips on how to answer the different
2:00:20
behavioral questions that are often asked in banking interviews. So starting off with the overview, your number one goal with bankers or behaviorals is pretty similar to networking, where the goal is really for you to get the banker to like you and root for you because they find you either thoughtful or interesting in the stories that you tell or in just how you just respond or and also to see that you are a good fit for the job. And that's expressed in a lot of
2:00:46
various different ways, but you want to show skills and attributes and tell stories that show that you have what it takes and you have the qualities to be a good banker. So through behaviorals, bankers are trying to figure out, one, do you know what the job is about? So what investment banks do, what an analyst slash associate does. Point blank, a lot of times bankers will ask you, like, what does an analyst do? What does an associate do? What does an investment bank do?
2:01:09
And then you can also show that you know about banking and you've done your research by adding in a lot of little details here and there as you're going through your answers. Second, can you do this job? Do you have good teamwork skills? What kind of situations have you been in and how have you responded in them? And then leadership related questions. Now for a junior banker, it's not really that important that you are a fantastic leader because you're going to be handed down a
2:01:31
lot of work and it's your job to just do a lot of grunt work. But still, ultimately, banks and companies like to hire for potential as well. If they see a lot of potential in you as a future leader, then that's a huge plus, right? So there can be leadership related questions as well. And then also there are opportunities for you to kind of lead even as an analyst, whether it's helping some interns in the future, or maybe you're interested enough to lead recruiting, etc, etc.
2:01:54
Lastly, do you know why you want to do this job? So for questions like tell me about yourself, why banking? And all these are things that you know, you're going to be asked and you want to have a good thoughtful reply and one that makes sense with your story and your narrative. So figure out with behaviorals. In terms of why they're so important, technicals assess your knowledge about finance and they do really help when it comes to differentiating candidates.
2:02:21
But on the other hand, behaviorals will help set the tone for the entire interview and create the first impression. Because when an interview starts, it never goes from technicals to behaviorals. It always starts with tell me about yourself, why banking, why this bank, a few maybe behavioral questions, and then they go into the technicals, right? And so it's very important that you want to set a solid first impression because if you do set a good
2:02:46
first impression at the beginning, the banker automatically kind of wants to help you when it comes to technicals and you're a little bit unsure, they maybe will nudge you a little bit more in the right direction. By having a good first impression, everything can just get easier and easier or it can go worse and worse. Like I've done interviews where behaviorals are very bad at the beginning. And I think, OK, this person doesn't seem like they've done a lot of research or why they want
2:03:08
to join a bank, their answers seem very cookie cutter. And then I go into the technicals. I'm not as excited. Next, bankers want to assess to see if you're a culture fit. They want to see if they are hiring someone who they'll enjoy spending 80 plus hours a week working with, especially if you are being interviewed by an analyst or associate who literally will be working right next to 80 to 100 hours a week. It's super important in banking for everyone to kind of get along for bankers to
2:03:34
see that you're a culture fit. A lot of candidates that I've seen have not been passed on to super days or have not gotten the final offer. A lot of times, at least 50% because of culture fit, especially given the fact that a lot of times towards the super day, it's the MDs who aren't asking technical questions all the time and are trying to better see if this person that they're speaking to has like potential and if they like their behavioral answers. So culture fit, super,
2:04:01
super important reason. And then there's also a chance for your interviewers to get to know who you are as a person. And it may seem like, oh, I just need to go into this banking interview and knock all these technicals. But it's much more than that. It's also who you are actually as a person. Do you have integrity? Do you have great teamwork skills? Like all that stuff that we've discussed. And then lastly, they allow you to stand out amongst other technically sound applicants.
2:04:24
So I won't say necessarily that technicals are simply just checking off the box because technicals can get harder and harder for candidates as you get all of them right. And so every interview will be a little bit different and you can stand out by being very, very technical. At the same time, there can be a lot of really strong technical applicants. But when it comes down at the end of who do we actually like more, behaviorals can be a key differentiator. So these
2:04:50
are the key reasons why behaviorals can be very important in banking recruiting. Now let's talk about what bankers want to see in terms of qualities and candidates. Of course, we have talked about being technical, reliable and personable in previous modules. But I wanted to provide some other characteristics that bankers often want to see as well. So there's grit. So can you through your stories or your answers show that you have this innate, strong drive to really push
2:05:17
through obstacles and get through whatever challenges in your way. So that's grit, humility. it may seem like all these bankers are they seem like hot shots who just really care about making a lot of money and climbing over each other to achieve success in their careers. But actually, the best bankers I've worked with are people who are very down to earth. And bankers always want to hire other people who are humble, especially at the junior banker position, because you're going
2:05:43
to be given the grunt work, right? You need to be open to doing anything your team asks. So if you seem cocky or arrogant at any point and you think you're above anything or anything like that, then you're going to quickly get your resume thrown out in the trash. So extremely important to be humble. And I think this is often overlooked. So humility and then at the same time, balancing this with confidence. So there's another way to kind of put this like people
2:06:09
to kind of combine the humility and confidence is like there's like a quiet confidence. A lot of times people portray. And I think that's a good way to put it. So you want to be confident in how you say your answers and your overall demeanor. But at the same time, you don't want to be too cocky. Right. And I think you probably know the difference between the two. So confidence, very, very important. You know, eventually you're the goal is to put you in front of clients if you
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keep moving up the ranks at an investment bank. And if you seem very meek and shaky, timid, then that will not bode well when you're put in front of clients, right? So confidence, very, very important. Next problem solving. So a lot of the times you are just going to have to put your head down as a banker, get the model done, get the PowerPoint done. But there is a lot of like little problem solving things that you're going to have to do. So whether that means you're going
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through, you're building an LBL model for the first time, you have to like problem solve on your own by watching YouTube videos, going through previous models, etc. Or there may be times when you have to build an industry landscape page. You've never really done it before. So you have to look at previous examples, do it yourself. So it's not necessarily like you're creating a new product or service in the world and you're problem solving that way. But you still do have to do a lot of
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problem solving on a day to day basis. And the more you can do that kind of resourcefully on your own slash know when to ask your associate or team for help. All of that stuff is very, very important. So problem solving is another quality bankers want to see communication skills. I think this is obvious, but it's not just about responding in a good way or whatnot. But banking, if you haven't gone through like an internship or anything yet is very intense when it comes to communication.
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So typically when you are responding, when I was back at the desk, if I was responding to an email more than five to 10 minutes after I received it while I'm on the desk, that's considered late. Even if you got an email that you from your deal team, especially on a live deal where they're asking for something, even if it takes you some time, you got to reply right away. I'm on it, usually within like a minute or something. And so even when I was going out to lunch or going out to
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dinner here and there, I would always be checking my phone to see if I got an email and responding right away. So super, super important. And you want to show this a little bit in your networking and your emails, but you can also showcase any of these qualities as you're talking about your behavioral answers as well. Last but not least, intellectually curious, especially when it kind of comes to finance, the last thing a banker wants to see is, oh, this person is not really
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interested in modeling, which ultimately over time, I actually see that some bankers are actually not as interested. Maybe they kind of just realize it's not for them or whatever. But at least when it comes to interviews, you've got to seem like you really want to learn how to model. You want to learn how deals work, want to learn about finance, all that stuff. Very, very important. You also want to show that you kind of go out of your way naturally already to look into things
2:08:59
that you want to learn more about because so much of the job requires you to learn a lot on your own. So these are the qualities that bankers want to see. Of course, it's not completely exhaustive, but these are some good ones for you to just kind of think about. And later on, as we go through brainstorming and my tips for behavioral questions, you can think about how can I portray some of these qualities more and more as I'm doing all the work for preparing for behaviorals. So you don't need
2:09:25
all these skills and many will be developed on the job, but you should showcase these qualities answers to the extent you can. That's kind of what I've been mentioning. So in terms of what to expect, most first round interviews consist of three to five behavioral questions with the rest being technical, unless it's digital interviews, which in that case, it can just be like two to three behaviorals. So questions that are most likely asked, tell me about yourself, resume questions,
2:09:47
why banking, why this bank, tell me about a recent deal the bank worked on, story question. These are the types of questions that are often asked. And we're going to go through all of these in the behavioral question section. Some super days and diversity programs will focus purely on behaviorals. But there will be times when you go into an interview with an MD and they only ask behaviorals because they assume, oh, the previous rounds, this candidate has already gone through
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all the technical stuff and we think they can do the job already. So bankers will likely ask many follow up questions to dig into your experiences and better understand who you are, especially more so in the super day later rounds, because in the first rounds, things are a little bit, you know, You don't have as much time. It's like a 30 minute interview. Just ask like a handful, a few behavioral questions and then move on to technicals.
2:10:32
In the super days and diversity programs, they might ask you a question and then they're going to ask a follow up question about what you said and then maybe another follow up question. It's important to know what you're saying and back up everything. Very important that you're honest and you don't want to get caught up in a web of lies because that's going to lead to an automatic rejection. So last one thing I mentioned earlier is senior bankers may just have a very casual conversation.
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So that's why sometimes for super days, you really have to be prepared for anything because you may get an MD who just purely as technical as they're like part of the M&A group. Other times I've seen candidates come out of super days and thinking, wow, like that was a lot easier than I thought. I thought I'd be asked a lot of technical questions, but then they just asked me a bunch of like behaviorals. But at the end of the day, you want to see you want to be prepared for everything.
2:11:16
So common mistakes and mitigants when it comes to behaviorals. First are generic answers. It's very, very important that you think of unique stories and examples to help you stand out. Another way to put it that I like to think about it is you want to stick with the interviewer after the interview. So what I mean by that is later on when that person is working, you are sticking in their mind and they're thinking, wow, that answer that they gave was so good.
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Or this person was so confident yet humble. And I think like that person did a lot of research into banking clearly is a top candidate. want to stick with the interviewer, you can only do that if you provide good answers in your behaviorals and in your technicals as well, of course. So if someone else can say your exact answer, then it's not unique to you. So very important to a lot of reflection and make sure
2:12:03
your behaviorals are very specific to you. Next is rambling. So typically a lot of times I speak with candidates and I ask them a very simple question of tell me about a time you led a team or something like that. And then they'll talk for two to three minutes about their answer. For the most part, you want to keep your answers under 60 seconds. Sometimes it's okay to go, you know, the general range, I'd say is like 60 to 90, but around 60 seconds is probably the sweet spot.
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You want to put yourself in the banker's shoes where they're working 80 to 100 hours a week, and they're interviewing candidates. And if they're hearing a candidate drone on and on and on and on, then no matter how interesting you think your story is, or like, I think a lot of times candidates think like what I'm saying, it's so important to include every single little detail, but ultimately it's not. It's more important is that you answer the question quickly and get to the point and
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you're able to have a unique answer. So I would highly recommend that you write out a lot of your answers, practice, keep them in the 60 to 90 second range. Next, not preparing enough. So don't underestimate how long it takes to craft good behaviorals. I would literally go on bus rides or walk to class. It's kind of reflecting a lot thinking about like, who am I like, what I really care about? Why am I interested in banking? Like, and I would write down my notes on my phone,
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it takes a lot of time to just craft your good answers. So make sure to spend a lot of time brainstorming and really dedicating time. Last but not least sounding like a robot. I personally did have an issue with this as well, where I kind of sound like very robotic and didn't really have a lot of intonations. So it's really important that you add up tones, down tones, you know, sound excited where you need to be or very focused and serious. So depending on what you're talking
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about, it's very, very important. And one small little tip that could be helpful is make sure to smile as much as possible. I know that was like a forced smile, but in an interview, when you go right away, take that interviewer's hand and smile right away. So very, very important. And so these are some common mistakes and mitigants. Let's next go into brainstorming and how to answer behavioral questions. And the brainstorming portion is super, super important. I think oftentimes very overlooked.
2:14:13
So this is just my approach to preparing for behaviorals. And historically, I think it's worked really well with candidates. Really easy to skip this step, but I highly recommend that you really apply what I advise you to do over these next few slides. So first step in terms of brainstorming, just brainstorm without any filter whatsoever. So whether it works better for you to write on a or just type on your computer, maybe even your phone, start off writing with absolutely zero
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filter and write on a piece of paper or in your Word doc key moments in your life. So whether that's big accomplishments or failures when you move to a new city, state or country, important school or work projects, breaking up with a girlfriend or boyfriend even. So obviously you're not going to include all of these things as actual things that you potentially talk about in an interview, right? You don't want to bring up personal things about like partying, for example, or anything like that.
2:15:06
Right. So instead, the point of this really is for you to think about what are the key things that really shaped me as a human. And by starting with zero filter and writing down everything you possibly can, it just gets the ball rolling really, really well. And it'll bring out a lot of key learnings for yourself about, oh, that's why I first got interested maybe in business because my parents moved from, I don't know, Bangladesh or
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something. They're immigrants to the States. And then they opened up a restaurant and I started working at that restaurant at a young age when I was 10 years old. And I helped my family with finances a little bit with the cashier. And then that was my first introduction to money. No. And that got me interested in finance. So it can be kind of anything, but whatever really comes to mind for you, just write all of it down, get the ball rolling. And this can easily take up to an
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hour or potentially a little bit more if you're just writing and writing, writing, and then just like kind of word vomiting as much as possible. You also want to think about major influences. So family, friends, mentors, any books, articles, et cetera, that you've read that really have helped shape your thinking. Write all of that down as well. And I added a note here on the top right. Think about the strongest emotions you felt, good or bad, help you remember past events. So I think
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a lot of times when you're starting off, there's kind of different ways to approach it. You could start off chronologically, you can think about, let me start from my earliest memory when I was four years old. And then first grade, let me write something down. Second grade, third grade, fourth grade, fifth grade, sixth grade onwards. I actually did that exercise and it was very, very helpful. Other times you can just think about what are the times where I felt the best in my
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life and then the worst and then kind of go from there as well. Or like the most excited and when I learned the most like huge epiphanies. So that's how I would start off. Some questions to also help you think? What are your greatest accomplishments and failures? When have you felt like a really, really, really strong leader? Who have been the people who have influenced you the most? What are your deepest fears and insecurities? Why do these exist within you? That question will
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really, really get you thinking if you're really honest with yourself. And then what is the strongest team you've worked on? What did you contribute to to help make that experience so great? I think this is also a really great question because it also makes you think when I was in the most high functioning best team of my life? What was it about other people and that team? And then what was it about myself that allowed me to contribute to being such a great team? So that's a very,
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very good one. And then what are the times you feel like a genius? So, you know, I'm not a genius for most people watching this. I'm going to assume that you're probably not a genius genius as well, like Albert Einstein or whatever. You may be very, very smart watching this. But in terms of this question of when are times you feel like a genius, there are times when you probably in life have done things where you're like, wow, I picked this up so fast. I was able to get through this diamond
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or whatever a lot more quickly than my peers for whatever reason. So anyway, these are good questions for you to kind of just think about as you are brainstorming as well. Okay, step two, two things should arise after you do all of this brainstorming. And by the way, the brainstorming person doesn't mean that it's just like a one hour thing. The step one is really to get the ball rolling. You can do
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that exercise first for 30 to 60 minutes. And then honestly, behaviorals are kind of a never ending always something that you're like improving over time. So for me, I had a lot of my behaviorals, like I did my brainstorming, I had my behaviorals written down. And then even up to my interview, I was always kind of recrafting my story a little bit, making my answer a little bit better with each mock interview and etc. So even with the brainstorming portion, things may come up to you
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later on as time goes on and you want to write all those down. So step one is not just like a 30-60 minute, it's kind of like an ongoing thing. But anyway, after quote unquote doing step one, two things should arise. One are impactful stories. So go through the ones that in your list, the stories that are the most unique slash interesting that really, really showcase who you are. You want to ideally choose around like five of those stories, but the more the better.
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And then you want to have a broad range of stories that cover things like teamwork, leadership, failure, problem solving, conflict, and et cetera. Now, we're going to be more prescriptive with all this when we go into the behavioral questions part of this module. And I'm going through actual questions and suggesting that you think about very specific types of stories. But if you are done with step one and you're watching this or maybe you're thinking about what to do next after you do step
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one, just try to point out the stories that are pretty good and actually applicable in interviews because you don't want to bring up like, oh, my parents got divorced or something like that, something very personal, not really relevant for interviews. So that's one thing that should pop out. The other thing are characteristics about yourself. So after doing a lot of reflection, you should have a much better understanding of what drives you. You should be aware more and more
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of your strengths and weaknesses, not just like the interview answer of, oh, I'm not like great at public speaking or, oh, like I try too hard and that's my greatest weakness. But really, really knowing what your key strengths are as a leader, as a person, as a person in a team, and then what your true weaknesses are. And then lastly, the more you know yourself, the better your behavioral answers will be. I ultimately got to a point later on after my first
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few years of interviewing and doing all this work where I almost didn't even need to prepare for behaviorals because I just knew myself so well that beyond just kind of preparing for some of the why this company or why, you know, tell me about yourself, all that stuff, like the stuff I knew I needed to prepare for when it came to other questions about that were kind of curveball question behaviorals or, you know, like tell me about time you worked with like a difficult person
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or tell me about a time you had to incorporate diverse perspectives to move your team along.
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I kind of just already had known myself so well or knew my story so well, I could just kind of adapt on the fly. And then there were times when I was asked like completely one off questions. Like I remember at JP Morgan for my super day, I was asked a question about, can you tell me about something not on your resume? And I wasn't necessarily prepared for that one. But I just kind of thought on the spot of story about me climbing Mount Kilimanjaro. And I kind of told my story about that and how it showed my drive and work ethic. And then it turned out to be like a really great answer, at least in my view.
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So we're going to go through all these things a bit more in the next section. But basically, after doing step one and all this reflection and having all that information, impactful stories and characteristics about yourself are things that should really kind of pop out. Next, let's go into step three, which is writing out your answers. So I do recommend that when you're first starting off, fully write out your answers for behaviorals to see what your quote unquote perfect answer looks like.
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But the thing is that when it comes to an actual interview, you're likely going to forget to say every single word, word for word. And then also you're going to sound way too robotic and rehearsed if you are just simply saying what you've memorized. So the next thing I do think that more advanced people with behaviorals do is they convert their answers into bullet points with the key points that you want to cover. And because some people do write everything, put everything down,
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but you're bound to be asked questions that you haven't prepared for in behaviorals. Like regardless of how much interview prep you do, whether it comes to behaviorals or technicals, will almost always be asked a question that you haven't fully, fully prepared for. And if you do go in with the approach of I'm going to try to memorize every single behavioral answer to every single behavioral question and be super prepared that way, you're going to come off
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way too rehearsed if everything is just memorized. So again, like you kind of also do have to work with the approach that works best for you. I do recommend, you know, fully writing your answers at the beginning and then later on moving towards more of a bullet point approach. Ultimately, you can kind of do what works best for you. But that is what I recommend. So in terms of answering the behaviorals, you can't get the banker to like you with boring, generic answers. And so there are
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three things to remember when it comes to answering your behaviorals. First is that it's very, very important that your answers are specific and unique to you. So if someone else can say your answer, then it's not specific enough. For example, if someone in an interview asks you why investment banking and you say, oh, I want to work in a fast paced environment, work on transactions that really shape industries and I want to build my financial modeling expertise, right? Then literally anyone
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in the world can say that. And it's not that you can't say any of those parts, right? Like ultimately at the end of the day, a lot of people want to go into banking for the same reasons. So it's okay to mention that you want to build your technical skills or you want to be working on deals that shape industries, but it's just that that can just be a part of your answer, but the way you lead up to it needs to be very specific to you. So for example, I used to invest in the stock market,
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and then I invested my life savings into the stock market. And I started building my own financial models. That's how I got really interested in finance. And it's what made me realize that in order to really build my technical skills, there's no better training ground than investment banking, right? So that's just like very, very quick example. Like, obviously, there's still maybe some other people who could say that because there are a lot of people who
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invest in stocks. But you can see how that is a very specific answer to my story. And that also included a bit of a cookie cutter portion, right? The cookie cutter portion was I want to build a strong technical skill set, but I introduced that part with me investing in the stock market. So we'll go through more of this in the behavioral question section. But again, the real important thing is your answers need to be very, very specific and unique to you. Next, concise. Each
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behavioral question, like what are the three words that your friends describe you the most in or something like that? Then that might be like a 10 second answer, right? The more longer questions should still not go beyond 90 seconds. So I highly recommend that you figure out what your word pace is. So let's say that for me generally, about 150 words is how many I say in a minute. And so like if I were preparing for behaviorals, I'd write out my answers and then copy paste it in a word doc.
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See if like, OK, is this 150 words and I'll be able to say this in about 60 seconds. I recommend you do that as well. Bankers work quickly and don't have the patience or interest for super, super drawn out answers. Again, like they're taking time out of their 80 to 100 hour weeks to interview you. The last thing they want to hear is you drone drone on and on and on and on for three minutes, regardless of how great your story is or how amazing you think your answer is.
2:25:14
Lastly, it's important to be memorable. So you want to make a long lasting impression. Not every answer needs to be mind blowing, but always aim to have answers that are very unique and interesting to you. And unique and interesting doesn't necessarily mean mind blowing, right? It doesn't mean that you had to have started like a huge nonprofit that has saved hundreds of thousands of children from diseases or whatever. It's not none of that, really.
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It's more about you being very, very clear on what you want, knowing through your story that it's very clear that you're interested in finance. you know what the job's about, you're very, very clear on all that stuff. And you know who you are as a person, like all of that is a lot more important than having like a crazy, crazy, mind blowing story. Last thing I want to mention is I think it's often overlooked that you can use
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stories from your sports or clubs or hobbies. Don't just go to like your school projects or internships when you're thinking about your behavioral answers may seem like that's what works well. But I can tell you, for example, the most generic story that I think no one should use is when you were working in a group project and someone wasn't really pulling their weight. So you had to talk to them. And then after talking to them, like everything worked well and you were
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able to submit this assignment on time or do well on that assignment or presentation. I feel like that's the most generic, boring type of story. I think it's a lot more interesting if you could talk about maybe when you're on a basketball team or a volleyball team or you're on cross country team or something like that and talk about stories that evolve from those experiences as opposed to only like school or internship related ones. So those are my tips for how to brainstorm and answer
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behaviorals. And then we'll next go into actually going into the specific types of behavioral questions and how to answer them. Let's now go into the actual behavioral questions that are asked in investment banking interviews for each specific type of question. And then also the questions that are asked within each category. Sample answers are going to be provided and tips along the way. So first of all, I would divide behavioral questions into four different types of categories.
2:27:19
First are personal questions, which are things like tell me about yourself and then what are your greatest strengths and weaknesses? And then there are what I call banking questions, which are just very, very specific to banking and or that specific bank. So why this investment bank, what makes for a good analyst, et cetera, et cetera. And then there are resume questions where the interviewer will ask you about your resume and you're going to need to come up with good stories
2:27:43
or talk about your different experiences in a good way. And then lastly, our story related questions. So these are things like tell me about a time you did X, Y, Z. Tell me about a time you were in a team or a leader, blah, blah, blah. And so for each of these categories, I'm going to be going to into each specific type of question. Let's now go into the personal questions and a brief overview about how to approach them. So first, you really want to highlight the unique qualities to make a
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lasting impression and help you stand out. So all the brainstorming things we talked about and all the important characteristics you're able to draw out of yourself after you do all the reflection, you want to really think about for each story that I'm telling or throughout my behaviorals, like what are the key points that I really want to drive home about who I am as a person? And also just whenever maybe you're asked a question that you haven't prepared for, as you are thinking about
2:28:33
how to reply, you kind of want to be thinking about simultaneously in your head, sometimes unconsciously. What is the key unique quality that I really want to portray? Next, reflect a lot on your personal story and think about your core characteristics that you want to communicate. So again, when it comes to the behavioral questions, especially for the personal ones, very, very important you do a lot of reflection. Third, be genuine. You don't want to make it sound
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like your answers are rehearsed and you don't want to make it sound like you're telling them what they want to hear. So for example, for greatest weakness, you don't want to just say, oh, I'm not a great public speaker because everyone knows that's a cop out answer. You want to give a real weakness that is unique to you and sounds very, very genuine. And for behaviorals in general, it's so easy for a banker to see through a candidate when they're just trying to tell them
2:29:21
what they want to hear and are not being authentic. But when you hear a real, genuine, thoughtful answer, it really takes an interviewer back a little bit and makes them think, wow, this person provided a really good answer there. And that's really what you want to aim for with personal questions and also in behavioral in general. And then lastly, go through the recommended brainstorming strategy to help you prepare for these questions. Very important for the personal
2:29:43
ones, because it really is important for you to figure out like who you are, as opposed to sometimes some of like the banking related questions or the resume. You just need to do a little bit more of like research. And that's what's really important for personal questions. It's almost like search yourself. So these are some important tips for tackling the personal questions for behaviorals. The first question we're going to discuss is the one that's asked in pretty much
2:30:06
every single interview, which is tell me about yourself. I'm going to go through some tips and then a sample answer. So first of all, in the introduction, don't say your name. This is what I see about like probably 50 to 75 percent of all candidates do. And it just automatically sounds like it's rehearsed. The interviewer already knows your name. Like in all likelihood, they've sent emails to you. They have your resume in front of you. When you shook hands with them in an interview,
2:30:31
like in the actual room, you probably said like, hi, my name is Bob or Sally or whatever. So if you sit down and they say, OK, can you first just tell me about yourself? And you say, yes, first, you know, my name is Ben and I blah, blah, blah. It just doesn't make much sense. Right. They already know your name. So don't say your name. No need to do that. Second, when you're thinking about background, you want to talk about where you grew up, family, if relevant. So for example, if they
2:30:55
were previously were doctors and you're interested in healthcare groups, then for example, you want to bring that up. I've also heard things like my parents grew up, immigrated and worked in a restaurant, which I helped out in. And so that was like my first foray into business. You also want to talk about in your answer, any relevant activities or influences that shaped you and got you interested in business slash finance and also your schooling as well. So like your university.
2:31:19
So to give you another kind of like example where talking about your background can really provide for a unique tell me about yourself answer. Like I heard one candidate talk about how they were always into sports and grew up playing a lot of team sports. So they're part of like football leagues and soccer, baseball, etc. And then that was a really important part of their childhood and also high school. And then when they came to college, that's when they were kind of looking for
2:31:47
something that was just as intense and also required and a lot of like teamwork and team building. And so that's what led a person to finance. So just to give you that example, it doesn't necessarily need to be something that's purely finance related that got you into finance. Think about what are the things that really shaped you in life? And then how did that ultimately lead you to something in finance and business and et cetera, et cetera. You next also very important.
2:32:11
you want to talk about the professional experiences that you have. I would really briefly go into these experiences and not take too much time because a lot of candidates where I see them do incorrectly a little bit is they go super in depth into their internships. But interviewer will ask you questions if they are curious about anything. I just would briefly in like for each key experience, maybe just say one sentence max. What's most important is that you have like a common thread that shows
2:32:40
like some kind of narrative that makes it very clear to see why you made the certain decisions you made that led you to your interview at that point. So what this would look like is if you think about the previous example of where I mentioned that someone was very involved in their sports teams and then came to college looking for something similar, got interested in finance, and then I could talk about. And so that's why I pursued first a boutique investment banking
2:33:06
internship, this firm. And then I also wanted to explore what private equity was like. So I worked at this small private equity firm for an internship, but realized that it wasn't really for me and banking was the best training ground. And so that's why I'm interviewing today and focused on banking recruiting. Like that's the kind of narrative that you want to be able to portray. And then lastly, it's optional, but you can talk about how everything led to this interview, which sometimes can come
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off as a little bit too contrived. But I would say that it's okay to do that if you have like a story that kind of leads to like why you are interested in banking or slash that interview. And then another thing that you can tack on at the very end is also like in my spare time, what I enjoy doing is playing golf or tennis or following the NBA, etc, etc. It feels a little bit unnatural, most candidates say to just kind of tack that on. But I actually think from an
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interviewer's perspective, it's always kind of nice to know what that person likes to do outside of school or work. And so whenever someone brings it up to me in an actual interview, I'm always like, oh, it's pretty interesting to hear like what that person actually is interested in outside of like professional things. So those are optional. It kind of depends a little bit more on you. Let's go through a sample answer. And this is what I would say when I was recruiting for JP
2:34:17
Morgan. So I would say, sure, happy to to start off with my background. I grew up in L.A. and my mom is a fabric saleswoman and my dad founded a textile factory. So I was always surrounded by business and finance from a young age. So that shows you a little bit already about, OK, this person has grown up in some kind of business environment, right? That's what led me to starting business at Berkeley, where I'm also minoring in creative writing to balance my analytical and creative
2:34:40
sides. The creative writing portion, obviously not as relevant for banking, but I did talk about it just so that it provided a little bit more uniqueness to my profile as a candidate. Next, while at school, I've worked as an analyst on projects for Cisco to help them with revenue expansion opportunities and Andreessen Horowitz to identify top millennial tech trends for potential investments. As you can see, I talked about two experiences in one sentence. Most
2:35:03
recently, I interned at Deloitte to help a healthcare client with budgeting and cost cutting. And these experiences gave me great exposure into financial strategy and corporate decision making. Beyond my internships, I built my own valuation models while actively investing in the stock market, which further solidified my interest in building a strong technical skill set. I talk about all these things because I didn't really have a strong finance background. So I
2:35:23
felt like I needed to talk a little bit more about building my own models and the finance kind of work that I did in my previous projects or previous work experience. Things will be different for you if let's say you already have a bunch of finance internships and you don't necessarily need to really talk so much about like how you were interested in building a technical skill set and whatnot. But just explaining to you like why I talked about things in the way I did here. And
2:35:53
how I built my own valuation models and actively invested in the stock market. So I needed to be prepared for pitch me a stock and tell me about the model that you worked on. So anything you say, very important that you know how to back it up. So last thing I'd say, all of these experiences combined are what led me to invest in banking. And outside of school, I've been playing tennis since high school and also enjoy following the NBA. So that is my kind of holistic answer.
2:36:16
Every single person's tell me about yourself is different. So don't necessarily think about, oh, let me get this and use this as a template. But instead, think about what are the key experiences in your life that really shaped who you are that have led you to the different experiences that you've had both personally and professionally and create a good story that you can tell that shows what ultimately led you to investment banking. So that is the tell me about yourself advice
2:36:41
that I have for you. The why banking question is probably the most common question asked of the banking related questions and you 100% need to be prepared for this question. The structure I recommend is to first bring in a personal part of your story and narrative, which can be from things like investing in the stock market, internships, people who influenced you, clubs and etc. You should have kind of come up with this already
2:37:05
with your brainstorming. And then mention one to three reasons as to why you're actually interested in banking. And these can be a little bit more cookie cutter. So again, with the overall theme and message I've been mentioning to you that's really important with behaviorals is that it's okay if some of your answer can be repeated by others and is a little bit more generic. But overall, your entire answer should not be repeatable by other people because it won't make sense given
2:37:29
their own unique different backgrounds. In addition, some additional tips. List out some of the common reasons to go into banking first. Of course, don't talk about like, oh, I want to make a lot of money, but talk about like the technical skills, being exposed to CEOs, CFOs early on in your career, things like that. Never, never, ever mention compensation or prestige. Those will just make you seem like you're not genuinely, truly interested in the role. So let's go through a
2:37:52
sample example that I would use back when I was recruiting for JP Morgan. So my interest for banking started when I began investing in the stock market in college. I put a big portion of my life savings into the markets because I thought with more skin in the game, I would learn a lot faster. And I started reading a lot of books about investing and valuation and building my own DCFs comps. That led me to banking, which I quickly discovered is the best training ground for
2:38:16
building a strong technical skill set, which is the number one reason I'm interested in banking. I really want to develop a deep understanding of how companies are valued and dive deep into the complexities of deals are structured because I find all of this extremely fascinating. So you see here, I introduce things with my own story. This next part is related to my story, but you can see that like kind of a lot of people can kind of talk about this, but it's combined makes it for
2:38:41
an answer that's personal to me. Now, next, beyond the technical side, I'm also drawn to the fast paced team driven nature of banking. An MD once told me that companies come to banks during their most important historical milestones because things like M&A and IPO transactions rarely ever happen. As a result, this entails working on high paced deals with tight deadlines for C-suite execs. And you really can't get this kind of exposure elsewhere besides banking. I thrive in environments
2:39:07
where I'm challenged. I'm working alongside highly motivated individuals, which is definitely the case in banking since everyone is willing to work 80 to 100 hour weeks. I want to work extremely hard at the start of my career and would be excited to join JPM for these reasons. So a lot to kind of talk about in here, but I this is true. And MD did once tell me companies come to banks during some of their most important historical milestones in that company's entire history. So think about
2:39:31
when a company sells itself or buys another company, goes IPO. These are huge, important milestones for any given company, especially if they're the larger transaction. And what this means is that the most important people are involved, right? It's not just like low-level managers. It's literally the CEOs, CFOs, C-suite execs, high-level VPs that you're interacting with on a day-to-day basis as an analyst, associate, or just a few years max out of college. So you get
2:39:59
a ton of super, super really great exposure. I've been on calls with CEOs and CFOs and heard them literally thinking about acquiring different types of companies, their thoughts on like negotiating, and then just talking through deals. And you just are a sponge when you're that young and just new to banking. And you're just like gathering and receiving so much information about finance, the industry and etc. Right. So I think what most people should probably do is take something
2:40:27
from this answer here, like I actually suggest to a lot of candidates I work with to kind of like steal this from me, where you can say that it doesn't have to be an MD once told me, but you know, I was a former banker. So you could say that banker once told me something that really stuck with me, which was that clients come to banks during their most important historical milestones. And this leads to working with C-suite execs, et cetera, et cetera, like all these things I mentioned.
2:40:48
And the reason I think that this is a really good portion to add to your answer is because it is really, really true. It's a clear example that you have actually spoken to bankers and know what the actual work is like. And so that's why I think this is a great thing to add along to your answer and almost anyone can. So I wanted to kind of double click on that last paragraph there. And this hopefully you see when you put everything together shows something
2:41:13
personal about me, talks about somewhat of a more cookie cutter reason of why I want to do banking for the technical skills, but it's still true to my story and narrative. And then lastly, it shows that I've done a lot of research into banking. And I cap it off at the very end about like why I'd be interested in joining that specific firm. So these are my tips and advice for the why banking question.
2:41:35
You are also talking a bit about the why Evercore question. And you don't have to give like an interview answer in any or anything like that. But from your experience, you know, having worked at the firm for two years, what are some things about Evercore that if you now looking back, like, again, I don't need like an interview answer, but more so like, what are the great things that you found about working at the firm? I came into work every single day knowing I will not be the smartest person
2:42:05
in any room. And that goes for my classmates. That goes for my bosses.
2:42:11
You know, I was fortunate enough to work under Jonathan Nee, who wrote The Accidental Investment Banker. And so these are people that have built the industry and to get to interact with them and everyone at Evercore, I would say broadly, is we started out very small. We sort of helped found the whole boutique model. And so you have to invest a lot in your people if they are your number one resource. We don't have a balance sheet. We can't
2:42:36
rely on that. We have to rely on pure intellectual capacity. And that still is true at the firm. They invest a ton in their analysts and associates as well and so on and so forth. But in my experience, I felt like I had the support of the entire firm, certainly my team, but even folks across the firm. And the internship is generalist, so you get to see that in action because you're working across a number of teams.
2:43:02
And I also saw the pride that people take in their work. There's a level of excellence that I have folks and friends that work at other banks, and I don't want to smear them or in any way say that they're not excellent. But I would like to think that just the level of rigor that we experienced at Evercore was unique. And I would think we're better for it because it teaches you how to never take okay for good enough. You want to be excellent in all you do.
2:43:35
But at the same time, everyone is quite personable. And, you know, there's a you mentioned how people watch movies and they might see bankers that used to be professional sports players and they think it's a cutthroat environment and it's going to be a bunch of American psychos. And that was anything but Evercore. You know, everyone is well balanced and they had interesting lives prior to this job and they are happy to be your friends and you can hang out with them outside of the office.
2:44:02
And so if I had to sort of go through the recruiting process all over again, I would love to end up back at Evercore. I think it was a fantastic place to start. And, you know, certainly there are horror stories from banking, but I can't, I'm not one of them. And I'm fortunate for that. You were talking a little bit throughout that answer about how you felt like the firm really invested in you. And so could you share a little bit more about that? Yeah sure.
2:44:26
You're paired with an official mentor, you're day one during the internship and then during full time as well. In my team specifically, we would have 30 minute breakfasts, you know, with every partner on team on a rotating fashion. So you get to really meet the people that are assigning you work. I would say that the firm broadly is trying very hard to make sure that analysts are seen and heard and they're, you know, the whole industry is going through sort of a tough moment when it comes to
2:44:55
overworking and seeing how best to respond to that. And I would say we have been very front footed or Abercore has been front footed about tracking hours and making sure that analysts are, you know, sounding the alarms when need be. And staffers have been doing a good job of essentially getting a grasp of what is happening and where the real hours being worked. But also just and this is sort of harder to maybe put into tangible experiences. But, you know, on my team,
2:45:21
I was fortunate enough that my second year, so the analysts that were there when I came in, were willing to spend all the time I needed to make sure I'm up to speed. Obviously, you have to, you have to be competent. If I was incompetent, I couldn't do the job, they would quickly lose patience. But it's, you know, you are now here, you've made it through the internship, you got the return offer. So every person that I worked with, wanted to make sure that I am getting it,
2:45:46
and that I am succeeding without too much struggle. There were certainly situations where I was alone against the problem, and you have to figure it out on your own. And it's one of the traits that banking is known for. But I would say 85, 90% of my experience was shared with someone else that is interested in my success. And then I passed it on to, to my first year. So I saw a class sort of grow up under me. And it was, it was obvious, it was a no brainer to spend the time with them and
2:46:14
to be invested in their success, because they will then carry on the torch. And it was done for me. And so it's culture of caring for each other and wanting to make sure that in this very difficult job you know the people are not being difficult and we're making it as smooth as possible for each other got it yeah and i will say that is not something i had a jpm because we weren't given
2:46:37
that maybe interns were given like mentors but actually for my group at least we were really small so i guess like it was it's not part of us our group culture for that reason maybe because everyone kind of helped each other a little bit here and there but i know for a lot of the groups at jpm i don't i don't think you're right on day one like giving a mentor who like checks in on you and all of that um so yeah i do think that there i've heard a lot of good things about every course
2:47:06
culture and so that's why i was a little bit curious about it was also curious just about a small thing about like um do you guys have like work from home on fridays or anything or like perks that were good as well. So I don't know if it's going to change in the future, but for now we are four days in the office, Fridays from home. You get your dinner stipend, your Ubers after certain hours.
2:47:31
I would say the teams are very understanding of personal situations. And so we've had folks travel and continue to work even though they might've been abroad or somewhere else in the country because they had situations that demanded it. And I would also say, you know, it's team specific. So my experience might be different from someone else at Evercore. And certainly within a class of 60 analysts, there will be those that had great experiences and those that might not repeat their experience.
2:48:03
But I would say the firm is overall understanding that we are still people and we need certain barriers and guardrails. And so even on the work-life front, concepts like protected Saturdays, managers had to get permission before teams could work Saturdays. And again, if you did work, you tracked all your hours. And so I had HR call me at some point after I had worked a number of Saturdays saying, are you okay? And is there anything you need us to do?
2:48:29
Because we understand it might not be the easiest thing to, I don't know, vouch for yourself. So again, banking gets a difficult rap because it's the same as net promoter scores. You know, the people that are really satisfied will tell you about it and the people that really hate it will tell you about it. And the quiet middle is there, but you don't know if it's a perfect distribution or if the people that hate it are 1% and they're just very loud.
2:48:56
I would like to think that from what I've seen and my folks in a class of 60, we were mostly okay. And the firm does a lot to try and make sure that you stay okay. Let's now talk about resume related questions, which are 100% going to be asked during your recruiting processes at banks. So in terms of these and how to approach, that's first thing important is that you know your resume. And I know this sounds very obvious, but I can't tell you the number of times when I've
2:49:25
asked questions during mock interviews or real interviews, where I ask simple questions about things people have worked on. And then it seems like they are really, really struggling because they don't remember since it's from so long ago, or maybe it's something that they like slightly fabricated or something like that. Or as I dig in more and more, they're just not prepared. So next, be honest. It's okay to polish some small things here and there that are on your resume, but
2:49:49
really easy to tell if you're just totally BSing everything. So really recommend you be as honest as possible. Be organized. You're going to see from the answers and the guidance that I give in the next few slides that is very, very important that you answer in a structured manner, ending with a meaningful takeaway. Usually it's like what you did, the story and like what kind of actions you took. And then lastly, the important things that you learned or skills you develop.
2:50:15
And then last, tell stories. You'll often be given a chance to tell a story that portrays your professional quality. So when they ask something like, can you tell me about a challenge you faced at this most recent internship that you had. That's exactly a time for you to be able to tell a story about a challenge, as opposed to just kind of mentioning the challenge that you faced and that being it, right?
2:50:35
You always want to think one step beyond your interviewer and answer their question directly, but at the same time, give them more if you possibly can. So one more tip about approaching before we go into example answer is when you think about telling stories, it's very important that you build the suspense. So this you may remember this from back in the day when you're in elementary school and you're like writing classes or something like that. You begin with like what happened, right?
2:51:01
The exposition and the introduction of the conflict. Then you have rising action where you build all the suspense and it leads to the climax, which is where you kind of resolved everything and like what you learned. So when telling stories, it's really important that you build the suspense and the drama, just like you're telling your friend about a crazy Netflix show you watched or some kind of movie. You don't tell them like, oh, yeah, the character did this, this, this, this.
2:51:26
And I mean, like nothing really big happened, right? You're really trying to sell the movie or show or something crazy happened. You build up the suspense and then you hit them at the very end with the climax. Right. So that's what I also want you to kind of think about as you're coming up with your own stories. And I've incorporated them in all of the story related answers that we're going to go through in the remaining videos.
2:51:49
So tell me about your experience at this firm question or like your previous internship. All of that is probably the most common question that's asked. And because all resumes are very, very different, I can't really go into all the different types of questions that are asked about resumes. So we're just going to only really go through this one. But I'm going to go through two different examples that will be helpful for you as you
2:52:08
think about how you should talk about your own experiences when you're asked about your resume. So the method I want you to kind of think about in terms of your structure are three steps. explain what the firm does or your role if you need to explain what your firm does. Then what projects did you work on? What actions did you take? And then what was the outcome and what did you learn from the experience? So people also know probably like the star method or the start method.
2:52:35
I like the star is situation, task, action, result. But I think that the middle part of the task and action can really just be combined. I think it's easier to think about three parts instead of four. And then so start is pretty much what I think is a little bit better, but situation, task, action, result, and then takeaway. So that's pretty much what the three step method I'm suggesting is. So situation, action and result, like what you did. And then lastly, the outcome,
2:53:01
key takeaway, what you learned from the experience. So tip is to pick one key story and one to two key lessons or skills that you picked up from the experience. I wouldn't try to go through more than one story because you again, you want to answer everything within 60 to 90 seconds. As a bonus, if you can explain how the experience solidified your interest in banking further, then that makes the answer even better. Unless you're a lateral and you're already working at a bank and you don't
2:53:26
need to explain that you are interested in banking because you're already in banking, right? So it's pretty clear at that point. So here's a question. Tell me about a challenge during your last internship. During my last internship at Capital Partners, a small boutique investment bank, I was excited to gain hands-on experience, but I quickly realized how lean the team was.
2:53:42
Just two weeks in, one of the full-time analysts unexpectedly left and suddenly I was pulled into a live sales side deal that was heating up fast. So situation, at first I was overwhelmed, juggling the presentation, maintaining the tracker for buyers and spreading comps for the first time, all while trying not to mess up basic formatting.
2:53:59
On one of the nights, the associate asked if I could make adjustments to the model and re-output the relevant pages for meeting the next morning, which we got done together at 4am. So again, this is kind of like the action and the result. This experience taught me that I learned best by doing. Being thrown into the deep end forced me to figure out things quickly, and I realized I enjoyed that kind of intensity.
2:54:20
It was great to experience how much responsibility junior bankers can take on when they show they're dependable. And even as an intern, I felt like a real contributor to the team. I feel like I got a small but real taste of what banking is like, and it confirmed that I want to be in an environment where I'm challenged every day and constantly pushed to grow.
2:54:36
So this last part is, as I mentioned in the previous slide, where you can double click on saying like, you know, this experience really showed me why I want to be in banking. Where you can add things like that, I think is a good way to round out your answer. So as you can see, the structure hopefully is very clear to you. Situation at the beginning, action results and what happened. And then lastly, key takeaway, skills you developed, what you learned.
2:54:58
Let's now go into story related questions, which are one of the most important parts of the investment banking recruiting process for behaviorals. And in terms of how to approach first off, when it comes to brainstorming, make sure again to really think about all the important moments of your life.
2:55:15
Do all the brainstorming activities that I mentioned earlier on in this module, because that'll really help you prepare for these questions that we're going to go through for the rest of these videos that are remaining. And then when it comes to actual questions that are asked, a lot of times the bankers like to kind of mix up the question.
2:55:32
So instead of just purely asking, tell me about a time you worked in a team, they may ask something like, tell me about a time you incorporated a lot of different perspectives when you're making a challenging decision in your past internship or throughout your life. And so a lot of times the best approach is not trying to come up with an answer for every single potential question because that's really literally impossible.
2:55:55
But instead, have basically a bank of stories that you can kind of just have as a Rolodex in a sense and just have in the back of your mind and tailor whatever story you think makes most sense or the question that's being asked. And this will be a lot more apparent when we go through the actual individual questions, because what I'm going to do is go through some of the common kind of topics of questions that are asked like teamwork, leadership, failure, ethical dilemma.
2:56:21
And then I'm going to provide you a sample answer and then provide you with a list of other questions that could be asked that you could use the same story for. But what's really important is that at the very end or throughout the entire answer, actually, you want to tailor it to the question that's being asked.
2:56:36
So if you're asked a question about just teamwork versus incorporating a lot of different perspectives, you may use the same story, but you want to use language that's asked in the question about how you were able to, for that second type of question, incorporate a lot of different perspectives and talk about that a little bit more as opposed to for just a pure teamwork related one. That might be totally different.
2:56:57
You may not have to talk about how you incorporated different perspectives, even though it's pretty much the same story. And also at the very end, you might want to change your takeaway and the key lesson learned. I'm kind of going into the three-step method, which we talked about earlier on as well already, but it's worth repeating for the story related questions as well. So first step is to explain the context.
2:57:19
So introduce the situation, briefly explain the task, what you were doing, then describe what you did, what specific actions you took. Did you step up as a leader in any way? Like what exactly did you do? And then the result, what was the outcome of the situation? What did you learn? What's the key takeaway? So as I had previously mentioned before, a lot of people think of the star method, situation task action result. But I think the task action part can just be combined into one.
2:57:43
Easier if you just think about it in three steps instead of four steps. And then next, again, I talked about this earlier on in the resume related questions, but I think it's worth repeating because it's super, super important. When you're telling stories, you don't want to just kind of talk about it in a very flat way where you're not building any suspense or any kind of drama or anything like that. When telling stories, you literally want to build up the suspense
2:58:07
and the drama like you're telling your friend about a crazy Netflix show or some kind of movie. You want to provide the, if you look at this on the left-hand side here, exposition and the start of the conflict, like what exactly was happening and then the rising action all the way to the climax. That's like what you did and all of the suspense, like building up to that key pivotal moment where you really took action and then end with the following action and resolution.
2:58:30
You know, what did you learn? What did you take away? What skills were you able to gain from that experience? So that's how you approach the story related questions. The first story question I want to discuss is the most common one, which is just generally about tell me about a time you worked in a team. And so I'm going to go over some tips and then give you a sample answer. So when you're answering this type of question, you want to talk about an obstacle your team
2:58:51
faced and how you contributed to overcoming it. And the focus and key really here is about what did you contribute? It's not so much about how effective your team was. it's really important to explain what you specifically did. I know that sounds very obvious, but there are a lot of times where I've heard candidates talk too much about what the team did as opposed to what you specifically contributed because that's what's most important. Next, focus on how you collaborated well with others
2:59:16
and the positive results that came out of it. Again, seems kind of obvious, but important thing to kind of double click on because it's really important to show that you were able to collaborate well with others and work well because in banking, you're always going to be working on a deal team. It's not some kind of like engineering job where you can just kind of code on your own and that's it. You're always working on with a team or every single deal that you're working on, every single
2:59:40
pitch bug. And you are going to be working with various different teams across various different deals, a lot of different MDs, VPs, associates, et cetera. Next, end with a key lesson you learned and optionally how it relates to banking. So usually for behaviorals, you're not going to be asked too many situation related questions because especially for first rounds, you're going to be asked a few behaviorals. Usually they're
3:00:01
going to be telling me about yourself, why banking, why this firm? And then maybe there will be time for one kind of situational question. And in higher views and digital interviews, you're going to be asked a lot of like these team related or authority related questions. The reason I'm saying this is because at the very end, it is great if you can talk about how what you learned and the situation, you know, really either enforced your interest in banking or has helped you build skills that will
3:00:25
be good for banking. When you're in the first round interview and higher views, then I think it's good to add that part about how it's related to banking. But then when it comes to a super day, and let's say you're asked like multiple situational related questions, you don't necessarily always need to tie it back to banking at the end because that kind of seems kind of repetitive. But here and there, for the most part, at least for that first situational question you're
3:00:46
asked, I think it is good to add a comment about how what you learned relates to banking. So you'll see that in the sample answer for this one and the other related questions or the other story questions, I should say. Last quick reminder is to avoid criticizing other teammates. You don't want to make it sound like I was the only star and I was able to do everything and everyone else sucked. Obviously, you don't want to be putting others down because, again, you're going to be
3:01:10
working on a team and no one wants to work with someone who's putting others down. And then the last tip is I've heard a million times candidates talk about how they were in college or working on subtype of student project for like a class assignment. And then someone is not pulling their weight for whatever reason. You go talk to them because you want to see what's up. And then you figure out that they're dealing with something. And then you guys like work together, able to
3:01:33
finish the assignment, do well in the presentation, etc. And that is like the most boring type of story that you can possibly provide. It's very cookie cutter. Every candidate can talk about something like that. So I'd really try to avoid student group projects or this team related question if you can, because I think it's the easiest one that almost every candidate thinks about first, but it's the most boring one. And so I would try to stay away from them. So here's an
3:01:56
example of one that's not student group project related. So you can kind of see what kind of experiences you can talk about. So one experience that stands out was on my club basketball team. We had a teammate who was extremely talented, but had serious anger issues. Anytime someone made a mistake, he'd yell or shut down emotionally and teammates started avoiding passing to him, which hurt team chemistry and performance. Everyone knew it was an issue, but no one wanted to confront him.
3:02:17
and I was scared to as well, but I tried a different approach. I asked him to shoot around before practice and got to know him off the court. Once we had some report, I brought up how the team was feeling and asked how he thought things were going. He admitted he felt like he was carrying the team and that others didn't care as much. What gave me the chance to explain how his reactions were affecting the team and he was actually really receptive. Things didn't magically get better right away,
3:02:40
but he made an effort to be more composed and the team started trusting him again. We ended up making the finals that season. I think a big part of that was restoring that trust and communication. Biggest lesson I took was that sometimes the best way to lead is by listening first. Banking where you're often working with strong personalities under pressure, being able to keep the team running smoothly is just as important as the technical side. And I hope to bring that ability to my deal teams.
3:03:02
So for this, you can see that it's totally unrelated to like a student group project. It is honestly kind of like a similar structure where it's someone who was having like an issue. And a lot of times it's totally fine to talk about that. I'm just saying try to avoid the student group project type of story unless you have like a really, really good one in a very unique circumstance or situation.
3:03:22
And then the other things I want to mention about this answer is at the very end, I mentioned about bringing out a key takeaway and relating it to banking. So this last paragraph here is an example where just for a few sentences, you're bringing everything home and reminding the interviewer that you are a good fit for banking. And again, it's OK to do this, like maybe with each interviewer. But I do think that sometimes when you're talking about it a little bit too much.
3:03:46
So let's say you're asked five situational questions in an interview. Maybe you can talk about like how everything's related to banking like two or three times. You don't need to do it all five times, I guess what I'm saying. In a first round interview or in digital interviews, though, you're not going to be asked a ton of situational questions. So I would add that last portion about how everything's related to banking. So for this story, you can use it for all these other types of questions.
3:04:08
So a conflict and how you resolved it. I made a difficult decision. Like you can talk about how approaching that teammate who had a lot of anger issues was something that was difficult for you. Right. Or have you ever had to work with someone difficult? Have you ever taken on a leadership role without having formal authority? So you don't necessarily have any authority in a basketball team, right? You're all a team and it's very flat. So that story could be an answer for that one.
3:04:31
Tell me about a time you had to give constructive feedback. And then what is your greatest strength? So this last one is, I think, a good example to talk about in terms of how you can mold your story to the question. Because what is your greatest strength? The story I just told, we don't really talk about a specific strength, right?
3:04:47
But you can talk about how you maybe think your emotional intelligence is your greatest strength or your ability to work with others or to be able to be comfortable with confrontation in a team setting. Those are different strengths you can talk about and you can use that story to really back up your answer for this question. So these are my tips for the very common question of tell me about a time you worked in a team.
3:05:10
So now you know how to crush behaviorals, but I know you may be watching this thinking, this is all really helpful, but I'm worried about putting it all together. Or I wish I could get feedback on my specific situation. That is exactly why I created the Banking Accelerator, my mentorship program where I work directly with a small group of students who are serious about breaking into banking and want one-on-one guidance. In the program, you'll get matched with a coach that matches your
3:05:37
background and career goals, weekly group calls with me where you can ask questions about your specific needs, a video course with over 30 hours of content and Excel exercises for technicals, a question bank with over 500 questions asked in real banking interviews, and basically everything you need for the banking recruiting process. I only work with a small group because that's the only way I can give everyone the personal attention that they need and so if you're interested check out
3:06:03
the program in this video's description. With that said now that you've got networking and behaviorals down it's now time for technicals which is a crucial component of banking recruiting and the way candidates are truly differentiated from one another. The candidates who are very technically sound are nearly 100% of the time the most impressive ones and that's my goal for you. Throughout these next three parts we'll be going over the most important banking technical topics
3:06:28
up starting with accounting which is the language of finance. Also be sure to download and review my cheat sheet with the most commonly asked technical questions and exactly how I would answer them word for word in the resource pack which you can find in this video's description.
3:06:45
Let's get things started with the three statements and a brief overview of what we're going to be discussing. So first of all why is accounting important in investment banking? First accounting is just the language of finance. And if you want to broaden it, the language of business in general, so much of a company's financial health is really done through the language of accounting. And so it's super, super important in that aspect. Next, the three statements are used all the time for
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modeling. I can't tell you the number of times when I was at the desk in banking, having to pour through and look through financial statements and look through company models that had the three statements in order to build financial models, do valuation analysis and etc. And then lastly, accounting is used very specifically in banking and also in banking interviews. So if you took any accounting classes before, you might have done those like T journal entries and stuff like that.
3:07:35
None of that is required or even really quite frankly useful. The theory behind it is but not exactly how you apply it in the real world in banking. And also for banking interviews, there are a very specific way that questions are asked. And so basically throughout this entire module, I just want to go through exactly what you need to know for accounting in banking. Next, some kind of overall guidance that I think is super important is just knowing what GAAP and IFRS
3:08:04
are. So the Securities Exchange Commission, SEC, authorizes the Financial Accounting Standards Board to determine U.S. accounting rules known as the Generally Accepted Accounting Principles gap throughout the module. You're going to hear me talk a lot about gap versus non gap here and there. And gap is basically imagine if you had a textbook of rules of this is what your books need to look like. That's basically what gap is. And then we have the International Accounting Standards
3:08:34
Board, which sets accounting standards called the International Financial Reporting Standards. This is more for everyone outside of U.S. essentially. And these rules are widely adopted in Europe, Asia, South America and more. And over the past, let's call it decade or so, there's been a convergence of a lot of GAAP and IFRS rules that have kind of like merged. And so there's a lot of similarities between the two. There are some small differences here and there,
3:09:00
but basically throughout this entire module, most of everything will be still applicable to you regardless of what kind of country you're in right now. So briefly going over the three statements and what we're going to discuss. So the income statement, this is revenues, expenses, and profits over a period of time. Very important note that the income statement is over a period of time. Cash flow statement is changing cash based on operational investing and financing activities
3:09:26
over another period of time. And then balance sheet is assets, liabilities, and equity at a snapshot in time. So this is like if you were to look at your bank account, you're going to log into Chase or MX or whatever it is. And then you find that you have, let's say $10,000 in your checking account as of today, right? That's just a snapshot in time. And then we're going to talk about how they're all connected because all three of the financial statements work together and you can't
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actually really affect one line item without affecting at least two of the financial statements in a lot of situation. And it's actually one line item will affect all three, but at the very least two. So that's what we're going to be going over. I wanted to give you a brief overview. Let's first discuss the income statement, which is a financial statement that reports a company's revenue, costs, expenses, and profits or losses over a period of time. So you have your revenue
3:10:17
minus expenses equals your profit. That is essentially what is in the income statement, but it gets, of course, a lot more complex once we dig into it more. But from a very high level standpoint, this is simply it. You have your revenue and you have all your costs. That equals your profit. Pretty simple, right? So the income statement describes how much a company earns, spends, and profits. Digging into this a little bit more, we have revenue, which is the money
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generated from the sales of goods and services. Then you subtract out your COGS, which is the direct cost of producing these goods and services. So maybe you're a company selling t-shirts. And so your revenue would be when you sell t-shirts, COGS, maybe the cost of the actual fabric, the cost of the tags on the shirt, all those little tiny costs for making the t-shirt before you actually sell it. Those are your COGS or your cost of goods sold. And then you subtract out your operational
3:11:09
expenses or also called your operating expenses. These are costs that help you maintain the business. So that could mean the rent that you have, wages you need to pay to employees and etc. Also interest in taxes. And then that gets you to your net income. But this is the money remaining after all costs and expenses are paid. A lot of you may have already taken accounting classes and already know this stuff. So let's go into things a little bit deeper as we discuss
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this section even more. So one thing I wanted to just show you to kind of visualize what we just talked about is this little graphic that I'm about to show you. So let's say you have revenue and that's your green bar. Let's say it represents something like $100. Then you have to subtract out what's going to be in red. So you subtract out the COGS. Let's say that's $20. Now you have $80 in gross profit, right? The amount that you have is shrinking. Then you subtract out your operating
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expenses. Let's say that's $30. So now your operating income is at 50. And then interest in taxes, let's say that's $25. And then your net income is at 25. So basically that green bar that started with 100 shrinks down all the way to 25 because of all of these expenses that you need to pay off. And that gets you to your net income, aka what most people call your profit. But profit is not the same thing as exactly how much cash you're generating, which is what we're going to
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go through a lot in the next few sections of this module. But I wanted to kind of give you that overview with that graphic because I thought it'd be kind of helpful. The next thing I want to discuss is something that you should memorize for your investment banking interviews. So when a banker asks you, you walk me through the line items in an income statement, this is pretty much what you want to say. Start off with your revenue, subtract out your cost of goods sold to get you
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to your gross profit. Then you subtract out your operating expenses, which gets you to your EBIT, also your operating income. Then you subtract out your interest and taxes to get to your net income. And just so you know, a lot of times investors, people in finance will call your revenue your top line and then your net income the bottom line. I think that's fairly intuitive as to why. So I wanted to also show you some real life examples of what income statements look like,
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because I've always found that looking at them is very different than like if you look at a textbook or when someone has created one, because there are some differences. So on the left here is Apple. You can see they've broken things down in their revenue to products and services, and then cost of sales or cost of goods sold also into products or services. So you can calculate your gross profit for each of the different types of products that they sell
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or into their products and services, basically. And then you have your operating expenses, which for Apple, they have their R&D, selling general and administrative, just two line items. They've kind of summed into line items a ton of different costs. And then also that's true for their products, right? As you probably know, Apple has iPhone, MacBooks, AirPods, like all of these different things. And all of that is just in products.
3:14:05
Then you have your operating income and then other income expenses, taxes, and then your net income. So this is what a real income statement really looks like. And then you can see Coca-Cola on the right. So they have just revenue, then cost of goods sold, gross profit, just SG&A, other operating charges, and then operating income, interest, income and expenses, taxes, and then net income. So you can see, I just wanted to show you basically that every company reports slightly
3:14:30
differently, but the key line items are always required, which are the ones we went over in the previous slide. And it's just important to know this because when you are actually going through financial statements in the future, whether you're at a bank or you're just like kind of studying, you'll notice when you actually look at financial statements of different companies, they're very different from one another, but they all kind of really point towards the same thing.
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So that's really the brief overview of the income statement. Let's now go into income statement rules, which is going to be extremely important for you to really pay attention to. So first rule is that whatever line item you're thinking about putting into the income statement, it must 100 percent correspond to the income statements period. Remember, in the overview of the three statements, I mentioned that the income statement is over a period of time.
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So let's call it January 1st, 2026 to January 31st, 2026. Over a period of time, the income statement shows you what your revenues, expenses, costs and profit is. So if you, let's say, are looking at the rent line item and you have the numbers or rent that goes from 2025 all the way to 2027, your income statement is only for 2025. Then your income statement should only include for that 2025 year the rent for 2025. And then for 2026, the rent for just 2026 and etc. Fairly intuitive.
3:15:54
I think basically, you know, anything that you want to consider putting on the income statement needs to 100% be within that period of the income statement. Last thing I'll mention for this is that it can be a portion, right? So if you have wages for just three months out of the year, but your income statement is for that full year, then, of course, those wages for just those three months can be included on that income statement.
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Next, the second rule is that the line item must affect the company's taxes, which eventually affects net income. So if the line item goes straight to equity, such as dividends or liabilities, such as debt repayment, then the item does not appear on the income statement. Now, you may not know exactly what dividends are and debt repayment for companies, exactly how that works with the balance sheet and all that stuff if you're new to the financial statements.
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But to kind of give you more of an intuitive example, let's say that for your own personal taxes, right, and you're thinking about yourself as a company in a sense. Let's say you make $100,000 a year and then for your normal kind of costs, you have any rent that you need to pay, food that you need to eat, utilities you need to pay, taxes and interest payments to your debt.
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These are kind of just regular things that you need to pay off in order to get to a profit number to figure out how much am I earning after all these kind of costs and expenses. Right now, when we think about something like debt repayment, let's say you have $50,000 in loans from college. Then when you think about on a year to year basis, you know, what exactly am I earning?
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And kind of from my quote unquote normal operations of going to my job and paying off all these kind of normal operational expenses. What am I earning when you are paying off your debt, like your student loans? That's maybe one month you decide I'm going to pay off $10,000. Another month you pay off $2,000. It's very lumpy and it's not really something that's continuous throughout your life, right? Eventually, once you pay off those student loans, you're not going to have them anymore.
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And so there are a bunch of these kinds of line items such as debt repayment and dividends, which is when companies pay their equity shareholders a fixed payment based on the number of shares. It could be like five cents a share or like one dollar per share, which is a lot. But basically, the point is there are a lot of these different line items that don't affect the company's taxes and net income because maybe they're non-operational. Maybe they're just more
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have to do with funding, etc. We're going to go through this a lot as we go through the three statements. But basically, the rule number two is that any line item must affect the company's taxes or net income in order to be included. Last but not least, the line item must be a revenue, expense, gain or loss. So revenues and expenses tend to be core operating items, but also include general business items such as interest expense. I think this is a little bit
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more intuitive, like revenue and cost of goods sold and your operating expenses, your interest expense, like all of this stuff, I think makes kind of intuitive sense, right? Gains and losses. These are something we're going to be going into a little bit more, but these are a little bit more non-core items, so non-core operational items. So this could be any times you sell an asset, lawsuit settlements, currency fluctuations. These need to be reported somewhere. And even though
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they're more one time and lumpy, they do represent revenue in a sense, right? An example would be something like when you are reporting your own personal taxes, any capital gains or losses that you need to report, that's kind of like what gains or losses are. You aren't going to have the same kind of trend in capital gains or losses each year, right? There might be times when you're up a lot or down a lot or in the middle. And companies in a similar way also need to report
3:19:26
their gains and losses in that kind of way. So again, something to stress is no debt repayments, dividends, capital expenditures, and etc. These are very, very different from gains or losses. So they should not be included in your income statement. Like debt repayments, that is not a loss, right? You didn't sell anything and then have that lose on your debt repayment, right? You're just paying down your debt. Dividends, also not a loss. It's also not an expense. Like dividends
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are when you're paying your shareholders a fixed amount per the number of shares they have. It's like you're expensing it because of the core operations of business. And it's not a loss because it's like a decision that the company is making. Capital expenditures, a line item we'll go through later is when you're buying property and equipment, such as if you buy a car, right? These kinds of capital expenditures, how I'd call them, these do not fit within just one period of
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an income statement. Usually it needs to be depreciated over time. I'm kind of going out of scope of this slide, but just wanted to comment on these things in case you're kind of already familiar with these things, but these are the three rules for the income statements. Every line item must follow these three rules. So in terms of what appears and doesn't appear. So what you do always see are these line items here. And you can see that beforehand, when we talked about how to walk
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a banker through an income statement, you know, revenue minus cost of goods sold, it's your gross profit, subtract OPEX, EBIT, subtract interest and taxes is your income. That's the very simplified version. When you are thinking about an income statement, there's actually a lot more that's incorporated and embedded into a lot of line items that are just overly simplified. So for example, you always pretty much will have your revenue and COGS and OPEX, but there's also depreciation,
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amortization, stock-based compensation, which are embedded into a lot of these different line items. Your depreciation and amortization is either embedded in your COGS or your operating expenses, stock-based compensation, usually in your OPEX. And then also within revenue and COGS, there's a ton of different line items. So when you actually look inside a corporation, and let's say we're able to peek into the Excel spreadsheet of the financial planning and analysis division, like
3:21:32
into someone's Excel, you'll see that their revenue line item may be summed up by like, this year we earned 1 million in revenue. You're actually going to see a ton of different products and services actually feed to that, right? And same thing for COGS, your operating expenses, a lot of different things. But the most common ones that are tested on in banking that are embedded are your depreciation, amortization, sometimes your stock-based comp. And then you
3:21:57
have your interest expense for any debt that you have, gains and losses, which we kind of just talked about, write-downs, which is slightly more of an advanced topic we'll discuss later. Then you have your other income and expenses, taxes and unit income. So these things always appear. And then this isn't an exhaustive list, but a list that I thought would be helpful for you to refer to of ones that do not correspond to the full period. They don't maybe affect net income
3:22:22
and so they never appear on the income statement. These include your capital expenditures, which is your purchase of property and equipment, purchasing or selling of investments and plant property and equipment. So when you sell your investments, you actually do have capital that actually comes into the company and you might actually report the gains. But in terms of that entire chunk of money that you may have received from selling an investment, you would not report
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that on the income statement. And as I mentioned before, dividends, issuing or repaying debt or shares, changes to balance sheet items such as cash, debt, accounts receivable, accounts payable, etc. All of this will be very, very apparent the more and more you dig into this module and go through the other three statements, how they connect and then the advanced topics. So next thing I want to discuss is super, super important accrual accounting. So this is not just for the
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income statement, but it does kind of most refer to the income statement. So that's why I'm including it here. But accrual accounting is used by most businesses and measures financial performance based on when things happen rather than when cash moves. And this, if you first are going through it, going to not really understand the importance of it. But this is a very, very crucial point of accounting that is tested on a lot in investment banking interviews. So I'm going to repeat that
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last part again. Accrual accounting is based on when things happen rather than when cash moves. So what does this even mean, right? So accrual accounting follows two main rules, which is revenue recognition principle and then the matching principle. And that really is going to explain the whole when things happen versus when cash moves. So under the revenue recognition principle, you record revenue when the revenue is earned. So your good or service is delivered. So let's say that I
3:24:01
have a t-shirt company and I sold this t-shirt for $50, but for whatever reason, the client has not yet paid me, right? So the money didn't go through or whatever. I'm just selling in bulk and then they haven't yet paid me. But then in that case, when I've actually delivered the goods and services, that's when I can actually recognize revenue because I've delivered the goods and it's highly likely that I'm going to actually receive my money. So let's say I'm modifying this example
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a little bit. Let's say I'm a t-shirt manufacturer. I've delivered $100,000 worth of blank t-shirts to a company that's going to print on them, etc. So I've delivered $100,000 worth. I can record that as revenue, but maybe that client is not going to actually pay me until one month later. And I would have to make all these different adjustments to my balance sheet and stuff like that in that sense. But basically what I'm saying is, even though I didn't yet receive the cash of $100,000,
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it hasn't hit my bank account yet, I can still record revenue. And that's what the when things happen versus when cash moves. That's what I'm talking about here for accrual accounting. So sum it up. Whenever revenue is earned, good or services are delivered and realized, either cash is received or realizable, high certainty. So maybe you really trust that that client is going to pay you $100,000 because you've worked with them in the past. And, you know, it's a deal, right?
3:25:21
and you're going to you know that you're going to get paid, that's when you can record revenue. There's all these things that happen when maybe you have delivered your goods or services and you no longer think that they're realizable because it's something happened with the economy. The client's not going to pay you for whatever reason. Then you will have to make some adjustments. But for the most part, earned, realized or realizable, then you record your revenue.
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Here's another example. A software company that sells a $1,200 annual subscription on January 1st, 2025 would record $100 in revenue in January 31st, 2025, and then $100 a month in the rest of the year. So they may have sold the $1,200 on January 1st, 2025, and they've received the money, so they got the cash, right? But they're not allowed to actually record the revenue until they actually deliver the goods and services. So this is kind of the opposite example of the t-shirt
3:26:12
manufacturer that I talked about. This is where the t-shirt one was, I've already delivered, but I have not received the cash. This one is I've already received the cash, but I've not yet delivered the goods and services, but can't record the revenue until I actually deliver my goods and services. And if you are new to financial statements, this is going to sound like crazy to you a little bit. But once you get through the rest of the statements and see how they all kind
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of work together, you're going to see how accounts receivable and deferred revenue line items for these two examples really account for everything and get adjusted on the balance sheet, cash flow statement and income statement. Once you're able to actually either record the revenue because the goods and services are delivered or you now have actually received the cash, everything kind of changes and works together. So that's the revenue recognition principle. And then the
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matching principle is that you match expenses to revenues in the same period, even if the cash was paid earlier or later. So you don't want to have a bunch of revenue on the income statement, essentially, and not have the associated expenses just because you can record the revenue at a certain time, right? You want the revenue and expenses to show up on the income statement together because they're all related. And that's essentially what the matching principle is
3:27:24
getting to. An example is COGS, cost of goods sold is recorded when the sale happens, not when inventory is bought. So let's say you are selling plastic water bottles and you purchased a batch of $100,000 for $100,000. You spent cash on inventory, $100,000 worth. Let's say you have spent that, right? On your income statement, you're not going to yet report $100,000 in your cost of goods sold because you're not allowed to until you actually sell all those water bottles. And then
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once you do sell those water bottles, that's when you can record your cost of goods sold. So that is the matching principle. Very, very important. That kind of goes over the main important rules for the income statement. Now we kind of went through it in quite a lot of detail, but super, super important that you understand them. Let's now go into the cash flow statement. And before we actually go into the statement itself, I want you to remember the phrase cash is king.
3:28:16
And it's a phrase you're going to likely come across at some point in your finance career. And what I want to really just stress is that revenue is not cash. EBIT is not cash. EBITDA is not cash. Your net income is not your cash. Only your cash is your cash. And cash, we're going to be going through this word so much throughout a lot of the different modules. And there's a lot of different ways to define cash layers.
3:28:39
Cash from your operations minus your capital expenditures, which some say is kind of your unlevered free cash flow in a sense. There's your levered free cash flow. There's free cash flow overall in general, as people talk about it. There's like proxies for free cash flow, which people use as for EBITDA and all of that. But essentially, only the actual cash you generate as a business, that is your cash, right? Your revenue, you need to subtract all these expenses, right?
3:29:06
EBIT, you need to subtract out things like your interest in taxes. EBITDA, again, you need to subtract out your interest taxes, DNA. Net income, distorted by all these non-cash expenses that are included as expenses, right? So none of that is actual cash. You have to make adjustments to your net income and whatever line item you're starting with in order to get to your true kind of change in cash or how much cash your company is actually generating.
3:29:30
And that really is kind of the purpose of the cash flow statement. So on the left here may or may not have heard of the Wu-Tang Clan, but they have a song called Dream, which is like cash rules everything around me. Again, another like way for you to kind of just remember why cash is so important. But in terms of why the cash flow statement exists, so companies may have recorded non cash revenue or expenses such as accounts receivable inventory.
3:29:53
So outside of the income statement, maybe because of accrual accounting and the matching principle. Maybe cash is being spent on things like inventory, but you can't actually record it as an expense on the income statement because you haven't yet recognized the revenue. So in that situation, you need another financial statement, which is a cash flow statement to show that you have actually spent cash on inventory because then you can see how much cash the company actually has
3:30:19
and is generating. So that's reason number one. Reason number two, there may be cash inflows and outflows that have not appeared on the income statement. So you may have things like your capital expenditures. Maybe you purchased a hundred million dollar factory, but you're not going to include that on the income statement, right? You're going to depreciate it over time. But as of today, when you first buy it, you need to include that in your cash flow statement
3:30:41
because that's where it's going to be recorded. And that's how you're going to see how much cash the company is generating over a period of time. Also, with things like that, maybe you raised a hundred million dollars in debt, but that's not part of your operating activities as a business. So you're not going to include that in your income statement. You're going to need another statement for that, which is your cash flow statement. So maybe you spent 100 million
3:31:00
in capital expenditures, you bought a factory, but you raised 100 million dollars in debt. So those two actually cancel out cash is not actually changed much in the business because maybe you did that to pay off your capex, right? And then you have the third reason, which is cash generation is the true measure of a company's value. So beyond just like recording all of this stuff and knowing how much cash a company is generating, like you have to kind of think about why is that even
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important, right? And ultimately, once we move forward with the later modules with things like your discounted cash flow and all of that, all of that is going to be based on the fundamental principle, which is that any measure of a company's value really comes from how much cash it can generate. So you have like a multinational corporation, let's say you have you're the owner of Apple and you are generating billions of dollars in cash flow a year, right? That's the
3:31:50
actual value of your company because tomorrow, regardless of the brand of Apple, if everything just flatlines and you go from generating billions of cash to next year generating zero, regardless of your branding, maybe like some other incumbent has just totally taken over your business, your value as a company, if you can't generate cash, it's going to go down to zero regardless of your past record. And history is full of this, right? All these companies in the past, like BlackBerry,
3:32:16
which was the king of smartphones, now is worth like almost zero because of Apple. So no company is safe. And the amount of cash you can actually generate is the true value of a company. Last thing I want to mention is that if you only had one of the three financial statements to measure the financial health of a company, you would always choose the cash flow statement because number one, again, cash is what's really, really important. And then as we'll go on in the later sections of this
3:32:40
topic of the cash flow statement, you'll see that there are a lot of different sections that cover the different parts of a business that give you a very holistic view from an operational perspective, from an investing perspective and financing perspective. The cash flow statement provides all of this. So let's actually go into the definition of the cash flow statement, which is a statement that reports a company's actual cash generated and spent over a period of time. Again,
3:33:05
important to recognize that this is over a period of time as opposed to a snapshot in time, which is the balance sheet. So in the cash flow statement, you'll have your operating cash flow, which is a cash generated or spent from the delivery of regular goods or services. So operating cash flow pretty much in the name, right? You're operating as a business, you're delivering your goods and services. You know, what is the actual cash spent or generated from that
3:33:28
whole part of the business? And then there's the investing cash flow. This is cash generated or spent from the purchase and sale of assets and investments. So just like as you might invest in stocks or bonds. Companies also make investments. So they make investments in marketable securities, which are like stocks and bonds. And then they also will make investments to generate more revenue in the future, right? Capital expenditures. They'll be spending money on laptops, chairs,
3:33:53
desks, factories, machinery, all this stuff in order to grow revenue in the future. That's investing cash flow. Then you have financing cash flow. This is a cash generator to spend from raising funds through debt and equity. So you might issue $100 million in debt or issue new do something like an IPO or follow an offering and then raise like $50 million. All of that is captured in the financing cash flow. And you may also do things like repay debt or issue dividends.
3:34:19
All of that is captured there as well. This is a little bit more advanced and we're going to double click on this later on. But what I do want you to also kind of keep in the back of your mind and know, or maybe you'll revisit this page later, is that your operating cash flow is affected by your assets and liabilities from the balance sheet. Your investing cash flow is your assets only affected by your assets. So as you can see in the definition, cash generated from the purchase
3:34:43
and sale of assets and investments, right? You raise $100 million in debt, it's never going to be part of your investing cash flow because it's not really an investment, right? You're fundraising and you're raising funds for your business. And then for your financing cash flow, only changes in your liabilities and equity affect your financing cash flow. So again, you can see here, raising funds through debt and equity, those are your liabilities and equity and only changes in
3:35:07
liabilities and equity will affect your financing cash flow. Your operating cash flow changes in your assets and liabilities will result in a lot of changes in your operating cash flow. So we're going to go through all this later on, but I just wanted to really, really to kind of add that in here. So you kind of get a preview for what's to come. And then all of these changes in your cash flow from these different sections ultimately lead to your net change in cash. So let's say you had
3:35:31
$100 million from operating cash flow, negative $50 million from investing cash flow, and then plus $50 million from your financing cash flow, then your total net change in cash is just $100 million. We'll now be going into the cash flow statement sections one by one, starting with the cash flow from operations. And again, this is the cash generated or spent from the delivery of regular goods and services. And what you see here is Apple's cash flow statement just from their
3:36:00
operating activities. And I just wanted to show you what a real one looks like as we discuss them, because I think it just helps really put a lot of the concepts you learn and brings it to light, right? So as you can see here, the really important thing is that cash flow from operations always starts off with your net income. So this is one key way that your cash flow statement is connected to your income statement. 100% of the time, literally the net income just flows to the top
3:36:27
of your cash flow statement. So that's one of the key aspects of your cash flow from operations. And then it adjusts for non-cash items. So we talked about in the income statement section, some key non-cash expenses, including your depreciation and amortization, share-based comp, which is your stock-based compensation. And then Apple has another section just for other, which you would have to dig into the footnotes of the financial statements to really understand what that is.
3:36:53
And then you have operational balance sheet items. So changes in your operating working capital. So you can see here accounts receivable, vendor non-trade receivables, inventories, accounts payable, and then other current and non-current assets and liabilities. And so what you see here are what's known as your changes in operating working capital, which we're going to go through in the next video in more detail.
3:37:15
But as you can see, you may have heard about some of these kinds of line items before. So accounts receivable is when you have already delivered goods and services, but not yet received the actual cash from and payment from your customers yet. And then accounts payable is when you've already received some kind of supplies from your suppliers, but you haven't yet paid them. And these are actual cash inflows and outflows.
3:37:39
We're going to discuss what all this looks like later on, but I just wanted to give you a little bit of insight as to what exactly is included in this section. And so for your cash flow from operations, all of them are really going to follow this format, net income, non-cash items, and then your changes in operating assets and liabilities. So the other thing I wanted to really point out again, which we had gone through before,
3:38:02
is that your only changes in your assets and liabilities affect your cash from operations and your cash from operations section answers the question, how much cash does the core business generate? So with your regular delivery of goods and services, what is the cash being generated? The next section in your cash flow statement is your cash from investing. And this is what is spent from the purchase and sale of assets and investments. So again, this is the cash from investing section for Apple.
3:38:30
And as you can see, it's fairly simple, right? You see purchases and sales of investments, which is purchases of marketable securities, proceeds from maturities of marketable securities, proceeds from sales of marketable securities. Marketable securities are literally just securities. So like bonds, stocks that are in the market, which you can openly kind of sell and buy. So companies all the time will be doing all these things with their cash balances and stuff.
3:38:53
They may be investing in similar things to like a high yield savings account. So they're going to be buying and purchasing kind of gives you some sense of like what's really happening. And then another very important line is capital expenditure. So this is payments for acquisition of property, plant and equipment. You'll also see at times like proceeds from sale of property, plant and equipment. because let's say Apple, for example, could sell a production facility if they wanted to or sell
3:39:17
their desks and laptops and stuff like that if they don't need them. But that is capital expenditures. We'll go over capital expenditures a lot more in the advanced topic section. But important to know only changes in assets affect your cash from investing. So things like things you won't see here are amount of debt or equity issued, any of that stuff. You can just kind of intuitively think about things like what you see here, marketable securities like stocks,
3:39:40
property and equipment, all of these things just sound like assets, right? So in cash from investing, only assets are involved. And this section answers the question, how much is being spent on long-term assets that help the business grow? Now, some things don't actually affect the growth of the business, like your purchase of marketable securities and all that stuff. But in general, this section really answers that question. Last but not least, in your cash flow statement,
3:40:03
you have your cash flow from financing, and this is cash generated or spent from debt and equity financing. So every company will need to finance itself, right? Literally every single company in the world from a lemonade stand all the way to NVIDIA or Apple, you need cash, you need money to make money, right? And where is that money coming from? And how are you repaying the people who have invested in your company? Like all of that is included in the cash flow from financing section.
3:40:29
So you can see here purchase and sale of equity related items. So payments for dividends, repurchase of common stock, like all of that stuff is related to equity. And then issuance and repayment of debt. So proceeds from issuance of term debt, repayment of debt, proceeds from commercial paper. So key takeaway really is that only debt and equity are the ways to really raise funds, right? You either put in your own money and that still is a form of equity financing,
3:40:58
or you raise money by borrowing it from someone else, or you sell shares to other investors, That's equity financing. So in all of these situations, you are really just capturing from cash fund financing as your business is operating, how are you really funding all of the operations? And so this section really captures all of that information. And what's important to know is that only changes in liabilities and equity affect your cash fund financing.
3:41:21
So you'll never see a change in asset affect your cash fund financing section. So changes in plant property and equipment or an inventory or all that stuff is not going to be included in your cash fund financing section. which answers the question, how is the business being funded and how is capital being used? Let's now talk about the third and final important financial statement, which is the balance sheet. Starting off with the definition, it's a statement that reports a company's assets,
3:41:46
liabilities, and shareholders' equity at a specific point in time, which is in quite stark contrast compared to the income statement and cash flow statement, which are over a period of time, whereas the balance sheet is more a snapshot in time. So the key aspects are assets, which are a company owns that will generate additional cash in the future. Very important that you understand this concept here that assets are resources that will generate future cash. If you have like a
3:42:12
laptop, if you have a machine, or if you have a factory or land, all of these assets can be used to ultimately produce cash in the future. Then there are liabilities, which are items that fund a business and will result in less cash in the future. Most common one to understand is like debt, right? If you raise debt, that's a liability because you need to pay it back in the future. And then there's shareholders equity, which is capital attributable to the company's owners.
3:42:36
And there's a lot of like different types of line items that we're going to go into for shareholders equity. That gets a little complicated. But the most common way of understanding shareholders equity is that in this section, you'll see when companies raise equity by issuing shares and that is included in shareholders equity. So if you raise one hundred million dollars by issuing shares, then that hundred million dollars will be included in your shareholders equity.
3:42:59
So your liabilities and your shareholders equity, these ultimately are the funding for your asset. And so all of that aside, you know, with the kind of more finance explanations, more simple way to understand assets, liability, shareholders equity is assets are what a company owns that provides value. Liabilities are what a company owes to external parties. And then shareholders equity is pretty much what the owners own after all the debts and liabilities are paid.
3:43:24
So assets minus liabilities equals your shareholders equity. What do the owners own at the end of everything. So in other words, balance sheet describes what a company owns, what it owes and what the owners own. Now, to go through an example, just to make things really crystal clear, let's say that you purchase a house for $500,000 and that is the value of the assets, right? 500K. You're in your liability side, you would have $400,000 in your mortgage. It's the
3:43:50
debt you need to pay off. And then shareholders equity, let's say that you've paid off with your down payment 20%, which is 100K. So in this really small example on your balance sheet, assets would be 500K, liabilities, 400K mortgage, shareholders equity, 100K. So as you can see here, the assets value is 500K, but you don't actually own all of that 500K until you pay off all of the liabilities. Then assets 500K would equal to zero liabilities and 500K shareholders equity,
3:44:18
and you would own the entire asset value. But the way you're actually funding the entire value of the asset is through liabilities and also equity. But that's one example. Another example is if we make things a little bit more nuanced. So let's say for your asset total is 650K, you have 500K house, 100K in Robinhood, just in personal stocks, and then you have a $50,000 car. So let's say in liabilities, you have your $400,000 in your mortgage, similar as before. And then in your
3:44:46
shareholder's equity, you have $100,000 in equity in the house and then $150,000 in after-tax earnings. So you have earned money. And what I want to really differentiate here from the previous example is in this one, you have $150,000 in after-tax earnings, which is what you used to fund the $100,000 worth of investments in Robinhood and $50,000 car. This is really, really important because later on, as we dive deeper and deeper into the balance sheet and
3:45:12
also how the statements are connected, your net income and what you earn is actually flows directly into a line item called retained earnings in your shareholders equity section. And so when I talk about, you know, liability to shareholders equity is your funding for your assets, not only just raising equity by issuing shares that funds your assets, it's also your net income. And then that is connected in your shareholders equity section. And if you kind of brought it and like
3:45:39
think a little bit more through what I've talked about before and throughout these past videos in this module, I also talked about how net income is attributable only to equity holders, right? Because you paid off your interest expense. So no longer attributable to debt holders. That also kind of flows in this concept talking about now here, where your net income flows to your shareholders equity through retained earnings and your shareholders equity has all to do with
3:46:04
your equity owners, right? So all of that kind of ties in together. So that's another example for the balance sheet. And the golden rule that you just really, really always want to remember is your assets always equal your liabilities plus equity. There cannot even be a single penny of a Assets must always equal liabilities plus equity. Make sure to remember that. And that's why they call it the balance sheet. Let's now discuss assets, which can be divided into current and non-current.
3:46:30
Current assets are assets that you expect to be liquidated and turned into cash within one year or less. And then non-current is everything beyond that. So more than one year. With examples, this gets a little bit easier to understand. So cash and cash equivalents, obviously you can use that cash within less than a year. Marketable securities. These are investments in like stocks. Securities that are in the open market, short-term investments, accounts receivable, inventory, prepaid expenses.
3:46:54
These are all things that within a year you expect to convert into cash. Note though that sometimes there are non-current versions of these line items. So there can be long-term, non-current marketable securities. There can be prepaid expenses where you've paid for expenses more than one year. So there's kind of some variability there. And then non-current assets. These are long-term investments, land property and equipment that you expect to last for multiple years.
3:47:18
intangible assets that you use for multiple years, goodwill, deferred tax assets, and equity method investments. Liabilities are fairly similar to assets since that they're broken into current and non-current, and they're really defined in a similar way. Current one year or less, non-current more than one year. And the common ones that you're going to see, and we're going to dig into them, are the revolver, current portion of long-term debt, accounts payable, crude expenses, deferred
3:47:41
revenue, interest taxes, dividends payable. Some of these can be in current or non-current, similar to assets depending on the length and use of them or timing. Non-current examples, long-term debt, lease liabilities, deferred tax liabilities, pension fund liabilities, asset retirement obligations. The last section of the balance sheet is shareholders equity, which I think is a little bit more of a tricky section because assets and liabilities are a little bit more intuitive,
3:48:06
right? Assets, things that generate money in the future, they just like feel like assets like P&E, cash, liabilities, things like debt, like, oh yeah, I need to pay in the future. It's a Shareholders equity, which is also known as the book value of equity, has all these line items that most people have not heard of and is a little bit more tricky. So let's go into it and let's make it not tricky for you, basically.
3:48:26
So shareholders equity is both a source of funding and a track record of how value has been created or lost over time for a company's owners. So let's go into what each of these kind of mean. So source of funding, if you issue shares, whether they're common shares or preferred stock, then you have your shareholders equity log. how much cash am I really earning or how much am I raising funds from issuing shares? So that's
3:48:49
what that is, positive net income or retained earnings. So there's a line item called retained earnings in your shareholders equity section that we're going to go over. That is a record of how much net income is being generated. And that can be a source of funding if net income is positive. But of course, as we have discussed, there are a lot of non-cash expenses and things like that, that don't exactly mean you're raising exactly that much in source of funding. But that is how
3:49:12
the income statement is connected to the balance sheet. And then the other parts of the balance sheet really make up for the changes in like the non-cash expenses and stuff like that, that are incorporated in the net income. Unrealized gains on investments, foreign currency, etc. These are all captured in the shareholders equity section. Then in terms of track record of value, you can look at dividends paid, you know, that really benefits shareholder, right? If they're actually
3:49:35
being paid dividends, net income and retained earnings. So retained earnings line item is a track record for how much cumulative net income that the company has earned minus dividends. So we're going to go through that later, but it's a track record essentially. And then share buybacks. So if a company has been buying back shares over time, that's usually a good sign. And so that's also a track record as well. So a lot of these things can be kind of intertwined in terms of like
3:50:00
source of funding and track record of value, but that's essentially what the purpose of the shareholder's equity section is. And another kind of important way to formula, you don't necessarily need to memorize, but a way to think about it is the amount of money raised from shareholders. So this is from issuing common or preferred stock, plus the amount retained from profits, aka your net income, minus your dividends, minus your share buybacks, essentially is
3:50:24
your shareholders equity. So that's kind of how I would overall think about it. And as we go through every common line in this section, and also as you do the Excel exercise, I think all of this will make a lot more sense. So as you can see in the bottom, I've kind of divided things into contributed capital, you know, what the company has owners have contributed themselves, earned capital, contra equity items, which actually reduce your shareholders equity, and then things
3:50:47
that just depend. So common stock at par value. So this is the legal quote unquote stated value of all common shares that have been issued and represent ownership. Our value is usually a really small number like 0.001 per share. And some people say that this is kind of an outdated practice, but all companies still have it. So you issue like a million shares and the par value is cent per share, then the common stock value will be 1 million times 1%, essentially 0.01,
3:51:15
which would be 10,000. And then your additional paid in capital, surplus capital, this is the cash shareholders paid above par value when common shares were issued. And this really important thing to note here is that the value doesn't change even if market price or shares fluctuate. When we go through the actual Excel example, it's going to be a lot more clear, but verbally, let me try to explain it to you of how these two work together. So let's say you purchased 100
3:51:38
shares, par value is one cent per share, but the amount you paid per share is $10 per share. So the common stock at par value will be 100 shares times one cent, which is one cent per share. So 100 shares times one cent would be 100 cents, so $1. The common stock is just $1. The amount of actual amount that you paid and the company has raised, though, is if it's $10 per share and 100 shares, 100 times 10, $1,000, right? The additional paid in capital is literally the total amount
3:52:06
minus your common stock par value. So in this case, it'd be a thousand minus $1. Your additional payment capital is $999. And it might seem like, why do you even do this? Again, it's a little bit outdated, but that's what additional payment capital is also called surplus capital. And the important thing to note here is that the value for your common stock and additional payment capital does not change even if market price or shares fluctuate. So even if your company, maybe I
3:52:32
purchased shares for $10 a share and now it's at $100 or $500 per share. Until new shares are issued, those numbers of like $1 in common stock, $999 in additional paid in capital, those numbers don't change. Very, very important to note that. And then there's preferred stock. This is a special class of ownership that provides shareholders with fixed dividends and priority claim over common shares. So fixed dividends, what that means is like for common stock,
3:52:54
if you are a common stock owner and you and the company pays dividends for each share that you own, that amount per dividend can fluctuate over time. They can raise it, they can lower it, they can get rid of it. Preferred stock, it's a fixed dividend that does not change over time. So maybe it's like 10 cents per preferred stock. You just are given the right to that dividend until you no longer own that preferred stock. The other important thing about preferred stock
3:53:17
is that it has priority claim over common shares. So when a company goes bankrupt and let's say it has $500 in cash and preferred stock owners have like 400 and then common stock, There's that value is like 500. The $400 in preferred stock owners, like they will be paid first and the remaining 100 will be distributed to the common stockholders. Above preferred stock is debt. So debt is paid first and then preferred stock and then common stock. But in terms of shareholders equity,
3:53:42
preferred stock is in the shareholder equity section and also includes like a preferred stock at par value, preferred stock, additional paid in capital, like separate sections as well. Then there is retained earnings. This is a super, super, super important line item attested in so many banking interviews. with accounting questions and stuff like that. Common stock, additional paid capital, preferred stock, not as common. Retained earnings, super, super, super common. And so it's important that
3:54:06
you understand what it is. It's very simple. It's your prior retained earnings plus your net income minus dividends. And if you have a company with negative net income, then your retained earnings can be negative. So when a company is first starting, their retained earnings is zero because they don't have prior retained earnings. Let's say next, the company has $100 in net income and zero and dividends, their retained earnings is now $100. Earn $200 the following year in net income,
3:54:28
then it's $100 plus $200, $300, and etc. So really, really simple, but a very key way that the income statement is connected to the balance sheet and is definitely the most important connection between the next is accumulated other comprehensive income. So this is very miscellaneous income, such as unrealized gains or losses on securities, foreign currency adjustments, and etc. These are all recorded in the shareholders equity section. And then treasury stock, this is the cost of the
3:54:55
company's shares that have been repurchased, but not retired. This reduces total equity. And that's why it's a contra account where you're literally subtracting out a value. And so that's what treasury stock is. And then non-controlling interest, this is equity not attributable to a company when it owns greater than 50%, but not the entire company. So if a company owns more than 50%, but in this case, let's call it 75% of a company. That company is required to report 100%
3:55:21
of that company it acquired, 100% of their financials as their own in their income statement, cash flow statement, balance sheet. But that 25% that's not owned, that's non-controlling interest, right? You don't own 25% of that company. And so that needs to be accounted for. There's all these different types of adjustments that do need to be made. And we're going to go over non-controlling interest a lot more in the equity and enterprise value module. Plus also I go over in the individual
3:55:45
items section of this module. So I'll explain it a little bit more as time goes on. But what you just need to know is that non-controlling interest is in the shareholders equity section. And it's when a company owns greater than 50%, but less than 100% of a company, that remaining amount is non-controlling interest. And so that pretty much wraps up the shareholders equity section.
3:56:06
All right. So now that you understand the three financial statements, the next thing you need to learn is how to talk about the value of companies through two key terms, equity and enterprise value. Beyond their simple formulas, there are a lot of ways these topics get a lot more complicated and they're super foundational for valuation. So it's very important that you watch this next section carefully. Let's now go into what equity and enterprise value are. So first off, as you can
3:56:34
kind of tell from the terminology, which have the term value, the two ways to describe the value of a company are equity value and then enterprise value. Starting off with equity value, I like to think of the analogy of buying a home. So equity value is the value of the equity you own in a home. So the down payment plus any principal payments that you've made. Let's say that you own $250,000 in terms of equity in a house and the remaining $250,000 is mortgage. So it's debt. The value of
3:57:03
your home to you is that $250,000 because if you were to sell it today, you would get $250,000 back, right? That's your equity value in the home. Compare this to enterprise value, which is the entire value of the home, equity plus the mortgage. So if you were to tell someone, hey, I'm trying to sell my home, they ask how much, then you would give them the enterprise value of $500,000, right? But if someone were to ask, oh, what's the value in the sale to you, then it would be $250,000.
3:57:30
Now, this is not going to be a perfect analogy, but it is a great way to initially first start thinking about what equity versus enterprise value means. But if we want to think about equity and enterprise value in more banking financing terms, the definition for equity value is value to only equity shareholders after all debt and obligations are paid.
3:57:49
So what's really important here is that the value to only equity shareholders. So if you own a percentage in a company, equity value, it can be calculated based on the number of shares times your share count. And based on that equity value and the number of shares you have, that's really the value for you.
3:58:05
And in terms of the second part of this definition, after all debt and obligations are paid, this doesn't mean to imply that all the debt and other obligations and other capital providers need to be paid today. It just means that everything after, let's say, hypothetically in a sale, after all the debts paid off, after you paid off preferred stock and all these other types of capital providers, that remaining value will be for equity shareholders.
3:58:29
We'll go into that a little bit later when we talk about kind of investor hierarchy. Next for enterprise value, this is the value to all capital providers, such as common equity, that preferred stock. And again, so you want to think of this as the entire house, right? It doesn't matter how you funded the purchase of the house. If you put down 100K in equity and down payment and then mortgage 400K in debt, or if you funded, let's say 400K with equity and then 100K
3:58:55
with mortgage, right? Ultimately, the total value of the house is 500K. That is your enterprise value. So when we think about the enterprise value formula, which we'll go into later, generally speaking for banking interviews and what most people say when they ask for the formula for enterprise value, they say equity value plus that plus preferred stock plus non-controlling interest minus cash. But this is a really quick overview of equity versus enterprise value. And let's dive
3:59:20
into each one of them in more detail. But the theory behind equity value is that your equity value is your market value of total assets minus your market value of total liabilities, which gets the market value of net assets, aka assets minus liabilities. This is also known as the market value of your common shareholders equity. You may be looking at assets minus liabilities. Wow, that sounds just like in your balance sheet, shareholders equity. But there's a clear
3:59:46
distinction that I want to make here. So let's go into this a bit. So equity value represents everything equity shareholders, only common stock shareholders receive after all other claims are satisfied. So after all your liabilities are satisfied, essentially. I want to really differentiate between the two equity value and shareholders equity and how they're not the same really with a few key points. So first is that preferred stock and non-controlling interests
4:00:11
are excluded. So in shareholders equity, preferred stocks in their non-controlling interest is in there. When we're talking about equity value, equity value only pertains to any claim on net assets by equity shareholders, right? So that's why the market value of total assets minus market of total liabilities is not your market value of shareholders equity, but instead something called market value of common shareholders equity. And this is going to be very important later on to
4:00:36
when we go into the business effects on value section, because we're going to refer to this a lot. That's why it's really also important to know the theory behind equity value. So in addition, the reason that equity value is not equivalent to your book value is that book value, aka shareholders equity is based on historical costs, right? If you go into any balance sheet, you go into shareholders equity, you go into common stock or even preferred stock, non-controlling interest,
4:00:59
all these things. A lot of the, and actually all parts of the balance sheet, right? Anytime you have something on the balance sheet, it's all historical technically, even if it's the day of. Think about your own checking account at a bank, right? At Chase or Bank of America or whatever your bank is. If you have $500 today and that's what it says as your cash balance today, that's historical because tomorrow it could be $502. It could be $550. It could be $1. It could be a
4:01:21
million dollars, right? So book value is all kind of based on accounting historical costs, whereas market value is based on future potential growth and risk. When you go into Robinhood or Fidelity or any kind of investing platform and buy a share of a company, you are participating in the market and thinking, I think that this company's net assets essentially and what the company has in terms of its assets, that company is going to be able to generate more and more
4:01:46
positive free cash flow in the future. And that's why I'm buying a share in this company. Market value is based all on what the company can do in the future. And so that's why there's this really big disconnect between equity value, which is all based on what the market thinks and market value versus shareholders equity, which is all really based on historical costs. In addition to that, as I said, preferred stock and non-controlling interest not included. So very, very different.
4:02:10
And another point I want to make about market value is that it's not that investors are going individually line by line into a company's different assets and liabilities. Like they're not going to PP&E, cash balance, accounts receivable, accounts payable debt and saying, we think that the market value of all of these different line items are this value. That's not really what's happening. Instead, investors will assign value to the entire company and their total
4:02:37
earning power based on a lot of different factors, whether it's the management team or the country they're in, the quality of their goods and services, competition, and of course, also historical financials as a track record, and then how all of this combines into potential earning power in the future. And so that's why the theory behind equity value is a little bit academic in the sense that it's not really how investors think about equity value, but it is important to know what equity
4:03:02
value stands for, because we're going to build upon this later on as this module continues. And then lastly, net assets include effects from both operating and non-operating assets and liabilities. This is in stark contrast to enterprise value, which takes out any non-operating noise because enterprise value is going to be all about the core operations of the business. Whereas you can see here on the left-hand side for equity value, total assets and total liabilities, right?
4:03:26
So even if it's something like cash or debt, which are non-operating assets and liabilities, these are taken into the equation for equity value. Whereas for enterprise value, you're going to see that capital structure neutral, and it's not going to be affected by non-operating assets and liabilities. Let's also dive into a little bit more of what equity value versus book value means because it's very, very important. And the two are extremely different. And I don't want you to
4:03:53
confuse the two. And let's go through what they mean with an example in numbers. So let's say a company owns 500 million in buildings, 200 in inventory, 100 in patents, and 300 million in debt. Company is trading at $1,200 million in equity value. How much more is equity value worth compared to book value? So this involves some very, very easy calculations. Total assets, you add them all together, gets you to $900. Total liabilities, $300 million. Net assets,
4:04:18
aka your shareholder's equity and your book value, that's $600 million. And so if you do these calculations, equity value over book value is 2x. So this implies that investors sees the company as two times more valuable than its net accounting assets, likely due to growth, earnings power, valuable and tangible assets, superior market position, and et cetera. And so what I really want to stress here and what's really important is that while the theory behind equity value is that
4:04:44
it's your market value of your shareholders equity, AKA your net assets, that's not exactly what investors are looking at in when they're purchasing shares, right? What they're doing in theory is saying, I believe that as each share I buy and more and more, I'm investing in the, what I believe the net assets are worth in terms of market value. But those net assets and what they can generate in the future and what kind of cash they can really generate in the future,
4:05:10
that's really what the investor is betting on. And investors are not really just looking at book value and making a lot of decisions based on that. Like how much more times book value should I be betting on this company? Because there's so much that comes into investing, right? So if a company's management team, the quality of their products and goods and services, competition, their financials, all of that stuff is going to be very, very important and incorporated.
4:05:33
And that's when an investor decides whether or not to buy shares versus them looking at book value and seeing like, should I pay 3x, 2x, 2.5x, etc. But in theory, this is what's happening. The other important points. So investors aren't going line by line with buildings, inventory, etc. and assigning a market value, but instead assess the company as a whole when determining equity value. So this is something I mentioned a little bit earlier, but it's very important, right?
4:05:56
The company is not going through every single type of asset or liability a company has and then assigning the market value of net assets. It's really assessing the company as a whole with qualitative and quantitative factors in order to get to equity value. Lastly, book value is based on historical costs, while equity value is determined on future projections. This is super, super important.
4:06:19
And I actually like to ask a question in investment banking interviews that tests for this, which is let's say you have two companies, company A and B, which have the same historical financials. Every single line in their three statements, three financial statements are exactly the same, but they have different equity values. How is that possible? Right. And the answer to it really is that there are so many other qualitative aspects that can affect the company.
4:06:45
But also a company's worth is really the ability of how much it can generate cash into the future. Because if you think about, let's say, a company like BlackBerry, which used to be dominant in the smartphone market until Apple came along, a company can be worth billions and billions of dollars. But if a company disrupts it and they lose all their customers, can't generate cash in the future, then that company is going to go down to zero.
4:07:07
And so the same thing for equity value, when investors are looking at companies, while it is important to look at track record and historicals and where trends seem to be going for financials, it's truly, truly 99% plus what's really, really important is the future of that company. How much cash can that company generate in the future?
4:07:27
And so when we bring this home and think about book value, shareholders equity, if you think about in that perspective, there's a lot of line items in there that are historical, right? And will never change. So common stock, for instance, you have your par value and then the common stock amount that was paid at time of purchase. And then that doesn't change regardless of what your share price is, right?
4:07:49
And then for the different parts of your balance sheet with your assets and liabilities, all of that is historical, right? The moment that you print it out on the balance sheet and you have all your line items, it's all historical numbers. And so book value, very, very different from equity value. Equity value is the here and now and what investors believe will happen with the company in the future, how much cash can it generate in the future and then coming up to a valuation based on that. Whereas book value is all based on historical costs.
4:08:15
So that's the difference between the two. And then when it comes to actual investment banking interviews, there are three ways to calculate equity value. The one we just discussed, net assets, market value of net assets. And then there's share price times number of shares, which get a little bit more complicated. We're going to talk about dilutive securities, which makes the number of shares portion a little bit more complicated. And then companies valuation and last round of funding or outside valuation.
4:08:39
So the second is used for public companies. And then the third is used for private companies because private companies don't have a share price. So they will have an internal number of shares, but without share price, it's not relevant anyway.
4:08:51
So what you will need to mainly know for investment banking interviews when the conversation of equity value comes up is number two, because private companies and equity value is not going to really be discussed that much in the vast majority of banking interviews. And then generally speaking, when bankers are asking about equity value in any way, there will be ways to think about, you know, market value of net assets and all of that.
4:09:12
But what they're really, for the most part, going to be getting at is the share price times number of shares. But hopefully, as you can see, it's as we go throughout this entire module, we're going to combine a lot of theory plus practical understanding. And all of this should kind of combine together and be very, very helpful for you. Last thing I want to mention for equity value, I want to show you the kind of quick and dirty way to calculate equity value.
4:09:32
So I just pulled Apple's share price from a few days ago, $213. And then I went to the company's most recent quarterly filing. And you can see on the bottom right here, the company has 14.84 billion shares. So if you multiply the share price times the number of shares, then you get to 3.17 trillion. And then that is exactly if you look on the left in red highlighted, that's the market cap Google says.
4:09:55
So in terms of very quickly calculating equity value and what is the value of the company to equity shareholders, very, very easy to do, as you can see. With that said, enterprise value gets a little bit more complicated and complex. So let's go into that one next. Let's now go into enterprise value. But before we do, it's very important that we talk first about the investor type hierarchy.
4:10:16
And what this really entails is different sources of capital can fund the business and they come with different liquidation priorities. And liquidation priorities, what this simply refers to is if a company heads towards bankruptcy and is liquidating all their assets, selling all their assets into cash and then has to distribute the cash it has to their different types of investors. There's some kind of ranking of who gets the money first.
4:10:39
Right. And that's because there's different risk and rewards depending on the type of investment that you make. So starting at the very top, you have your debt holders. And within that, it gets a lot more nuanced and complex as well. We'll discuss it more in the LBO section. debt holders, the company must use operating cash flow to service debt through principal and interest before equity holders receive anything, right? So if you think about your income statement
4:11:01
after your operating income or your EBIT, you subtract out your interest expense. Any cash that you're generating, you need to pay off your debt holders in that way first. And then you pay off your taxes that gets you to your net income, which is what's available to equity shareholders, right? And in addition to that, when a company is heading towards bankruptcy, let's say the company has sold all its assets and has 50 million in cash and they owed debt holders 75 million,
4:11:26
then all that 50 million would be given to debt holders. And then if the company had, let's say, 50 million cash, 40 million in debt holders, and then 10 million in preferred stockholders, then 40 million of that cash would go all to debt holders, the remaining 10 to preferred stockholders, leaving zero for common stock shareholders. So preferred stock shareholders are second in terms of tier. So they're entitled to fix dividends from profits before common
4:11:51
shareholders receive anything. So that's another way that they have kind of priority and preference. Preferred stock shareholders, usually whenever you are a preferred stock shareholder, you'll have some kind of fixed dividend. And before your common shareholders can be paid a dividend or anything like that, preferred stock shareholders need to be paid first. And also in the event of a bankruptcy,
4:12:11
after debt holders are paid, preferred stockholders are paid next. And then lastly, our common stock So after everyone else is paid, pretty much common stock shareholders are paid last. And that might seem not great, but you also have the highest risk, highest reward. So debt holders, if you think about it, they pretty much just get interest payments, which can range from, let's call it 2% to 10, 15% on an annual basis. And then you get your principal back.
4:12:38
So, you know, relatively good deal if you're a debt investor, but it's like a slow and steady type of return, right? Preferred stockholders, you get fixed dividends, but those dividends don't tend to grow over time. And then common stock shareholders, that really just depends on the growth of the company's equity value. Right. And so you could have a company that goes like NVIDIA that blows up to four point five trillion dollars in equity value.
4:13:00
And if you are a debt holder at NVIDIA, you're not earning anywhere as much in terms of return versus common stock shareholders. Right. But they're really pros and cons to a lot of these different types of investors. So the reason all of this is important is that it eventually will feed into enterprise value. And so let's first go into the theoretical explanation of enterprise value. So EV reflects the value of the core business operations to all investors, not just equity.
4:13:24
But that's why understanding the different types of investors is so important. Enterprise value is the value of core business operations to all investors. You want to think again about the house analogy we had earlier on. The total house might be worth $500,000, but it may be funded by $250,000 from equity investors and $250,000 from debt holders. Right. But the total enterprise value of that house is the five hundred thousand, regardless of the amount of financing.
4:13:52
But it's to all investors, debt and equity. So in terms of the theory behind enterprise value, you want to start off first with your equity value, a.k.a. the market value of your net assets, and then subtract out any non-operating assets. The reason you're doing this is because enterprise value reflects the value of core business operations. You want to subtract out any non-operating assets such as cash, and then you want to add any liability and other investor claims.
4:14:18
So we started off with equity value, right? The down payment, let's say, of a home. And then you need to add the other investors who have a claim on your business, like your debt holders have a claim on your business, right? You add liability and other investor claims that equals enterprise value. Now, the reason I say this is theory is because there's a very standard formula for enterprise value, which we're going to go into later.
4:14:41
But this is really what's happening essentially in that formula as well. So what is happening here is enterprise value is stripping away any non-operating noise by deducting non-operating assets that aren't part of day to day operations from equity value. There is a little bit of a caveat here where sometimes your cash balance is actually part of your operations, right?
4:15:02
Like if you own a lemonade stand, you're going to need to have cash in the cash register to actually operate your business on a day to day basis. Change to your customers. Right. And so there is some extra nuance, but don't worry about too much of that for now. And then next, by adding liability such as debt and other investor claims such as preferred stock, enterprise value captures the full value of the company's core operations attributable to all capital providers.
4:15:27
So when a company is thinking about, I want to start a business and you think about the different types of investors, you might raise money from equity investors. You might take out money from the bank via a bank loan. And then you may have some bird stock investors. And then all of them have a claim to your business, right? Based on the different contracts you have, the firms and et cetera, everyone's kind of has a claim on your business in a different way.
4:15:51
And enterprise value basically reflects the value of your core business operations to all investors. And so that's why enterprise value is often interpreted as the takeover price of a company. So again, thinking about the house, your equity value may be very different depending on how much equity you put into the house. But ultimately, if someone were to come in and purchase the entire house, what they will need to pay is that full amount of the house, right?
4:16:13
The $500,000 that we keep referring to. But this is the theory behind enterprise value. And I want to go into what the different non-operating assets are. You have a better understanding of them. So these are non-core, non-operating, and they're not used to sell a company's regular goods and services. Pretty much in the non-core, non-operating term. But cash and cash equivalents, so checking accounts, money market firms, short-term, T-bills. Sometimes cash is required for operations.
4:16:39
So you do take out like a small amount of the kind of minimum cash balance required. But in general, for the enterprise value, you just look at the entire cash balance and then take that out because it's just simpler and easier to do that way. But when you actually go through like an M&A transaction, then I'm just saying things could be a little bit different. And then there's marketable securities, short term investments that can be liquidated quickly.
4:17:02
Investments in other companies, minority stakes or equity investments in unrelated businesses. So this does not affect your day to day in terms of selling goods and services. Right. So that's why you need to take it out. Assets held for sale. So these are non-core assets the company plans to sell. Again, you want to take this out, not part of company's core operations. And then excess PP&E, so land, buildings or equipment that are not used in core operations.
4:17:26
For the most part, this is kind of going a little bit too deep because for enterprise value, you're simply going to, for the most part, be subtracting out your cash. But just so you know, these are additional things that you could be taking out of your enterprise value formula when you're thinking about your non-core slash non-operating assets. And then in terms of liability and other investor claims, these are claims on the company's core business besides common equity.
4:17:50
So debt is the most easily understood one. This is just capital loan to the company must be paid regardless of profitability. And then if you don't pay, then the debt holders usually have a claim on the assets. And so they can kind of take the assets just as banks can foreclose on your home if you don't pay the mortgage. And this preferred stock, hybrid security with debt and equity that has higher liquidation preference over common equity and typically has a fixed dividend.
4:18:13
And there's non-controlling interest, something we'll go into in a bit. But this is an unowned portion of majority owned companies. So the amount would be 10% of non-controlling interest if a company owns 90% of another company. So Amazon owns 90% of black, then 10% is the non-controlling interest, the portion that company doesn't own, right? That also is another thing that you need to add inside your enterprise value formula. And then capitalized financing leases.
4:18:42
These are debt-like obligations with interest payments used to acquire PP&E. So because this is an obligation that you need to pay, and these may not exactly be investor investors in the kind of standard typical way, but there are contracts that result in claims in that company's core operations and PP&E, right?
4:18:59
And then lastly, unfunded pension liabilities. So these are future pension payments not covered by reserved pension assets. So essentially, when your pension liabilities are greater than your pension assets. And you can kind of think of this as while workers that you need to pay in the future, workers who they're not exactly investors, but they do have a claim to future cash that you have promised them.
4:19:20
Right. And so in that way, it's kind of like more of a liability that this company needs to pay out in the future. And when it comes to enterprise value, the first three that you see here are really what's most important. The last two are more advanced topics that don't really come out too often in banking interviews. But I wanted to show you them just because it's important for you to kind of have exposure to them, at least and know what they are.
4:19:44
And so next, in terms of how all of this comes together or enterprise value, when it comes to banking interviews, a very common question is what is enterprise value or give me the formula. And what you need to recite is equity value plus that plus preferred stock plus non-controlling interest minus cash. Of course, things get a little bit more complicated as we have gone through, where there may be some additional liabilities and obligations and non-operating assets that you want to subtract
4:20:08
out besides just cash. But when it comes to being asked the formula in banking, really, this is all you need to really say. And I want to give you guys a visual to really showcase what enterprise value kind of looks like. Very similar to the house analogy earlier on in this module. But let's say enterprise value is the total amount on the left hand side here. The different parts of what we discussed in this formula all kind of add up to enterprise value. So equity value, usually the largest.
4:20:36
And then you have net debt, which is your debt minus cash and then preferred stock and then non-controlling interest. When you kind of visualize it this way, you have all these different other types of investors and capital providers. And then when they're all added together, in a sense, that's pretty much your enterprise value. So if we think about the house analogy, it's the total amount of the house and value of the house
4:20:58
versus for each investor, how much is their claim worth, essentially. So that's enterprise value. And I know we went through a lot of theory and stuff, but in terms of banking interviews, when asked about enterprise value, you can really simply give this formula. And then next, I want to go into non-controlling interest because whereas debt and equity, that kind of preferred stock, all of it makes sense in terms of how they provide capital to the business, non-controlling interest doesn't
4:21:23
fit that definition, right? Non-controlling interest is not really about providing capital, but it's the additional portion that a company doesn't own. So starting off with the definition, non-controlling interest is the unowned portion of a subsidiary of which a company owns greater than 50%. So let's say you have a smaller company, parent company owns greater than 50%, let's say it owns 80%. And then there's some other minority investor that owns less than 50%, let's call it
4:21:48
20%. So when a company owns more than 50% of another company and is the majority owner, 100% of the subsidiaries' company's financials must be reported in the parent company's financial statement. And it's just an accounting rule as to why this is needed. And in some sense, it makes sense because if you own, let's say, 99.9% of a company, then you putting 100% of these subsidiaries' financials in the parent company's financials, I feel like intuitively
4:22:14
makes more sense versus let's say you own 51% of the company. You still have to do that, but it kind of feels like it makes a little less sense, right? Why not just report 51% of the financials? But regardless, that's the accounting rules. Whenever you own more than 50%, you have to include 100% of the company owns their financial statements, combine them with yours, and then isolate in your income statement, your balance sheet, the non-controlling interest, the part that you don't
4:22:39
own. And in terms of why non-controlling interest is added to enterprise value, you want to think about enterprise value as reflecting 100% of the subsidiaries operating value, while equity value only represents what the parent company's shareholders earn own. So in this case, it'd be 80% of the subsidiary for this example, you see up top here, and non controlling interest fills in the gap. So another way I like to think about it is when you're thinking about enterprise value,
4:23:05
and this is the amount that you need to pay for the entire company to own 100% and pay off every single obligation you possibly have to, then when you think about it in that perspective, you pay off all your equity shareholders, right? You pay off all of your debt shareholders. I'm going to go back to this slide because it helps visually. In order to own 100% of a company and pay off everyone, you need to pay off your equity holders. You need to pay out all your debt holders,
4:23:29
all the loans. You need to pay them out. You need to pay out your preferred stockholders. And then to own 100% of the entire company, you need to pay off the portion that you don't own, right? You need to pay off that remaining 20% of the subsidiary you don't own. That way you own 100% of everything. And that's pretty much what enterprise value is and why you need to add non-controlling interest. But let's go through an example because I think adding numbers and such
4:23:55
will help with your understanding a bit more too. So let's say large co owns 80% of small co and we need to calculate large co's enterprise value over EBITDA, which is a multiple. It's trading comp. This kind of is jumping forward a bit because comps is going to be the next module. But I think is pretty straightforward enough for you to be able to get it even if you don't have an income before. But like P multiples, revenue multiples, EBITDA multiples, if you heard those terms before,
4:24:19
that's what we're going to be going through. So we're given all this information, large co, equity value 500, debt 200, cash 100, EBITDA 50 million, small co, equity value 100, and then EBITDA of 10 million. So as I mentioned, large co needs to consolidate 100% of small co's financial statements with its own. And then adding non-controlling interest to enterprise value makes the numerator and denominator apples to apples or valuation multiples. We're going to kind
4:24:43
of go into these notes as we go through the numbers. So EV over EBITDA, enterprise value on the top 500, the large co's equity value plus its debt minus its cash plus the non-controlling interest. You know, as we kind of have gone through already, enterprise value is your equity value plus debt plus preferred stock plus non-controlling interest minus cash, right? And so since we don't have preferred stock, this is pretty much our enterprise value formula on the top here. And then EBITDA on
4:25:06
the bottom is our large co of 50 million plus our small co 10 million. And you can notice that on the bottom here, we've added 100% of small co. We didn't just do 80%. We did 100%, right? So let's go into the implications of all this. First of all, the 500 million in large co, the equity value of large co, this reflects already 80% ownership of small co. So when investors are looking at large co and they're looking at their financials, they understand when they go through the large co's
4:25:35
income statement, balance sheet, financial statement, all of that includes 100% of Malco's figures and financials. All of them are combined with Largico. But there are parts of the financial statements that show really like what proportion is non-controlling interest, right? If you go to the income statement, the very bottom, it says net income attributable to parent shareholders, right? So when equity investors are valuing a company that owns the majority of a company,
4:26:00
but doesn't own 100%, they take all of this into account. And then so the equity value reflects parent company and the amount that they own in a smaller company. Then you have debt and cash, pretty easy. And then in order to account for the portion that's not owned, if SmallCo is worth 100 million, then we need to add this 20 million of non-controlling interest here, right? And so now in your numerator, you have 100% of everything, right? You have the 80% of SmallCo plus the 20%.
4:26:29
And so your numerator is 100% of SmallCo. And then that matches with your denominator, which has your large co EBITDA plus 100% of small co's EBITDA. If you had something different on numerator or denominator, it wouldn't be apples to apples. So if non-controlling interest wasn't in the numerator, then your denominator is comparing your entire company's EBITDA of large co plus 100% of small co while only in your numerator comparing against 80% of small co, right?
4:26:57
Similarly, if you had 100% of small co in the numerator and then in the denominator only had 80% of small co's EBITDA, then again, you're not comparing apples to apples. The whole point, basically what I'm trying to say is that enterprise value for trading comps, it's very, very important that your numerator and denominator are comparing apples to apples. We're going to go through this a lot more when it comes
4:27:18
to the comps module. So don't be worried if you don't fully understand this concept yet, but hopefully it makes sense generally for why non-controlling interest is added. And then last thing I want to do is kind of go through calculating equity and enterprise value, given some certain figures and numbers that you have, because it's a very kind of common, easy question in banking interviews. So let's say that a company has $1 billion in equity value,
4:27:44
$100 million in preferred stock, $300 million in debt, $50 million in non-controlling interest, and $150 million in cash. Calculate enterprise value. So you should know the formula. I want you to pause the video here and see if you can calculate it for yourself before I give you the answer. So pause the video, write down your answer, and I'll go into the answer now, which is enterprise value equals your equity value plus your preferred stock of 100 plus your debt of 300
4:28:08
plus your non-controlling interest of 50 minus 150 in cash, which gets you to enterprise value of 1.3 billion. And then let's say that a company has 7 billion in enterprise value, 200 in preferred stock, 2 billion in debt, 300 in non-controlling interest and 3 billion in cash. Now it wants you to calculate equity value. So this also very, very easy. You just need to kind of flip the signs, Right. So again, pause the video here if you can get the answer before I give the answer to you.
4:28:37
And I'll now go into the answer, which is that equity value is your enterprise value of seven billion minus all the liabilities and claims. So 200 million in preferred stock, two billion in debt, 300 million in non-controlling interest. And you add back the three billion in cash to get you to your equity value of seven point five billion. So this is a very, very common type of question asked in banking interviews. And as you can see, as long as you know the formula, very, very easy.
4:29:02
So make sure to memorize that enterprise value formula. And hopefully all the theory behind everything also kind of adds in together. It's very uncommon that you're going to be asked about things beyond the standard enterprise value formula. But just in case you are, you're now really well prepared to answer those kinds of questions.
4:29:21
So that's how to describe the value of a company. And if this course has been helpful for you so far, I'd recommend hitting that subscribe button and following me on Instagram and TikTok, where I'll be sharing tons of banking recruiting tips that I've never shared before. Going back to the course, we now have the foundations built to talk about valuation, which is by far the most common topic in banking interviews. In this next part,
4:29:42
we're going to be going over the three main valuation methodologies, trading comps, transaction comps, and the DCF. I used to spend around half my time every day in Excel building models. And so I take careful notes for this next section. And be sure to download the resource pack if you haven't already, because there will be a DCF template you can study and use for your own valuation analyses. Welcome to the comps module, which is our first step in the destination of
4:30:08
understanding how valuation works in investment banking. One of the topics that most people really care about the most and very commonly tested upon in investment banking interviews. Also a huge part of your actual job when you're in banking as well. So going over comps and what we're going to discuss, the table of contents include an intro to valuation, multiples, which is the foundation of what comps are all about, trading comps, transaction comps, which are two types of relative valuation,
4:30:34
which we'll go into. And then lastly, how to prepare for interview questions. And as with all the other modules, there is an Excel sheet that you should definitely download. And after a lot of these sections, we're going to have Excel exercises that we go into for each one. You can really put into practice a lot of the concepts you learn. So going into an intro to valuation is going to be really brief because there's a lot of material we're going to really
4:30:56
go into for each of the topics. But let's say that you were transported to a foreign planet that was very, very similar to Earth and you're there with a Porsche and you own that Porsche and you're trying to figure out how much can I really sell it for? Because let's say you have no other money. So you're trying to figure out how much you can sell it for so you can get some money and then buy food and whatnot. Right. So just play along with me for this analogy here.
4:31:17
if you're thinking about how much you can sell this car for, there are a variety of different ways you can kind of intuitively think about it, right? The first is you might look at other cars that are similar to your Porsche and you may think about, okay, maybe these other similar cars are trading for 30,000, 40,000, 100,000 of whatever currency on this foreign planet. So then that gives you a sense of, okay, I think my Porsche is worth around this much, right? And it also matters,
4:31:42
you know, the Porsche is more of a sports car, so you don't want to be comparing against like Toyota Camry types or motorcycles, you want cars as similar to your Porsche as possible when you're comparing, right? And then next, you can also look at similar cars to the Porsche that have been sold in the past. And then based on that information, you can reasonably deduct, hey, other people were willing to pay this amount for similar cars in the past. So maybe my Porsche is worth X amount as
4:32:08
well. Next, you can also try to think more intrinsically about the car itself and how much value it can actually bring to someone and how much cash or money they can generate from owning that Porsche, whether that is being a taxi driver or being an Uber driver and whatnot, you'd be the most fancy one, right, with a Porsche. But anyway, these are different ways to kind of think about valuation or any given asset. And it's true also for companies, because when it comes to
4:32:34
valuation methodologies, there are two types. First is relative. And this is trading comps, a.k.a. essentially looking at other Porsches or cars in the market and comparing against yours to get a better understanding of what your Porsche is really worth, a.k.a. what your company is worth. And then precedent transactions is when you're looking at previous cars that have been sold in the past that are similar to yours and then getting the value for your car, a.k.a. your company in that
4:32:59
way. So relative is really the key word here where you're comparing your company to other companies that are relative to each other. And then the next type of valuation methodology are the
4:33:09
So these include the discounted cash flow, leveraged buyout and dividend discount model, the last of which is used a little bit more for industries like financial institutions and is not really tested upon that much. But comps, DCF, LBO, super, super common in investment banking interviews. And for intrinsic valuation methodologies, it's a lot more about what can this company generate in terms of cash and based on that, getting to a value for the company.
4:33:34
I'll leave it at that because, you know, this module is much more related just to the comps. And the other really, really important thing is that when it comes to valuation, there's never a correct answer, but there is a more accurate one. So with comps, it's pretty easy, actually, for two different parties to work on comps and get to very, very similar numbers. But when it comes to DCF, for example, there's a lot of different assumptions that are input into the model.
4:33:58
And so two people may have very, very different valuations for the same company or asset. With that said, there is no correct answer, but there's a lot of kind of defending and arguments you could make for any of these valuation methodologies and the kind of assumptions you choose to get to a what may be considered a more accurate answer.
4:34:15
And in addition to all that, whenever investment banks think about valuation, and this is also how you should think about it as well, valuation for a company is an extremely complex and not a straightforward type of exercise, right? Like if you think about a company that has maybe thousands of employees, hundreds of different products, millions or even billions in revenue, and companies are very complex and can be a very large organization, right?
4:34:41
If you think about trying to value something that large, that complex with so many potential different ways that the company can execute on its plans in the future to earn revenue and also with all different types of competition and with a lot of potential disruption, there's like a lot of things that can happen, right? So when it comes to valuation, it's always a range. What you're seeing here is what bankers call a football field.
4:35:02
And you can see that on the left hand side, you have a 52 week low to high, just a normal trading price. And then analyst price targets. This is what equity research analysts feel that the company should be worth. And these are just like you literally are just pulling these numbers. And so this is not really like valuation methodology related. Then you see here trading comps based on publicly traded numbers. What is the company worth?
4:35:24
Precedent transactions based on previous transactions that the company can be compared against. Like what is the company worth?
4:35:29
And then there is the discounted cash flow DCF, pretty much the most common slash famous valuation methodology, especially when it comes to banking. And based on all of these different types of valuation methodologies, you can kind of triangulate to a valuation that is arguable and defensible. And that's pretty much what a banker and bank works on when advising their client during an M&A transaction.
4:35:51
So that's pretty much a brief overview. Hopefully it gets you a little bit interested and intrigued about what valuation is. But over these next handful of videos in this module and future ones, we're going to be really focusing a lot on valuation.
4:36:05
Let's now go into trading comps, which is one of the most fundamental valuation methodologies in investment banking, because pretty much no matter what industry you're in, trading comps are almost always going to be relevant versus something like a DCF may not be relevant for certain industries. So with that said, let me first give you the interview answer of if you're in an investment banking interview, someone asks you, what are trading comps?
4:36:28
Then this is what I would say. And in blue, bolded are the words that are kind of keywords. So trading comps are a relative valuation methodology through which you compare financial metrics across a set of companies similar to the one you're analyzing to determine your target company's valuation.
4:36:46
So relative valuation methodology means you're comparing against different companies and these companies should be similar to yours. Right. As we went through in the analogy, when we first started this module, if you're selling a Porsche, you're not going to be comparing it against Camry's or Prius's. Right. You want to compare against other similar sports cars in a sense. And so that's pretty much what trading comps are. We're going to walk through the entire process.
4:37:08
But really quickly before that, you may also hear trading comps be referred to as comparable company analysis or public comps or market comps. Market comps, not as commonly referred to, but usually in banking, it's a lot easier to kind of just say trading comps. So that's pretty much how you're going to call it on a day to day basis. Very rarely will you be in the cubicle or in the office at a bank.
4:37:30
And it's unlikely that your associate will say something like, hey, can you give me the comparable company analysis or work on it? They're going to say, can you work on the trading comps? So let's walk briefly into the process of building out trading comps. And then I'm going to go through each one step by step. And then lastly, at the end of this section, we have a Excel exercise for you to actually build trading comps yourself.
4:37:53
So the first step of building trading comps is creating a set of similar peers. So you want to create a small subset of companies that are very, very similar to the one that you are valuing. So that's step number one. And then step number two is really gathering a lot of information and data, right? So select, collect, and calculate financial information that you're going to be using to compare your target company with the peer set.
4:38:18
And then lastly, analyze the comps and value your target company, right? That's pretty much the whole purpose of this analysis. And so these are the three steps. And in the following videos, in the next three videos, I'm going to be going through each of these steps in more detail. Step one in trading comps is to create a set of similar peers. And your goal here is to find four or more companies that are most similar to the target company that you're valuing.
4:38:41
And you typically want anywhere from around four to eight. If you go beyond that 15, 20 plus, it's actually not helpful because most likely you're going to be looking at companies that are not similar to yours. So each peer set should be around maybe four to eight, but you can also have multiple peer sets of around four to eight, which we'll go into a little bit later.
4:39:00
But in general, you don't want to be comparing your company against, let's say, like 30 to 40 or 50, because even though that might sound like you're doing more analysis, you're probably going to get a less accurate answer. So you want a much more smaller, very similar set of peers. That's a lot more valuable than a lot that are very different from your company. So in terms of finding similar peers, let's go into criteria. The first is business model.
4:39:22
So investors pay very different multiples depending on how the company earns revenue and its cost structure. So this may be a little bit intuitive. When you think about the way a company generates its cash and profits, so whether it's an e-commerce company or it's like a software as a service company, or if it's more of like a retail company that has brick and mortar stores, depending on how the company earns money, you should find peers that are similar to the one that you're valuing.
4:39:46
And if they earn money in a similar way, then that is a great potential way to filter out any other companies that may not be similar to yours. I want to kind of combine this with the next one, which is industry, right? So based on your industry dynamics, there's a lot of different types of growth, risk and regulation types of changes that really can drive valuation differently.
4:40:05
So when it comes to industry, typically the easiest filter for when you're finding similar peers is to look by industry. So if you're valuing an airline company like JetBlue, then you compare against Delta, American Airlines and etc. Or if you are trying to find some similar peer set for hotel company, then similar hotels, right? tech company, tech companies. Very easy in that way, right? The way I want you to also think about
4:40:28
this, though, is that sometimes there are times where you cannot actually find similar peers in the same industry. And so you may actually want to find companies that are in different industries, but have the same business model. For example, there are a lot of companies that are e-commerce companies, and they may be in very different industries where one sells furniture while the other sells water bottles or home goods or something like that. But even though they're
4:40:53
in different industries, they might have very, very similar business models. And so that's why when you are thinking about creating your similar peer set, you can't just think of one only criteria. You kind of mix and match a lot depending on the company you're valuing and creating the best set of peers as possible. Moving on, geography is a pretty big one. So different regions present very different opportunities and challenges. And I personally don't really think that it's good to
4:41:18
use different geographies when comparing across companies because the rules, regulations, laws are just so vastly different. Customer demographics are very, very different. And the way that businesses are just operated, it's just so different. Accounting rules may also be very different. So typically, if you are in the US or let's say in China, Brazil, you know, whatever country you're in, you most likely want to just focus on a set of peers that are within your own country. But
4:41:43
there are times when you can't find peers just within your own country. So you may have to expand to other broader geography. And so maybe if you're in Europe, you're comparing across all European companies in Asia, across all Asia, Latin America, et cetera, et cetera. Next is size. So smaller companies often grow a lot faster and trade at higher multiples because they're growing more quickly, while larger ones are a lot more stable, but trade at lower multiples like Apple, for
4:42:08
instance. Most people, if you don't know much about valuation, you may think, oh, Apple is such a large company. It's doing great, has been doing great for decades. It must be very, very expensive. Like investors really like the company, right? But it's actually growing at a very, very low rate, low, low single digits, less than a few percentage points in revenue growth over the past few years. And so if you compare that against a lot of smaller companies, especially like startups,
4:42:33
like OpenAI, they're growing in the hundreds of percentage points per year in growth. So when you're looking at building out a pure set, you also want to ideally find companies that are similar size, whether that's in market cap or going into the next one, financial profile, if similar size in terms of revenue, EBITDA, EBIT, etc. And so similar growth and margin profiles really ensure that multiples are comparable. So in combination with the overall size of the company,
4:43:01
then you also want to look at the kind of financial profile. And it doesn't mean that their revenue necessarily needs to be very, very close to one another. But typically, you want to find companies that at least have pretty fairly similar revenue growth around the same ballpark in terms of revenue as well. Like you don't want to compare a company that has a million in revenue versus 2 billion in revenue, right? That's just totally different types of
4:43:25
scale. You also don't really want to be comparing against companies that have 1% EBITDA margin versus 50% EBITDA margin, right? So there, of course, there are always caveats and times when you kind of have to break the rules a little bit. But overall, these are the criteria that you really want to think about when creating your set of similar peers. And let's go through an example. Let's say you want to value Netflix and we're going to look across different industries and
4:43:49
think about what are a good set of peers for Netflix. So first, we may think about the streaming peers that Netflix has, you know, Disney Plus, Comcast, Warner Brothers, Paramount, they all have streaming services. But even though these companies are very, very different from Netflix, Like Disney in particular, they may have Disney Plus, but they also have theme parks. They have a whole bunch of other parts of their business that are very, very different to Netflix.
4:44:12
But all these companies have streaming components and businesses. So this could be a set of peers for Netflix. And then traditional media. So AMC Networks, Lionsgate, Fox, Sony, all companies that are in the media space, just like Netflix is and have studios and produce content. And then we may think about broader tech. Netflix at the end of the day is known a lot as a tech company. And so we may want to compare against companies like Alphabet, Meta, Amazon and Spotify.
4:44:40
And so if we think about these three different categories, obviously very, very different from one another, but all kind of related to Netflix in a lot of ways. Right. So let's think about also the companies we excluded. Apple may be a company that's in tech and does have a streaming service. But Apple TV is a very, very, very tiny portion of its overall business. Tesla is also a tech company, but ours are just not related to content.
4:45:05
Microsoft, again, a tech company, but its software is not really related to Netflix at all. Snapchat is in the kind of content space, but it's really, really small in comparison. And then Tencent also has a lot of kind of like media related business, but it's based in China. So, you know, I'm not saying that this Netflix pure set is actually perfect because there's probably a lot of adjustments, other companies that could be considered, etc.
4:45:28
but I think you hopefully get the picture of how you want to build a set of peers for a company. Step two for trading comps is select, collect, and calculate. Jumping into this, so select is all about choosing the financial metrics based on the company's performance and stage in the business lifecycle. We're going to go through it in a little bit, but essentially you want to determine whether or not you want to be looking at margins, if the company is profitable or not, and then what kind
4:45:53
of multiples to be looking at. Second is collecting the information. So using the best accessible data source. You're not at an investment bank and the best you can really do is just collecting a lot of historical information through bamsec.com or Yahoo Finance or something like that, then that's great. If you are at an investment bank, then you want to be as accurate as possible. So sometimes you want to be using facts that other times you want to actually be looking inside
4:46:17
filings for the historical figures. Other times you may be wanting to use Bloomberg, depending on the information and data you're trying to collect. And then calculate. This is where you're calculating the financial metrics like growth rates, margins, your equity and enterprise value, and your multiples. And you're going to see, especially as we jump into Excel later on, that the calculation portion of trading comps is super, super easy and simple. So going a little bit into each of these
4:46:43
steps within step two, a good way to determine which metrics to select is based on the company stage in the business lifecycle, which is something you may have seen before. But essentially, a company usually starts off in what's called kind of like the introduction stage where they have low sales. There's a lot of upfront costs and very little profits until the company starts to scale and enters the growth stage where they're increasing sales rapidly, reducing costs and have
4:47:11
some profits. And in the introduction and growth stage, you basically want to be looking a lot at your revenue growth and maybe your gross profit margins and looking at revenue and gross profit multiples. And then later on, as you get into the maturity stage, this is where you have a lot of consistent sales, companies maturing, there's reduced cost margins are expanding, and there's increasing profits. So you're likely going to want to be looking at EBITDA margins and profit margins
4:47:34
and also EBITDA multiples and maybe the PE multiple. And then the last stage, reducing sales, constant costs, and then reduction in profits as the company just kind of declines. That's where you're probably still going to be wanting to look at EBITDA and profit margins and also those, you know, even done PE multiples. But there are times as well where you don't actually enter a decline stage and the company just kind of grows because they kind of reinvent themselves. But I
4:47:58
just wanted to kind of give you this kind of business theory in a sense. Of course, when you actually look at companies, they are not always so directly in one stage or the other. And, you know, companies are always constantly evolving as well. But I think this is good background for the next part where I want to talk about depending on if the company is more early stage, mid stage or mature or declining, what kind of financials and multiples to be looking at. So when it comes to
4:48:23
early stage companies that are maybe startups or pre-profit, then you want to be looking at revenue growth, which typically if it's truly a promising company, they're going to have growth rates of 50 to 200% plus year over year. And then gross margins, this helps you focus a lot on unit economics and how much are these companies able to basically rate in gross profit per each unit sold. And then operating margins, you want to see if it's trending up. A lot of times your EBIT margin
4:48:51
is actually going to be negative, but it's still helpful to see, okay, maybe it was negative 100% two years ago, and now it's negative 50%. And this year it's going to be negative 10%, right? That's a very, very positive trend and something that you want to see for a high growing company. And they may be funded by venture capital. And so that's why they can burn a lot of cash until they actually get to profitability. You may also want to be looking at customer metrics like monthly
4:49:13
active users, daily active users, the churn of users or customers, pack your customer acquisition costs, and then your lifetime value for your customers. And then you may also want to look at your market size and TAM or your total adjustable market, kind of justify growth potential, right? Like if you have a company that is in a huge market and it's just a tiny player right now, but you think you could capture a large portion of the market, then that's very, very promising,
4:49:36
right? But these are the types of financials you want to kind of look at and consider. You may not need to collect all of this information into an Excel sheet. So for example, a lot of times I don't see a lot of like market size and TAM necessarily in like a comps spreadsheet or early stage companies, but you may want to kind of think about it a little bit when you're kind of considering what companies you want to include or you have the information, just kind of have that as like
4:50:00
foundational info when you're choosing your comps and the information. So in terms of valuation multiples, revenue multiples, monthly recurring revenue, gross profit, EV over monthly active users or kind of other business metrics. These are the kind of multiples that will be most relevant. But basically what you're normally just going to see are revenue multiples if the companies have revenue. And for all other things that you see here, like monthly recurring revenue, gross profit
4:50:24
can be a little bit more common as well. But the business metrics of monthly active users, that's really going to just depend a lot on like the industry you're in. But hopefully you get the picture here with early stage companies of what kind of financial information you're going to want to collect. And then for mid-stage companies that are scaling and getting more and more profitable, these are typically companies that are growing in terms of revenue 20 to 50% or so per
4:50:47
year. And their EBITDA margin is either trending from breakeven at 0% to the mid-teens or is already kind of in the mid-teens. And then profit margin is also around like breakeven to single digits. Whenever a company is scaling up, then a lot of times they focus first a lot on just top-line revenue growth, they don't really care that much about costs until the company is starting to mature more and more and then focus a lot more on profitability. So during this mid stage for
4:51:14
multiples, you may also be looking at gross profit multiples, but it's more common that you're going to probably look at EBITDA or EBIT or EBITDA type related multiples. And then maybe if your company is starting to get a lot more profitable, then you can look at your PE multiple. And then lastly, for companies that are much more mature and in the declining stage, they're established and generating a lot of cash. Typically, these companies are in low single digits to 10%
4:51:38
revenue growth. A company like Apple is a great example where they may not necessarily be declining, but they are obviously very, very mature. And their growth rate is just a few percentage points a year. But their EBITDA margins are super, super high. And for a much more mature company, you expect and want these companies to have very, very high EBITDA and profit margin and also cash flow. Because ultimately, later on, the company may be evolving and investors may not be investing
4:52:03
in that company because of their growth potential, but because of the ability for that company to return cash and returns to their investors, maybe through dividends or share buybacks. So those are the kind of financial metrics you want to collect for mature companies. And then for multiples, you're typically going to still see EBITDA and P multiples. And you're not going to see a lot of the remaining three here, EBITDA minus CapEx and your free cash flow figures,
4:52:26
because they're harder, take more time to calculate and there's more variables. But certainly they are in the realm of possibility and would be understandable to use. So these are the different types of financial metrics that you want to kind of collect and the multiples that you want to use depending on the type of company. And just as a quick note for additional information, you'll always also need to include the share prices of the companies if they're public, share accounts,
4:52:48
hash debt figures to ultimately calculate your enterprise value, and then your preferred stock and non-controlling interest if they have any. Just so you know, though, out of the hundreds of companies that I've looked at, very, very, very few actually do have preferred stock or non-controlling interest. I'd call it probably maybe one to five percent of the companies that I've looked at. So typically preferred stock non-controlling interests are not going to be very, very common just for you
4:53:10
to know. I know we went through a lot of preferred stock and non-controlling interest in a lot of the material over the past few modules in accounting and equity enterprise value. But I just wanted to be clear that it is important to know what they are, but you're not always going to actually see them. So let's take a look at what trading comps actually look like and what you kind of need to calculate. So this is a trading comps table that I'm continuing on with the Netflix example. So you
4:53:33
can see at the bottom, we have Netflix and all the information here. It's gathered through FactSet, which I have access to as of August 19th, 2025. So depending on when you're watching this, this could be a very outdated date. But imagine you're is currently August 19th, 2025. Based on this date, I've collected the share price, the percentage of the 52 week high of the company of where they had been trading over the past year. And that's just kind of good kind of information to
4:54:00
refer to. And then the company's market cap, enterprise value, revenue growth rates for 2025 and 2026, EBITDA margins, profit margins, and then EBITDA multiples and PE multiples. And the reason you want to look at EBITDA margins and profit margins is just because Netflix is a profitable company, right? 30% EBITDA margins, 25 to 27% profit margins. So EBITDA and P multiples are going to be relevant. P multiples, depending again, if you want to look at them, but I'd say
4:54:28
EBITDA is probably a little bit better. And then I didn't include revenue multiples because the company, while it's still growing relatively quickly for a company at size, the company is still a lot more mature, right? And so the margins are really high. You don't need to or want to be looking at revenue. So as you can see here, I've also color coded things where for each peer set, If it's good, basically, it's more green. If it's more bad, then it's more red.
4:54:51
For example, revenue growth rate 4% is high for this pure set because the other companies are growing at negative 11% for 2025. And then for your broader tech, you have 19%, which is high, which is good versus 11%, which is low. And typically at when you are creating comps at an investment bank, you're not actually going to be color coding to make it look like this. Typically, you don't have any of like this, these colors.
4:55:13
but I just wanted to add it here because it makes it easier for you to kind of understand. But let's go through a few more notes. So the comps table here is divided by types of peer groups, which we went over in step one. And given that Netflix is profitable, EBITDA and PE multiples are most relevant. And then you do see some dashes here and empty data. And that's because whenever a multiple is way too high or if it's negative, then it's not a helpful multiple, right? If a
4:55:38
companies trading at 2000 times PE or 2000 times EBITDA, what that typically means is that the company's enterprise value is any big number, let's say like 100 million, et cetera. And then the EBITDA net income for your PE multiple could be really, really low, something like $1,000 or something like that. Because there are times when companies are near break even. And so if you look at like their EBITDA multiple, maybe super, super high, like, and it just makes no sense to use. And so
4:56:03
that's what's happening. We've gotten rid of the multiples that are over, I believe, 100. But arguably, you don't want to use multiples that are pretty much over like 50 because they're not very helpful. So this is what you would ultimately be working towards when you're collecting and calculating all of your financial information for your comps. Hopefully, it's helpful to see here. And we're also going to be using the information that you're seeing right now in the Excel exercise
4:56:31
to actually calculate comps later on as well. The last step for trading comps is analyzing the comps and valuing your target company, which was really the whole purpose of this entire exercise, right? And when it comes to analysis, you really just want to be comparing your peers and their revenue growth and their margins against their multiples. And as we've discussed in the multiples section of this module, the company is trading above its peers. Typically, the market expects higher growth
4:56:55
and profitability, whereas if the company is trading below its peers and trading at lower multiples, then the market expects slower growth and profitability. Of course, there's a lot more that goes into why a company might be trading a lot higher or lower, a lot of different other qualitative and quantitative factors. But for the most part, you can kind of adhere to this rule. Next for the actual valuation portion, I think when you don't know much about
4:57:19
trading comps and you first do it, it's actually very surprising how quick and easy the actual methodology is, because all you're really doing is you're choosing a range of multiples from your set and then applying them to your company's financial metric. And I think that's actually probably where the hardest part and most judgment really comes in because you need to select a really, really good range. And typically as an analyst, you're not really going to be selecting
4:57:43
that range. But maybe if you're a more senior analyst, you may want to take a stab at it, present it to your associate, but also take a stab at it, present it to your VPN director. And ultimately the director who has decades of experience looking at these companies and knowing which kind of ranges to use, we'll select a range for the trading comps. The second point is that you also typically want to be looking at trading comps and valuation for multiple metrics and years. So
4:58:09
using, let's say, your EBITDA and your PE multiples, and not just looking at the current year, but also the next year. This provides you with additional data points so you can really triangulate to a good valuation range. Then lastly, usually the valuation ranges, you can just kind of select the companies that you want to from like a low end to a high end, or you can use core tiles of like 25% and 75%. But that's I've never really seen in banking presentations where, oh, the company is
4:58:36
just going to use a 25% and 75% core tile just because that typically is just too formulaic and restrictive. Typically, what I see is that a director will choose the low end and high end based on the comps that they're looking at. You can also kind of look at a company's gear set and then look at the mean and median. And that doesn't give you a range, but you can look at those to kind of generally see what is like a fair benchmark overall valuation for my company. So you can kind
4:59:02
of look at use comps in different ways, depending on what you really need to use it for. Right. So if you have a company, let's say, and you're maybe you're not trying to get the overall range of the valuation, but instead trying to think, OK, my company is trading at 10 times revenue. We're looking at seven other different peers. Their median or mean range is that they're trading at around seven times revenue, something like that. So my company is a lot more expensive than a lot
4:59:25
of the other companies in the industry. Like that's another way to kind of use comps. Let's go to a quick example. Let's say your target company has 2026 EBITDA of 100 million and the peers are trading from 10 to 15 times 2026 EBITDA. Then in order to get your target company's valuation, you can pause the video really quickly here if you want to do it yourself. But it's very, very simple. In order to calculate your target company's valuation for the low end,
4:59:49
you use the 10 times multiple and multiply by your EBITDA 100 to get to 1 billion. And on the high end, 15 times 100 to get to 1.5 billion. But based on these trading comps, your valuation for the company is 1 to 1.5 billion. Very, very simple, right? I think a lot of the work actually comes more from collecting the right set of peers, getting all very accurate financial information, which does require a lot more kind of manual work. You can't always just get everything from
5:00:16
a database like FactSet or Bloomberg and assume it's all right because there are a lot of mistakes and you have to double check them. But once you get all the information, actually calculating your valuation is actually a very, very simple exercise because all you're doing is just multiplication. So let's go through an example. So continue on with our example for Netflix. We're going to be looking at a set of the peers instead of all three, just at the streaming peers and see what we can
5:00:40
kind of deduce from the information here. So we have Netflix at the bottom, the streaming peers, Disney, Comcast, Warner Bros, and Paramount. And we have all the information that you saw a little bit earlier as well. Transaction comps are very similar to trading comps. So we're going to reinforce a lot of what we've already discussed with trading comps. But there are some important distinctions between the two, which we'll be going over. But first, let's go over the interview
5:01:04
answer for what are transaction comps, a very popular and common investment banking question. And the way I would answer it is by saying transaction comps are a relative valuation methodology through which you compare the financial metrics across a set of previous completed M&A transactions similar to the one you're analyzing to determine your target company's valuation.
5:01:24
So instead of looking at other companies and what they're currently trading at for trading comps, we're now looking at previous transactions that have already happened in the past and ideally looking for target companies that have been acquired that are similar to yours, looking at what multiples they were purchased for, and then using all that information to get to your company's valuation. That's what transaction comps is all about.
5:01:47
And it's a very, very similar process and analysis to trading comps. That's why they're grouped together so frequently. So transaction comps, also known as president transactions or selected transaction analysis. But similar to trading comps, when you're in banking, pretty much the bankers, your associates, your VPs, etc., they're going to call it transaction comps for the most part and not the other names. But just for you to know, they're all the same thing.
5:02:08
So let's go briefly into the main differences between trading and transaction comps to kind of set the stage. And then we'll go into the actual process or how to build transaction comps. But first, if we think about trading comps and what we've already discussed, so they focus primarily on the present and the future. Strictor criteria for similar companies. Reflects current market sentiment. Super easy and needs constant updates. Relatively good apples to apples comparison.
5:02:32
Compare all of this with transaction comps, which have very distinct differences. So transaction comps utilize historical multiples at the time of the deal. For trading comps, we talked a lot about how it's very, very important to be using multiples that are focused in the future because anything can happen. And so the past is not a prediction of what's going to happen in the future.
5:02:52
So with that said, for transaction comps, these are all transactions that happened in the past, right? So what we're going to be looking at are usually LTM and NTM multiples at the time of the announcement of the transaction in order to get an understanding of, okay, when this transaction was announced, investors were willing to pay these certain multiples based on the last 12 months and next 12 months of a particular financial metric. And those are the multiples that are used for transaction comps.
5:03:20
So sometimes uses historical LTM, not just future multiples, which would be NTM. In addition to that slightly looser criteria, especially if there are a smaller number of deals, we talked a little bit about how for trading cops, it can still be challenging to find a set of peers that really makes sense for the company you're valuing. And that's even more true for transaction comps, because now you have an even smaller universe of potential companies you can compare against.
5:03:45
Because companies that are public, there's hundreds of them and there's a lot. But for actual transactions that happen in your particular industry for the target company you're acquiring and finding similar companies, not going to be always easy to actually find transactions, especially if you're in a more niche. Next, multiples include what is something that is called the acquisition premium, which we're going to go into more and more.
5:04:06
But whenever a company is acquiring another company, they don't just acquire that company for whatever their equity value is trading at and then pay off all their debt and all the other non-controlling and just preferred stock and etc. When you're purchasing another company, you have to incentivize those shareholders to want to give up their equity.
5:04:22
It's kind of like if you had a home that you purchased for a million dollars and you thought it would appreciate to 1.1 or 1.2 in the next year, then it wouldn't really make sense for someone to come and just say like, oh, I'll give you like 1 million for it. If you think that by holding it, you're going to generate a return, then you might say, no, I think I'd rather hold on to the house. And so then the person who wants to buy it might say, OK, I'll give you like 1.1.
5:04:44
I'll give you a 10 percent premium for the home. And that takes away a lot of the potential risk, right? As the homeowner, you are thinking, oh, maybe I can earn 100 to 200K on this home. But a lot of things can change. And similar with companies as well. Basically, in order for a company to want to be sold, they're going to want a premium. And that premium, first of all, makes it more attractive to sell shares. And then also, second, takes away execution risk.
5:05:11
So acquisition premium included in transaction comps, it inflates the multiples you see. as a result versus trading comps don't have any acquisition premium included in the multiples. And we're going to go into that a lot more in detail later on. Next, transaction comps take a lot of digging into, but once they're done, they never change. And that's the great thing about transaction comps. Whereas for trading comps, you need to constantly update them
5:05:33
every single date that you want to refresh the numbers. Transaction comps, because everything's historical, you don't need to ever look at them again as long as you have all of the multiples and information and as long as everything's done accurately. So what that means is that typically at an investment bank, when you are looking for your multiples for transaction comps, if another team for another deal has worked on transaction comps that is similar to the ones that you need
5:05:59
for your current company you're valuing, then you can actually literally just take their Excel file, use the data that they found, and you don't need to actually do any extra work. But with that said, when you actually do need to add new transaction comps to your table or your set, it kind of can be painstaking work that you need to be very, very careful about. And it's a little bit harder to find information. But once you do it, never changes. Last but not least, for transaction
5:06:22
comps, they're not as reliable due to vast differences. So if you think about trading comps, even though there's a lot of market noise and things are going up and down, at least you're comparing all companies as of the same date and the market sentiment or interest rates or economic events that are happening are affecting all companies potentially at the same time, right? Whereas for transaction comps, if you're looking at transactions that happened a year ago, two years
5:06:44
ago, three years ago, four years ago, five years ago, all of these transactions are happening when market sentiment could be changing wildly. Economic events could be changing things wildly. Like in 2020, there was COVID. So if the transaction happened during COVID, that's a very different environment than in 2025 or something like that, right? So transaction comps, very, very imperfect, just as trading comps are, but still very helpful in knowing that other investors were willing to
5:07:09
pay certain multiples for companies and for transactions that have actually closed. And so as you can see, there are a lot of differences between trading and transaction comps, but the process of conducting transaction comps is actually very, very similar to trading comps. And so let's go into that when we are looking at the overview of building transaction comps. So the first step is to create a set of past M&A transactions. And these transactions should involve target companies
5:07:34
that are acquired that are similar to the one that you are valuing today. And then you want to select, collect, and calculate financial information. Very, very similar to trading comps. And then analyze the comps and value the target company. So a lot of similarities. The main differences you're gonna see is in step one, you, instead of looking at publicly traded companies or even also private companies that are similar to your company,
5:07:56
you're looking at previously announced or closed M&A transactions, and then selecting the financial information instead of looking at projected numbers for the future, you're going to be looking usually at last 12 months and next 12 months financial metrics at the time of the acquisition. So we're going to go into all of that, but that's a brief overview of transaction comps. Step one of transaction comps is creating a set of past M&A transactions. And the goal similar to trading comps
5:08:24
is finding four or more transactions with companies that have been sold that are similar to the target company that you're valuing. And if you can find more than four, maybe like four to eight, that's great. Anything beyond that, if you have like 10 to 20, just like for trading comps, probably not going to be as helpful. So typically the sweet spot is around like four to eight. Anything less than four is probably like there could be too much variance with just a few transactions you're
5:08:46
looking at. And so the criteria that we discussed for trading comps is very, very similar to transaction comps as well. Business model, industry, geography, financial profile, size, all of these things are still important when you are looking at the M&A transactions and the target company that was acquired. You want them to have all of these similarities as well, ideally. The only major other difference in terms of criteria is time. As I kind of discussed when we were talking
5:09:10
about the differences between trading and transaction comps, since markets and industries change so much over time, more recent deals are preferred and are more relevant. And I think that just makes a lot of sense, right? Like even if you think beyond just companies and if you think about a car, right? If you have a car today and it was built in 2025 and you're trying to sell it in 2025, it's more important to look at what similar cars were sold in the past one to two days versus
5:09:38
five years ago, right? And it's the same thing for transaction comps. You can have companies that are super, super, super similar to yours that were sold. But if it was sold 10, 15 years ago, then the multiples may not be as helpful as a company that may be a little bit less similar, but was sold like one or two years ago. So all of that needs to be taken into account. And with that said, even though, again, transaction comps is not a perfect analysis,
5:10:02
it still could be helpful to look at those older transaction comps because it does provide some information and data, right? Especially if you have a limited number of transactions you can choose from. But that said, basically all the criteria from trading comps is the same. Only additional one pretty much is time for transaction comps. Let's look through an actual example for transaction comps. So you kind of get a sense of what it's like creating a set. So let's look at
5:10:25
transaction comps for Microsoft's $26 billion acquisition of LinkedIn in 2016. I took this from the proxy merger, the FFM 14A filing that we discussed also in the trading comps. And you can see here the catalyst partners compare 20 selected SaaS transactions greater than $1 billion in value announced since 2009 and they list all the transactions and you can see at the time of the transaction which was in 2016 you can look at the announcement dates here and you can see that
5:10:52
it stretches all the way back seven years and so there's a lot of differences in the market environment and based on all of the changes that have been happening what I want you to kind of take away from this is that banks are going to look at a broad range of a lot of transactions and a huge list. But ultimately, when they come to the actual multiples, they decide, which you can see at the bottom here, where it says based on analysis, Catalyst applied an NTM
5:11:19
revenue of five to nine. This is going to be from a much more targeted and smaller list of these transactions. So it's not that from all these 20 transactions, the range was five to nine. Catalyst, what they did is they looked at these 20 transactions and based off of this list, chose the transactions that made the most sense and the multiples that made the most sense and then created and selected their range of five to nine.
5:11:42
But I think what's important is when you are considering transaction comps and creating your peer set, it usually does require looking pretty broadly over a long period of time. And then it's really your team and your director, ultimately his or her job to figure out which transactions make the most sense to use for transaction comps. So that's pretty much an example of what transaction comps can look like.
5:12:05
I encourage you to, again, think about some companies in industries that you really like that have been acquired and were public. Go into their merger proxies and then look into the fairness opinions to get a better understanding of what bankers really do. There'll be a lot of information for transaction comps, trading comps, DCFs, and whatever valuation analyses they did. Step two for trading comps is select, collect, and calculate. exactly the same as trading comps. But in practice,
5:12:31
when you're actually building transaction comps, there are some important minor differences. So we're select, you want to be selecting financial metrics based on the target company you're valuing and based on their operating figures and also availability. Operating figures, what that means here is, again, depending on the company you're valuing and the stage of the business lifecycle that they're on, they're more early growth, mid-stage or mature. And if they have high growth
5:12:56
or if they're profitable or not profitable, based on all of that, then that'll help you determine should we use revenue multiples or EBITDA multiples. And then in terms of availability, when you have a public company that was acquired, then it's very possible to find estimates and historical information and financials for that company, because for historical, that's definitely going to be available because public companies
5:13:18
need to report their earnings every quarter. And then for projected, it may be a little bit harder to find if like for some reason, no equity research analysts are providing estimates for that particular company. Although that's kind of rare. Usually when a public company goes public, then they will always have equity research analysts covering that company. But it could be a little bit harder to find. And then or also to verify to make sure that they're accurate.
5:13:40
And then when it comes to private companies, that's when things are super unclear as to what information you can find, because private companies have no obligation to report their earnings and especially not very neatly in, oh, here are the last 12 months, here are the next 12 months. And so if you can't super accurately figure out what financials that a private company has, then you can't really use them for your president transactions, at least not for an investment bank.
5:14:05
So that's in terms of selection, the major differences between trading comps and transaction comps. And the other thing is something I mentioned a little bit, LTM and NTM. When you're doing transaction comps, you can't look at just one specific year because all these transactions have been happening across many, many years, potentially a decade plus. So what that means is when you are looking at financial metrics and creating your multiples,
5:14:29
you want to be comparing the last 12 months and next 12 months as of the announcement date for a given transaction and what the revenue or EBITDA typically was for last 12 months and next 12 months for each transaction and each target company. We're going to go through all of this in the example. So this will become more and more clear, but just wanted to mention that that's really, really important difference between trading and transaction comps.
5:14:50
Next for collecting the information, this is where you're collecting financial metrics across various data sources. This is a little bit different than trading comps where for trading comps, you can kind of get a lot of the information from just a handful, maybe two or three really, really good sources, meaning like your company filings and then like stock price data and things like that from FactSet or Bloomberg or CapIQ. Whereas for transaction comps, especially if you
5:15:14
have companies that were private, you may have to look across a wide variety of different sources, which we went over in the previous video. And then lastly is calculating. This is where you're calculating multiples and other financial figures like growth rates and margins are nice to have in maybe a presentation to your client, but it's not necessarily going to be something that will be easy to find and can look really spotty if you can't find a lot of the growth rates or margins,
5:15:37
especially again, if you have a lot of private companies that were acquired. And so calculating the multiples and having that in your comps table, that's what's most important for transaction comps versus for trading comps, you're going to have a lot more. So given the challenges of finding projections at the time of acquisitions, transaction comps require the use of historical financials, which we discussed with the LTM financial figures, right? So I'm going to give you kind of a review
5:16:00
because we talked about this in the multiples section, but let's say it's the end of 2025. Then your last 12 months is Q1 of 2025 to Q4 to 2025. And then your NTM is Q1 2026 to Q4 2026. And something else that's important to note, and you may already know this if you've gone through the Excel exercise for multiples after the multiple section in this module, is that for LTM and NTM, it's not literally 365 days before or after a certain date because it's
5:16:29
kind of impractical and infeasible to actually get those numbers for all your companies. especially again if they're private. LTM means the past four reported quarters and then NTM is the next four projected quarters. So let's say that it's March 1st, 2025. If it's March 1st, 2025, then the three most recent quarters that have been reported if we're on a normal December 31st fiscal year end is quarter one through four of 2024. Because first quarter of 2025 is reported in March 31st, 2025, right?
5:17:02
And we're at March 1st. But then NTM, which would be quarter one of 2025, which ends March 31st, 2025, and then all the way to Q4 of 2025. So just wanted to kind of review that. If that was a little bit confusing, I highly recommend that you go through the multiples Excel exercise because there we calculate LTN and NTM figures based on different dates. And so that'll really help you understand what I'm talking about here.
5:17:26
But going back to the topic at hand of transaction comps, we typically will look at LTN and NTM financial figures. And the reason being is that we can't just look at one single particular year or even like two or three particular years because a lot of your transactions may be across a long period of time, five to 10 years plus. So additional few notes I wanted to add here is that depending on the target company stage in the business lifecycle, revenue or EBITDA or rarely PE multiples
5:17:54
will be used for transaction comps, LTM or NTM revenue EBITDA. And then even with all the resources available to bankers, finding projections for acquired companies at the time of acquisition is extremely limited, especially if any of the acquired companies were private. What you literally have to do on the job if it, let's say, was a transaction that happened five years ago, is go either usually through Bloomberg or actually download the equity research reports that were
5:18:19
from five years ago, and then look at what the analysts were projecting either from the equity Research Reports or Bloomberg, and then find that information to calculate the next 12 months projections at that particular time. So you literally kind of have to like travel back in time to find the right figures. And that's why transaction comps can be a little bit more challenging to actually do on the job as a banker. And then the other note is that private companies
5:18:44
are not required to disclose any financials, but it's often possible to find at least the last 12 month financials. Oftentimes in press releases during announcements of transactions, these kind of figures of LTM are provided. NTM usually like almost impossible to find for private companies. But yeah, LTM, NTM, very, very common. And then there's something else that I haven't included in here, which is like one year forward or two year forward. NTM is pretty much one year forward. And
5:19:10
then you sometimes you can do transaction comps with two year forward, meaning that instead of the next 12 months, you're looking 24 months basically into the future and the two years out into the future. You can have that as well if the data and information kind of allows for it. But most of the time you're going to see LTM and NTM. Last but not least, going beyond NTM calendar year plus one or calendar year plus two, these often results in a small subset of multiples that drastically
5:19:35
decrease the sample size. So that's why a lot of times you really stick to LTM and NTM. But there are times where if you do have enough information, then you may go beyond just one year. Another really important aspect of transaction comps are what are called acquisition premiums. We talked about this a bit earlier, but it's the premium that the buyer is paying the seller in order to incentivize them to sell. And I wanted to show you guys a real life example and what kind of happens
5:20:00
with a company stock when this happens. So Palo Alto Networks announced agreement to acquire CyberArk back in July 30th, 2025. And you can see here I've added a few points depending on the dates of where the stock price is at. So you can see that the announcement was on July 30th, but there was this huge increase in the stock price from the 28th to the 29th. And that's a lot of times because transactions can get leaked to the press or investors can kind of somehow figure out that a
5:20:28
transaction is happening. And then so even before the actual announcement date, there can be times where the stock actually increases. But as you can see here, the stock jumped from 383 to 434, which is around the price of the acquisition. And you can see at the bottom here, it says that CyberArk was acquired for $25 billion, which included a 26 premium to the unaffected 10-day average of the daily VWAP of CyberArk stock. Don't worry about like VWAP and all of that is volume
5:20:53
weighted average price. But basically, it's just saying that there's basically like a 26% premium. And let's go into a few notes about acquisition premiums. So the definition is the percentage difference between the purchase price per share paid by the acquirer and the target's unaffected share price before any rumors or any announcements of transactions. So just to give you a little bit of a story that I heard or things that I've heard about some of the old school top investment
5:21:18
bankers, a lot of the rainmakers. I've heard through the grapevine that sometimes, even though this is not really what they should be doing because everything's supposed to be confidential, there are times when bankers would leak transaction a little bit into the media so that there's a little bit more pressure to actually get a deal done. That's like more of an extreme example that I don't think really happens anymore. And I haven't really seen it nowadays. I've heard that happen
5:21:41
much more in the past, like a few decades ago. I wouldn't be surprised if it somehow still happens a little bit now, though. Don't quote me on that. But basically, there are times where, you know, you're working on this M&A deal and it's super, super confidential. No one else should know about it. But somehow information kind of leaks through the cracks here and there. For example, you may be an employee and you see an investment banking team come into the office and maybe you talk or
5:22:04
something like that. And however it happens, these things can leak. And I'm sure the media has their own ways of trying to figure out this information as well. But before any leaks, any rumors or any announcements of transactions, there is an unaffected price. And whatever that unaffected price is, you compare that with the acquisition offer price. And then the difference between the two basically is your acquisition premium. In terms of why they exist, there's multiple reasons
5:22:30
that I've listed in here. So one is control. The acquirer is actually buying ownership, right? You should pay a premium to acquire the entire company and have full control in a sense, theoretically, versus if you're just purchasing a portion, then you're not really gaining control. You can't make future decisions and you can't make decisions that in particular may be super beneficial for you. And so that's one reason a premium exists. Another is synergy.
5:22:53
So if the acquirer expects cost savings or revenue growth, synergies is going to be a topic we discuss a lot more in the Christian dilution module as well. competition. There may be multiple bidders that are driving up the price during an M&A transaction that causes the premium to go higher and higher. And then lastly, incentive. The acquisition premium gives the management team and shareholders the option to remove execution risk. Even if they
5:23:18
think their stock is going to 2x the next two years, there's a lot of potential things that could go wrong, right? So if they can get something like a 30 or 40% premium on the current share price, everyone can be happy and get that money and invest elsewhere and potentially earn more And so their acquisition premium exists to provide that incentive. When you're asked in interviews, okay, like what's a common acquisition premium?
5:23:38
Typically, you can say anywhere from 10 to 30%, but 10% tends to be much more on the lower end. If you had to just give one number, I would just say 30%. And they can go a lot higher too, depending on the company. At JPM, I actually worked on a transaction where the acquisition premium was something like 100% plus because the stock was just so beaten down, but there was actually a lot of value in the actual asset.
5:24:00
So it really ranges a lot. Also depends a lot on the type of acquirer. So a strategic company that sees a lot of potential synergies going to pay a lot more than a private equity buyer who just wants to make it as efficient as possible and reduce a lot of costs, load up their purchase of the company with a lot of debt and then pay down their debt. strategic versus private equity, very different types of acquires that will pay different types
5:24:22
of premiums. And then, of course, like the market, how things are, you know, if it's a really hot market, you might have to pay a higher premium company performance if the company is just amazing and there's a lot of bidders and the premium goes higher. And so as you can see, there's a lot of reasons why premium might be higher or lower. So let's look at now the kind of financial data you would collect and calculate for transaction comps. And you're going to see it's very similar to
5:24:45
trading comps, but even just more simple, right? So typically what you're going to see is acquire, target, announcement date, enterprise value, EBITDA, LTM, NTM, or revenue, LTM, NTM, the trading multiples, and then the premiums paid just as a reference point. And then all of this is kind of helpful for you to ultimately calculate your valuation. So as you can see, a lot less in here than trading comps, but a lot of very, very similar information and the calculations that we're
5:25:15
do is also going to be very, very simple as well. So in a few notes that I want to talk about compared to trading comps, data for transaction comps is a lot sparser. So things like growth rates and margins, not typically required. And then once you have accurately created transaction comps, you never need to do them again for the respective transaction, which I mentioned earlier on as well. So this is the kind of information that you select, collect and calculate. And let's
5:25:39
move on next to the next video where we're going to talk about actually analyzing transaction comps and getting to a valuation. Step three for transaction comps involve analyzing comps and valuing your target company. So starting off with analysis, very similar to trading comps in that you are comparing multiples or companies that are similar and also are ideally kind of similar in size. But you're not going to always be able to have revenue growth and margin figures because
5:26:05
especially if the companies are private, then you're not going to be able to find that information for the most part if the private companies didn't disclose any information. Premiums paid are available just if the company was public and was acquired because then it has a stock price and then a premium to that stock price. If it's a private company, then there is no stock price basically, right? And then it is helpful when you're building out your transaction comps to
5:26:28
look at historical revenue growth and margins. If you can somehow find it, if the companies that are being acquired are all public, but if you can't find it, then you can't find it. In terms of valuation, you select the range of multiples from your set of transactions and apply it to your company's financial metric, LTM or NTM. And then you calculate your valuation range by selecting a range or using quartiles like 25th percentile to 75th percentile or less frequently. You can
5:26:53
kind of look at your median or mean if you are just kind of wanting to look at a set of similar transactions in the past and say, my company is trading at 10x right now, but the mean of 10 other similar transaction in the past were seven times, eight times EBITDA or something like that. In terms of an example, let's say that you have a target company with LTM EBITDA of 50 million and NTM EBITDA of 70 million. Previous similar transactions were announced with ranges of LTM EBITDA 5X to 10X,
5:27:20
NTM 4X to 9X. So all we need to do is calculate our LTM EBITDA to our range for LTM EBITDA multiples and then NTM EBITDA to our NTM EBITDA multiple. So the target company valuation range is 250 to 500 for LTM EBITDA. And the way we're doing that is really just getting our LTM EBITDA 50, multiplying it to 5X and 10X, which gets us 250 to 500. And same thing for NTM EBITDA, multiplying our 70 million EBITDA to our NTM EBITDA range of 4X to 9X to get 280 million to 630 million.
5:27:55
So as you can see for transaction comps, Once you have all the information and data, it's really a matter of multiplication and really, really easy to actually value your target company. Similar to trading comps, the real value of an investment bank comes in getting all the information, the right transactions and right set of M&A transactions, and then figuring out what range makes sense to use for valuation.
5:28:17
Now, the next thing I want to do is go back into the transaction comps table that I showed you and kind of go into a little bit of analysis. And then ultimately another example with valuation. So the first thing that we can see here is that our target company, Byte Tech Co, by the way, all of these figures are fake and just for illustrative purposes only. So our target company is, as expected, trading at a discount compared to our transaction comps due to premiums paid.
5:28:42
And let me explain that a little bit. So you can see Byte Tech Co is trading at 9.5x LTM EBITDA and 8x NTM EBITDA. Right. And the transactions, you can see that they're required anywhere from 10x to 12x for LTM or 16x, I should say. And then for NTM, 8x to 12.5x. Right. Higher than our target company here. And the reason for that, for the most part, is that transaction comps include premiums in the enterprise value that you're looking at here.
5:29:12
So when you think about when a transaction is announced. So let's take the first transaction as an example here where TechSphere acquired CloudNova. or 3.6 billion in this transaction when it was announced tech sphere saying we want to purchase cloud nova for 3.6 billion but if you look on the very right hand side it shows that the premium paid was 32 this means that cloud nova was trading at around 32 percent less than the 3.6 billion so if
5:29:40
you were to look at cloud nova's ebitda multiples before any transaction announcement then 30 less of 3.6 billion. That's around 72, 100, about like 1 billion less. So it would be trading at around 2.6 billion. And then so if you divide that by the EBITDA figures, then you would have instead of 12x and 10x, a lot less, probably something like 8x and 7x or something like that. So because you have the acquisition premium included in the enterprise value, that inflates the trading
5:30:12
multiples. And so that's why transaction comps typically will have larger valuation ranges than your trading comps. And then most of the times compared to your DCF as well, unless your DCF assumptions are really, really aggressive. So that's something really, really important to know about transaction comps. Very common for bankers to ask which of the three main valuation methodologies amongst transaction comps, trading comps, and DCF usually yields the highest valuation. And the
5:30:38
answer you should normally give is transaction comps. But of course, it always depends. The next thing I want to mention is that you can see that buyers historically were willing to pay relatively consistent multiples of 10x to 16x of LTM EBITDA and 8x to 12.5x NTM EBITDA. So that range here, while there is still meaningful differences between 10, 16x and 8 to 12.5x, still is relatively tight and that's what you kind of want to see. So this is a set of transaction comps that if all these
5:31:05
target companies are pretty similar to our target company ByteTech, then this is a pretty good transaction comps table to use. In terms of valuation, let's say that we want to just use LTM EBITDA, the min to max. So we're going to do 200 million in LTM EBITDA for Byte Tech Co, multiply by 10x for the low end and 16x for the high end. And that gets us to a enterprise value range of 2 billion to 3.2 billion. And then based on NTM EBITDA, also doing min to max,
5:31:35
If we use our NTM EBITDA for Byte Tech Co. of 225 million, multiply that by 8 and 12.5 for the min and max, then we have a 1.8 to $2.8 billion enterprise value. So that's really all it is when it comes to valuing your company using transaction comps. You just get the multiples and you select a range for the most part and use that range multiplied to your company's financial metric in order to get to your valuation.
5:32:02
And so that really wraps up what transaction comps are. In the next video, we're going to go into the pros and cons, because as you probably have been going through throughout these handful of past few videos, probably noticing some holes when it comes to transaction comps. And that's what we're going to discuss in the next video. Welcome to the Discounted Cashflow module. And the DCF is the most important topic in investment banking interviews.
5:32:25
So obviously, this module is going to be really, really important. And what we're going to be covering is first an overview of what the DCF is, second, how to build a DCF, third, some advanced topics, and then lastly, how to prepare for interview questions. So first, going into the overview, the DCF is really built on this concept called the time value of money.
5:32:45
And to explain what that concept is, I want you to think about this question of would you rather have one million dollars today or one million dollars 100 years from now?
5:32:55
And the obvious answer is a million dollars today. And the reason for that is where the financial kind of theoretical reason for it is not just because you'd have it today and be happier today and you're probably not going to be alive in 100 years, but more so that you could use one million dollars today and invest it into a security or bond and be able to earn a return. And so that's why money is more valuable today than it is any time into the future.
5:33:20
Of course, you could also invest one million dollars and lose it all right away. But you assume that you're able to earn some kind of safe return on it. And so it's more valuable today. So the time value of money states that a dollar today is worth more than a dollar tomorrow. That's really all it is. And the reasons for it and going into this concept a little bit, as I mentioned, investors can invest that dollar and earn a return on it in the future.
5:33:44
As a result, there's an opportunity cost of receiving that dollar in the future versus today. Inflation also further reduces the purchasing power of money over time. I'm sure you've heard from your parents or your grandparents before, like back in my day, I know a movie ticket was like $2 or something like that. And that's really due to inflation. And then so in order to value a company or asset in today's terms, then their future cash flows need to be discounted back to the present day.
5:34:10
And that's really what we're moving towards, what we're getting towards for the DCF. The DCF basically says that a company's ability to generate cash is the value of the company. But because that cash is going to be generated in the future, you need to discount that back into today's terms somehow, which we're going to discuss. And that's how the time value of money really is a fundamental concept for the DCF. And so you may be wondering, how exactly do you discount back to present value?
5:34:38
How do you figure out what those future cash flows are worth today? And that's where we're going to introduce something called the discount rate, which reflects the required return for investors based on the risk and opportunity of their cost of capital. Because every investor is always going to or should be thinking about if I'm investing my money in this one particular asset, then I could potentially invest in other assets, right?
5:34:59
So there's an opportunity cost to investing in any particular asset. And investors all have their different styles and their different mandates for how they invest. But the discount rate kind of reflects how much investors overall expect on their return on their capital. And that is how we are going to be thinking about how to think about future money in today's terms. We'll be going into a lot of detail into all these concepts as we go into the how to build a DCF videos.
5:35:24
So the time value of money is the fundamental concept behind the DCF, as I mentioned. And let's walk through an example with numbers. So let's say your rich uncle gives you two options. First option is $100,000 one year from now, and then $100,000 two years from now, or $180,000 today, which is obviously less than the $200,000 total, right? Assuming you can reliably earn a 10% return each year, which offer is better?
5:35:49
And I want you to also think about this as well and pick one of the two options, and then we'll kind of go into the answer here. So the way we want to think about this is end of year one. So we're going to be talking about option one first. you're receiving $100,000 at the end of one year, and you're assuming that you can get a 10% return, right? So what we're doing with this math you see on the right hand side is we're getting the
5:36:11
100,000 and dividing by one plus the 10%. And that gets us to $90,909. So what this means, basically, is that if you were to get $90,909 today, and then earn a 10% return on it, if you do the math on a calculator, then you'll see that that equals $100,000. So that's essentially we mean by discounting we think about our future cash flow and discount by the potential return aka also known as the discount rate and then we use an exponent for the number of years in the
5:36:43
future so this will make more sense when we also look at year two so year two is a hundred thousand dollars divided by one plus ten percent to the power of two because now you're earning a ten percent for two uh ten percent return for two consecutive years and so if we do that math what we get to is $82,645. Again, if you were to do $82,645 times 1.1 or the 1 plus 10% times 1 plus 10% again. So basically it's $82,645 times 1.1 times 1.1, then you're going to get $100,000.
5:37:17
And so let's move on here. So basically the present value of option one is $90,000 plus the $82,000, which gets you to $173,554. Then now you want to compare this with option two, which is $180,000 today. So taking the $180,000 is actually the better deal because it's more than the present value of the $173,554. So the key insight here is that even though option one gives you $200,000 across two years, it's actually less valuable than receiving $180,000 today. And that's the main
5:37:52
point that I want you to take away is that when we think about the future cash flows of a company and the cash flow company is able to generate, we need to discount back their future cash flows to present day terms. And the way we do this is with a discount rate. So thinking about valuation methodologies in general, if you went through the comps module, then this will look familiar. But there are two types of valuation relative where we look at trading comps and transaction
5:38:17
comps. And then there are intrinsic methodologies, the DCF LBO dividend discount model, which is not very super common, but it is another valuation methodology. And the DCF is the most commonly used intrinsic valuation methodology in investment banking. When you are talking about building models, pretty much most of the time for most groups, you're going to be building DCFs. Sometimes here and there are accretion dilution models and LBOs. And so that's why the DCF is
5:38:42
super, super important in banking interviews, because it's the vast majority of the time what you're going to be building and what banks get paid for as well. So in terms of the DCF concept, it really states that a company is worth the present value of projected future cash flows and then present value of its terminal value. These are new concepts to you. We're going to go through all of them in the how to build a DCF section. So don't be too worried. But what I wanted
5:39:06
to show you this graphic just because it really is a visualization of what you do in a DCF, which is You project out a company's free cash flow for as many years that makes sense for the particular company that you're looking at. So that's where you see the cash flow plus cash flow on in the middle of the slide here. And then you project out each year's cash flows. Let's call it five to 10 years. And then everything beyond those five to 10 years until the end of time.
5:39:34
That's called the terminal value. And it might seem crazy right now to think, how do you value a company until the end of time? but there's a mathematical way to approach it, which we're going to be going over. But getting all of your future cash flow and then your terminal value, getting all of that and discounting back using a discount rate, getting all of those cash flows and the terminal value to present value, that's the value of your company.
5:39:57
So this is just a graphic of what we're going to be doing. And so the last thing I want to leave you with in this video is how you should answer the what is a DCF question. And I put this in here because there's a lot of steps and the DCF can be arguably a little bit complex. But in terms of the interview answer, this is pretty much how I'd answer it. It's all the main points, but it's also short and sweet. So a DCF is an intrinsic valuation methodology
5:40:21
based on a company's future free cash flows. You first start by projecting cash flow for five to 10 years and calculate terminal value using either the exit multiple or perpetuity growth method. Then calculate your WAC to discount both back to present value in order to get to your enterprise value. So if all of this is new to you, It all makes sense as you go through the next section of this module. But I wanted to leave you with this and you can refer back to this when you prepare for
5:40:45
your interviews for answering this question of what is a DCF. Let's now go into how to actually build a DCF. And after each of the core five steps, we're also going to be jumping into Excel so that you actually practice these concepts with numbers. And so that'll really help build your knowledge and understanding for the DCF. So in terms of the five core steps, first is to project out free cash flow.
5:41:08
Second is to compute a discount rate, which is called your weighted average cost of capital or your WAC. Third, calculate terminal value, discount your free cash flow and your terminal value to present value. And then lastly, calculate your implied enterprise value and share price. So let's jump into the first step, which is projecting out your free cash flow.
5:41:27
And to give you an overview, and I'm going to be going through this for each of the key steps and to kind of focus you on the main topic at hand for the DCF. So when you think about a company's overall value and its enterprise value, it can be broken down into the present value of projected future free cash flow and then present value of terminal value. So right now we're focusing on the future free cash flow portion.
5:41:50
So for free cash flow, this is oftentimes the most important and time consuming component of the entire DCF, because this is where you're thinking a lot through the entire company's operations. And there's a lot of different parts of the free cash flow formula that you have to project. And then there's more complexity when you think about also building out different scenarios for your revenue, let's say, or your EBIT. And so this is really the most time consuming portion.
5:42:16
And your free cash flow, really, the main two things you're going to need to know about it for the DCF is something called the explicit forecast period, and then the actual formula itself. So that's how we're going to be thinking about free cash flow throughout this video. So let's go first into the explicit forecast period. So this is the number of years you'll be projecting out your free cash flow. And it's more than just choosing a number. There's some things you have to consider
5:42:41
when you're thinking about the number of years. And that's what we're going to be discussing. So the first decision you need to make when building a DCF is this explicit forecast period, the standard number of years. And typically what you just say in interviews is five or 10 years, five years for very mature, stable companies where growth and margins are expected to normalize. Then 10 years for early stage companies where high growth is expected before maturity.
5:43:05
But with that said, you could do a DCF for any number of years. Typically, the reason bankers say five to 10 years, honestly, it's just because five and 10 are nice kind of round numbers. And that's also honestly why bankers will choose either five or 10 years. But there are times when you need to do more or less. So for certain companies and industries, 15 to 20 plus years may be necessary.
5:43:27
So some industries have really long ramp up cycles like biotech companies that require more than 10 years to fully scale and reach steady sales or early growth. Or another example is unprofitable tech companies that are going to be profitable over time.
5:43:41
And so like when back when I was at J.P. Morgan, there were times when I would build 20 to 25 year DCFs because for biotech companies, they're developing their drugs and actually have negative free cash flow for let's call it five years, sometimes even more. and then they start being profitable once their drugs are actually approved. And then so you need to project out free cash flow for a long period of time.
5:44:02
For biotech in particular, because they have patents and I won't get too much into that. The main takeaway I want you to understand is that for a DCF, you are actually building it out and it should fit your own analysis. And so depending on the company that you're actually analyzing and building a DCF for, technically you could do three years, you could do 100 years.
5:44:23
But then there's a certain point as well where if you do too many years, then you can't actually rely on your projections because there's so many things that could happen in 100 years. Right. And also going a little bit back into this five versus 10 year thing or mature, stable companies that already have their growth rates kind of settling down to a certain number.
5:44:41
And then their EBIT, EBIT, the margins are kind of stabilizing and it doesn't seem like it's going to really change too much if you project out your six to 10. It may make sense to use a five-year for that reason. For companies where they are just starting to really become profitable, they're going to have super, super high growth rates. And then their profitability margins are going to be pretty low, but growing over time and kind of stabilizing, right?
5:45:04
And for your DCF, you want your growth to kind of steady to a certain lower-ish percentage. And then you want your margins to be stabilizing. Because once a company is super, super large and mature, they should really be operating at a very, very efficient level. and their margins should be relatively stable. So those are some things that we jumped ahead a little bit about. We're going to go through it in a bit, but that's something that's important to really take away.
5:45:28
And the last thing I want to mention here is that the key principle is that you forecast as long as you can reasonably defend your assumptions. Then you rely on the terminal value, which we'll discuss later. So let's go into the unlevered free cash flow formula. It's your EBIT times your one minus tax rate. Essentially, you're getting your EBIT and subtracting out your taxes. It is a little bit different from your actual taxes that you would pay as a company because
5:45:52
from your earnings before taxes, you subtract out your taxes, right? And that already is impacted by your interest expense. For your unlevered free cash flow, we're starting from EBIT and then taking out your taxes based off of your EBIT. That may sound a little strange to you if this is your first time hearing about it, but the reason, again, we're doing this is so that the cash flow is available to all types of investors, both equity and debt.
5:46:14
From there, you add your depreciation and amortization back, subtract out CapEx, subtract out your change in networking capital. So let's kind of I want to give you a brief summary into each of these. So again, EBIT times one minus tax rate available to all investors. DNA, this is the most common non-cash expense and it's tied to CapEx. It's also recurring, something you can predictably project over time.
5:46:35
CapEx, this is cash outflow that's going to be required for you to maintain and grow the business. And then change in networking capital. This is capital required for day-to-day operation. So hopefully with all this, you can kind of see that there are some patterns with a lot of these. They affect all investors because when you, for example, subtract out CapEx, there's less money that's actually available for your investors, right? And same with change in networking capital.
5:47:00
And to be included in the Unlevered Free Cashflow formula, I want to go into a little bit of the patterns that we were talking about. So here are some key criteria. First is that the line items need to affect core operations. So directly tied to running the business excludes financing activities and non-core investing activities. So you don't see in our unlevered free cash flow formula, subtracting out cash, for example, or M&A investments, anything like that.
5:47:26
We're only focused on the core operations. The reason for that is because it's really important when you're projecting out cash flow that things are recurring. You want to project out line items that are expected to occur on a regular, repeatable, predictable basis because unusual one time events such as a lawsuit or impairment on your goodwill, M&A investments. Those are all things that can on or off happen at any given year.
5:47:52
But you can't actually know when things like that are going to happen for the next five to 10 years. Right. It really depends on what happens with the business and what kind of opportunities arise. And then the last thing available to all investors. So the line items need to represent cash flows before servicing debt or paying dividends. And then it must exclude line items before interest expense on the income statement.
5:48:11
So these are patterns and characteristics that you're going to see as we talk about the different components of the unlevered free cash flow formula. And so I just wanted to kind of really point these out because they're going to be occurring again and again. Step two of building your DCF is your discount rate, which is one of the most commonly asked about topics in banking interviews. So it's going to be super, super important that you pay close attention to this section of the module.
5:48:35
But going back to our simplification of the DCF, we have the company's enterprise value. And in blue here is present value, which is really what the discount rate is all about. It's getting your projected future free cash flow and terminal value all back into today's terms, a.k.a. your present value. So in terms of the discount rate and what it is, since companies have multiple sources of capital, they also have multiple costs of capital.
5:49:02
And all of that combined is called your weighted average cost of capital, also known as your WAC. And it's comprised of three different components, your cost of equity, your cost of debt, and then your cost of preferred stock. So as you can see, these are different ways that a company can receive and raise capital. And for your cost of equity, there is a return that investors expect from investing in the stock, either through stock appreciation and dividends.
5:49:28
And then for cost of debt, this is the return debt holders receive from interest payments and then cost of preferred stock. These are returns that investors receive from bird stock dividends. And so the three of these all have different ways of being kind of calculated and they're all part of your weighted average cost of capital.
5:49:46
But for investment banking interviews, you don't need to worry about the preferred stock portion because it's not asked about and you don't need to really reference it at all. I just include it in here so you kind of have exposure to it. And we're going to be talking about the cost of equity and cost of debt in more detail. And I'm going to help you understand how all of this works. And then going into the actual formula for your WAC, which is what you always use in your DCFs,
5:50:09
this is a formula that you're going to need to memorize 100% for banking interviews because this is a very simple, easy question that you need to get right. Otherwise, the banker is going to be unsure if you're actually invested in the job. So your weighted average cost of capital is your percentage of equity times your cost of equity, plus your percentage of debt times cost of debt times one minus the tax rate. That's exactly what you need to say in your banking interviews.
5:50:33
So breaking this down a bit, your percentage of equity is how much the company is funded by equity. This is really simply your equity divided by your debt plus equity. So if your company has $100 million in debt, $100 million in equity, in total, they have $200 million in value, let's call it, right? The percentage of equity is 100 divided by 200, so 50%. Then your cost of equity. This is how much equity investors expect to earn. There is a way to calculate this that
5:51:00
we're going to be owing over called the capital asset pricing model or CAPM. Percentage debt, this is how much the company is funded by debt. Cost of debt, how much debt holders expect to earn, what is the interest rate, and then one minus the tax rate. There's a tax shield based on the company's tax rate because your interest expense reduces your tax point. All of these things, we're going to be going into more detail, but notice that your WAC takes into account all
5:51:23
sources of capital. So that matches to your unlevered free cash flow, which is available to all investors. That's why ultimately all of this works together to get to your enterprise value. So let's go through an example of the formula in action. So let's say a company is comprised of 80 equity and 20 debt as a 20 tax rate. The company raises capital with a cost of equity of 10% and cost of debt of 6%. What is the whack? And if an investor invested $1,000, what is the expected
5:51:50
annual return. So with this question, I want you to see that with your WAC, there are two sides of it, the cost for the company and then the return that the investor expects. Those two things are the exact same thing, as you'll see with this question once we get into the answer. So plugging all these numbers into the WAC formula, you have 80% equity times 10% your cost of equity, and then your 20% of your debt times 6% interest rate times one minus your tax rate. That is your cost of debt
5:52:18
portion, right? And this all equals 8.9%. What this means is that if a company raises any capital, they're going to need to pay 8.9% of that capital to their investors. And you can see it's weighted based on the amount of a company's equity times their cost of equity, plus the amount of a company's debt times their cost of debt. And then you subtract out your tax shield portion. And so the key takeaway here is really that it's your weighted average cost of capital is exactly
5:52:44
what it sounds like, right? It's weighted based on the different cost of capital. And then cost of capital is literally the amount that you need to pay in order to raise capital. So if a company raises $100, they need to pay $8.90 to their investors. And so to directly answer this question, the company's whack is 8.9% and investors expect to earn $89 per year, aka the $1,000 times 8.9%. But please keep in mind, this is for all investors in total. Depending on the type of
5:53:15
investor you are, whether it's equity or debt, you're actually going to receive a different because equity investors expect 10% and debt investors expect 6%. Step three in building your DCF is calculating your terminal value. So if we go back into the DCF simplified for a company's value, you have your future free cashflow and the present value of your terminal value. And that's where we're going to be going over. So terminal value, unlike all the other concepts that we've
5:53:40
kind of discussed throughout the past few modules for technicals, terminal value is not something that we really have discussed at all. So if it's new to you, it's going to feel really, really foreign. But ultimately, it's pretty easy to understand. So that's kind of the good news. But terminal value is the value of all future cash flows beyond the explicit forecast period. So anything beyond your last projected year of free cash flow, you're trying to basically get the value of your company
5:54:05
from your last projected year until the end of time. Because your DCF, as a reminder, is what a company can generate in terms of cash from today until the end of time. and all discounted back to present value. Total value of company is your future free cash flow and your terminal value. Typically, your free cash flow is five to 10 years. Terminal value is beyond forecast period until the end of time. So in order to calculate terminal value, there are two methodologies.
5:54:28
So there's the perpetuity growth method and then the exit multiple method. Perpetuity growth method, you use a formula, which is the final year of free cash flow that you have projected, times one plus your perpetuity growth rate, all divided by your WAC minus your perpetuity growth rate. We're going to go into why this formula actually works. And to go into some of the conceptual theory behind this method, so it basically assumes that your cash flows grow at a constant rate forever.
5:54:54
And it's grounded in economic theory, but very, very sensitive to small changes in assumptions. And the standard perpetuity growth rate that you'll use is typically from especially companies in the US is going to be two to three percent. Next is the exit multiple method, which is your financial metric that you use in your financial year, most likely EBITDA multiplied by an exit multiple. So this assumes that the company is sold at the end of the projection period at a multiple.
5:55:17
So basically what you're doing is a comps analysis. And this is anchored to real market data, but it's heavily reliant on the multiple that you choose. Especially if this is your first time really going through terminal value. I know this is coming at you really, really fast. But let's break down each of these methods and how they work and the conceptual theory behind them. The perpetuity growth method assumes that cash flows grow at a constant rate forever.
5:55:42
So the formula, as we had discussed in a previous video, finding your cash flow times one plus your perpetuity growth rate, also called your terminal growth rate, divided by your WAC minus your perpetuity growth rate. Let's talk about why this works. So in general, a perpetuity is a stream of equal cash flows that continue forever with no end. So for example, if you invested in something that gave you $100 a year forever, that would be a perpetuity.
5:56:07
And perpetuity just also means into the future forever. So if you were to think about the present value of a perpetuity, that would just be the constant cash flow divided by the discount rate. So an investment that generates $100 per year with a 10% discount rate is worth $1,000 because you just do $100 divided by 10%. In other words, if you were to invest $1,000 today and earn 10% on it forever, you would receive $100 in perpetuity, right? So that's why this formula works for the perpetuity.
5:56:37
And so this is very, very similar to the perpetuity growth method for your terminal value for your DCF, because for the present value of a perpetuity with growth, that equals your cash flow in your next period divided by your discount rate minus your perpetuity growth rate. So an investment that generates $100 per year with a 10% discount rate and grows at 3% is worth $1,471, which is your $100, which is the cash flow that you're generating, times
5:57:05
1 plus 3% because you want to get your cash flow in the next period. And then you want to divide this by your discount rate minus your perpetual growth rate. So this is basically the same thing as your terminal value perpetuity growth rate method formula. And that's really the theory behind the perpetuity growth method. You don't really need to know much more than this or even the theory at all, because when you're interviewed for banking, you're not going to be asked about the
5:57:30
theory. You're just typically going to be asked about the formula and what the perpetuity growth method is. But I want you to understand the theory just so you understand, you know, like why this method even kind of works or makes sense. So another important thing that I want to mention to you is the growth rate. So the perpetuity growth rate is typically two to three percent because the company cannot grow faster than the overall economy forever. If you look at U.S. GDP
5:57:52
growth, typically it's you can see here at 0.3 to 4.4 percent. Of course, there are ups and downs, but the U.S. economy, for example, doesn't typically grow larger than two to three percent. And a higher perpetuity growth rate than let's call it three or four percent implies that the company is going to overtake the economy in the long run, which just is impossible. Right. Because no one company can be larger than the overall economy that it sits into.
5:58:17
And with a growth rate of five percent, because we're talking about perpetuity and because of the law of compounding, if you have a growth rate of four or five percent, ultimately that company in time is going to grow larger than the economy it sits in. the economy is growing at two to three percent. Right. So that's why the perpetuity growth rate, the rate that you always are going to be using, especially for U.S. companies, it's two to three
5:58:40
percent. Even if you go outside of the U.S. and maybe the economy or emerging markets are growing at six to seven percent, you still want to use a more reasonable perpetuity growth rate because every single quickly growing economy in the world has ultimately slowed down and started to grow at a smaller, more reasonable percentage. So that is the perpetuity growth method. And, you know,
5:59:01
There's kind of theoretical and, you know, the formula may not be as intuitive, but we're going to go through Excel examples of using the actual method. And that should really help with your understanding and how it calculates term value. The exit multiple method is a lot simpler and easier to understand. And it really just assumes that the company is sold at a valuation multiple.
5:59:19
Just as how when you're doing comps analysis and you have a company, let's say, with 100 million in EBITDA and peers are trading at 10 times multiple, then your company is valued at 100 times 10, 1 billion. And that's essentially what you're doing with the exit multiple method. So you're getting your financial metric in your final year that you choose. It could be revenue. It could be EBITDA. And then you multiply by the exit multiple.
5:59:41
So in practice, the financial metric in your final year is almost always going to be your EBITDA. But sometimes you may use your revenue EBIT on leverage for cash flow, which is very, very rare. Exit multiple comes from trading and transaction comps, typically a little bit more so from trading comps. And so if a company is projected to generate 200 in EBITDA in year five and then trading comps justified eight times multiple, then the company's terminal value is 1.6 billion.
6:00:07
So as you can see, it's a really simple market base and often preferred method, but it's very, very sensitive to the multiple chosen and doesn't capture company specific long run economics because you're really just slapping on a multiple. And there's also a kind of drawback to the exit multiple method in that when you think about the DCF, it's an intrinsic analysis. You're looking not at market data, but what a company can
6:00:31
generate from its operations. But when you use terminal value, you're actually introducing a market related input into your model, right? Because now your model is actually being affected by the market. So that's kind of like a drawback or a con to the exit multiple method. You're taking away from the intrinsic methodology of the DCF. Step four in your DCF is discounting to present value. And we have gone through some of these slides already, but I want to review them
6:00:57
with you. And the DCF states that a company is worth present value of its projected future cash flows plus its present value of its terminal value. This is a graphic we went through when we first started the DCF module. And this is pretty much hopefully now making a lot more sense to you because we went through the cash flow part, the discount rate part and the terminal value part. And now what we need to do is just discount everything back to present value.
6:01:22
So if you remember this example for the time value of money, your rich uncle is giving you two options, 100K one year from now, 100K two years from now, or 180K today. Then even though your uncle is giving you 200K in total in option one, your option two of 180K is actually a better deal for you. Because if you recall, for end of year one, you discount that 100K by 1.1 to the power of one and then end of year two, 100K divided by 1.1 to the power of two. That ends up being
6:01:50
worth $173,000 today versus the 180K. So taking the 180K is a better idea. And essentially what you just saw here is what we're going to do with our cash flow and our terminal value. So when it comes to discounting to present value, due to the time value of money, your cash flow and terminal value must be discounted back to present value. And for your cash flow, what you're doing is you're getting your cash flow from your first year divided by one
6:02:13
plus your discount rate to the power of one. Then for your second year, cash flow divided by one plus your discount rate to the power of two on and on until your last projected year, which is end here. So let's call it five or 10, 15, 20, whatever it is for your DCF. And then for your terminal value, you're getting your terminal value divided by one plus the last projected year, because what you are assuming with your terminal value when you calculate it is that is what the value of your
6:02:41
company is worth in your last projected year until the end of time. So for example, when we think about your exit multiple method, if in your last projected year, let's call it year five, you have a terminal value of 500 million, you're basically saying with that exit multiple method in year five, when we use our year five EBITDA and use a multiple, we believe that at the end of your last projected year until the end of time, your company is worth, you know, let's call it 500
6:03:07
million EBITDA times 10 times multiple $5 billion. And so you need to discount that back to your present value because your terminal value that you calculate with either method is going to be the value for your business from your last projected year until the end of time. So just to give you some numbers so that it kind of hopefully clicks a little bit more if it hasn't already, the cash flow where you can see here is growing 100 million, 105, 125. And then if we have
6:03:34
a WAC of 10%, then the denominator is one plus your WAC to the power of each individual year. And then for terminal value, let's say you calculate terminal value of 500 million, you divide that by one plus your WAC to the power of five. That's really all there is to it, to discounting to present value. Let's also next jump into Excel so you can get some practice with this as well. Step five for your DCF is calculating your enterprise value and your share price.
6:03:58
This part is also really, really easy. So the sum of the present value of projected free cash flow and terminal value results in enterprise value. You're literally just summing them up together to get to your enterprise value. And so enterprise value, cash flow at terminal value for present value of each and your present value of projected for cash flow is being discounted at each respective year. Your terminal value is being discounted by your last year of projections. So five in your,
6:04:23
if you're projecting a five-year DCF, 10, if it's 10-year DCF, this is because it's everything your terminal value is based on your last year's projections, right? So to get to enterprise value to implied share price. You have to subtract out your net debt to get to your equity value and divide by your fully diluted shares outstanding to get to your implied share price. This is very, very just standard equity enterprise value conceptual stuff. So let's say we have enterprise value of 1 billion.
6:04:47
This is the present value of the sum of your unlevered free cash flow and the present value of your terminal value. Then let's say the company has 200 million in net debt. You also would subtract out preferred stock and non-controlling interest if needed. But for the most part, most companies don't have it. Then that gets you to 800 million in equity value. What you would want to do is the whole purpose of your DCF is to try to compare your implied
6:05:10
valuation versus what the company is actually trading at on the market, right? So you want to compare, let's say we calculate for a company, okay, their implied equity value based on DCF's 800 million, but the company right now is trading at 2 billion. Then you're going to think, whoa, this company is trading way too high right now. way too overvalued versus if the company is trading at 100 million and you get to 800 million,
6:05:34
you would think based on my assumptions, this company is going to grow to their 800 million dollar valuation that I'm getting. And you want to buy the stock, right? Then you divide by your fully diluted shares using the treasury stock method to find the fully diluted shares outstanding. We went over in the equity enterprise value module that gets us to an implied share price of $8, which you compare with the current share price to see whether or not the stock is undervalued or
6:05:56
overvalue. Now for private companies, you don't need to calculate the implied share price. You can just stop at enterprise value and equity value because typically, you know, like our private companies, they don't have share prices. So you're just not going to need to do that. And so, as I mentioned, the whole purpose of the DCF is to get to your implied share price and compare with current share price. If the company is public, that's really what we have been building everything
6:06:16
towards. Let's go jump into Excel. You're going to see that this part is really, really simple and easy. All right, so if you can believe it, we're coming to the end of this video. Definitely give yourself a huge pat on the back if you've made it this far because you're now equipped with a ton of knowledge other candidates don't have. And now it's also time for execution, which I want to touch upon as a brief bonus section here. First, I've created a preparation checklist that should be
6:06:42
super helpful for you to track your progress for banking recruiting. You can find the checklist in resource pack you can download for free using the link in this video's description. Second, if you want more personalized help with your specific situation to maximize your chances for a banking offer, feel free to check out my mentorship program, The Banking Accelerator. That's where you'll work directly with me and my team for one-on-one calls,
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group calls, guest speaker calls with bankers and investors, over 30 hours of video content just like in this video, and more than 500 questions asked in real banking interviews, and a whole lot more. Third, and perhaps most importantly, take this video as an action call to actually do something. You're now equipped with the knowledge to be able to practice and become a much better candidate. Reach out to bankers, work on your behaviorals, or build a DCF in the next 24 hours.
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Don't just watch this video and then forget about it. Drop a comment below and tell me what you're going to be working on first, and if you have any questions, I read every comment and I'll reply to as many as I can. I'll also be very impressed because then I'll know that you watched this full video. Alright, so we covered a lot of ground in this video and here's a quick recap of what we went through. You learned that there are three key components to banking recruiting: networking,
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behaviorals, and technicals. And so we started with recruiting fundamentals to help you understand the industry and how recruiting decisions really get made. We then dove into how to craft your answers for behaviorals to make you a compelling candidate. And then we went through the most important foundational technical concepts covered in banking interviews. Honestly, this video represents years of banking experience and everything I've learned from helping over a hundred students break
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into banking. But here's the thing and I can't stress this enough, you actually have to do something with this information. I've seen so many people watch videos like this, get a lot of advice and just never take action and I really don't want you to be one of those people. The candidates who succeed are the ones who watch something like this and then immediately start implementing. They start networking with a clear understanding of what bankers want,
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do some deep introspection to craft authentic behaviorals, and become technically sound. They don't wait for the perfect time or until they feel completely ready. I was once in your shoes trying to figure out how to break into banking, cramming technicals and trying to understand what bankers wanted and how recruiting really worked. I made a ton of mistakes along the way, but I kept learning and eventually it somehow all worked out.
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You now have advantages that I never had. This entire video is all about providing as many people as possible an inside view into what banks look for and the knowledge you need to do well in interviews. If you found this video helpful, please do me a small favor by hitting that like button and subscribe to the channel and check out my Instagram and TikTok for even more banking recruiting tips. Alright guys that's all from me. Download the resource pack and please take action
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and start implementing the advice in this video. I'm genuinely rooting for your success and love hearing success stories from people who watch my content and actually go and make things happen. So feel free to DM me or leave me a comment if any of the advice and help that I gave you or give you from this video or other videos has helped you for banking recruiting. We'd really appreciate that
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and thanks so much for watching this. Props to you if you watched this whole video. See you all in the next one!
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