Breaking Into Wall Street Exam Questions & Answers (All Technicals) 400 Questions & Answers: A+ Guide Solution

You've never worked in finance before. How much do you know about what bankers actually do? (Ans- I've done a lot of research on my own. Based on that, I know that bankers advise companies on transactions - buying and selling other companies, and raising capital. They are "agents" that connect a company with the appropriate buyer, seller, or investor. The day-to-day work involves creating presentations, financial analysis and marketing materials such as Executive Summaries. Let's say I'm working on an IPO for a client. Can you describe briefly what I would do? (Ans- You meet with the client and gather basic information - such as their financial details, an industry overview, and who their customers are. You meet with other bankers and the lawyers to draft the S-1 registration statement - which describes the company's business and markets it to investors. You receive some comments from the SEC and keep revising the document until it's acceptable. You spend a few weeks going on a "road show" where you present the company to institutional investors and convince them to invest. The company begins trading on an exchange once you've raised the capital from investors. How much do you know about the lifestyle in this industry? Do you know how many hours you're going to work each week? (Ans- I've done my homework and I understand it's going to be an 80-100 hour per week job but I'm not afraid of that. Can you tell me about the different product and industry groups at our bank? (Ans- Being a bulge bracket bank, Credit Suisse offers pretty much anything a client could ask for. Restructuring, M&A, LevFin, Debt and Equity Capital Markets. Some specific groups - Financial Sponsors, ECMS, DCMS, Ultra High Net Worth (UHNW). Some specific industries - healthcare, industrials (my previous interviewer), financial institutions, etc. What's in a pitch book? (Ans- It depends. 1. Bank "credentials" (similar deals they've done to "prove" their expertise). 2. Summary of a company's options ("strategic alternatives" in banker-speak). 3. Valuation and appropriate financial models (for example, if you're pitching for an IPO you might show where the IPO proceeds would go). 4. Potential acquisition targets (buy-side M&A deal) or potential buyers (sell-side M&A deal). This is not applicable for equity/debt deals. 5. Summary and key recommendations. How do companies select the bankers they work with? (Ans- Usually based on relationships. When it comes time to do a deal, the company calls different banks it has spoken with and asks them to "pitch" for the business. This is called a "bake-off" and the company selects the "winner" afterward Walk me through the process of a typical sell-side M&A deal. (Ans- 1. Meet with company, create initial marketing materials like the Executive Summary and Offering Memorandum (OM), and decide on potential buyers. 2. Send out Executive Summary to potential buyers to gauge interest. 3. Send NDAs (Non-Disclosure Agreements) to interested buyers along with more detailed information like the Offering Memorandum, and respond to any follow-up due diligence requests from the buyers. 4. Set a "bid deadline" and solicit written Indications of Interest (IOIs) from buyers. 5. Select which buyers advance to the next round. 6. Continue responding to information requests and setting up due diligence meetings between the company and potential buyers. 7. Set another bid deadline and pick the "winner." 8. Negotiate terms of the Purchase Agreement with the winner and announce the deal. Walk me through the process of a typical buy-side M&A deal. (Ans- 1. Spend a lot of time upfront doing research on dozens or hundreds of potential acquisition targets, and go through multiple cycles of selection and filtering with the company you're representing. 2. Narrow down the list based on their feedback and decide which ones to approach. 3. Conduct meetings and gauge the receptivity of each potential seller. 4. As discussions with the most likely seller become more serious, conduct more in-depth due diligence and figure out your offer price. 5. Negotiate the price and key terms of the Purchase Agreement and then announce the transaction. Walk me through a debt issuance deal. (Ans- 1. Meet with the client and gather basic financial, industry, and customer information. 2. Work closely with DCM / Leveraged Finance to develop a debt financing or LBO model for the company and figure out what kind of leverage, coverage ratios, and covenants might be appropriate. 3. Create an investor memorandum describing all of this. 4. Go out to potential debt investors and win commitments from them to finance the deal. How are Equity Capital Markets (ECM) and Debt Capital Markets (DCM) different from M&A or industry groups? (Ans- ECM and DCM are both more "markets-based" than M&A. In M&A your job is to execute sell-side and buy-side transactions, whereas in ECM/DCM most of your tasks are related to staying on top of the market, following current trends, and making recommendations to industry and product groups for clients and pitch books. In ECM/DCM you go more in-depth on certain parts of the deal process, but you don't get as broad a view as you might in other groups. What's the difference between DCM and Leveraged Finance? (Ans- They're similar and there is some overlap but Leveraged Finance is more "modeling-intensive" and does more of the deal execution with industry and M&A groups on LBOs and debt financings. DCM, by contrast, is more closely tied to the markets and tracks trends and relevant data. Explain what a divestiture is.