iBanker.jp

Investment Banking Series Post 7 Roadshows 1. What is it anyway? Roadshow is basically marketing of the firm issuing securities to the potential investors. CFO, CEO and a few more people from senior managers hit the road and make presentations to all kind of investors in both group and one-to-one meetings. The presentation's contents are typically heavily curated by investment bankers to make sure that the equity story is as smooth and persuasive as possible, and they show and tell only the positive sides of their business. There would be an explanation of the existing business, and the expansion plans that will be financed by the proceeds from fund-raising. It is actually also a good opportunity for junior bankers to meet the company that they spend many days and nights to make look good in the pitch book. And the savvy ones would make good use of it to connect with the CEOs and CFOs that in the future may benefit from their investment banking services. 2. Inv...

Very interesting article, so I took the liberty of quoting it below: Bank pay in Singapore makes sense By PETER STEIN When it comes to pay, Wall Street could learn a thing or two from Singapore.

I have reformatted my Valuation posts and uploaded as a PDF document on Docstoc.com. All formulae are now much easier to understand, and the overall visibility is much better compared to when posted on this blog. The file can be found here .

Investment Banking Series Post 6 Equity Story 1. What is it anyway? Equity Story is, in its essence, the reasoning why the particular stock should be bought by investors. It emphasizes the strong side of the company and places the stock in either the value or the growth category. In a nutshell, the value stock is expected to have little price appreciation, but pay out relatively high dividend, whereas the growth stock is expected to have a high appreciation potential, but not necessarily pay much dividend. How a stock is classified depends on several factors, such as where in the industry life cycle it is, what the macro conditions are, what industry it belongs to, or sometimes even if it has a hot buzzword in its description. For instance, a power generation company would usually be classified as a value stock: there is very little growth potential, but the cash flows are steady and not as much correlated with the economic conditions. An Internet portal or a biotech company ar...

Investment Banking Series Post 5 Valuation, Part 2 DCF Valuation Discounted Cash Flows (DCF) analysis looks at the amount of cash the company generates and discounts it back from a fixed point in time (usually 5 or 10 years, depending on the sector) along with the terminal value. Specifically, company's Free Cash Flow is projected for every year of the valuation period, the terminal value is calculated for the last year of the valuation period and the sum of the two is discounted by the Weighted Average Cost of Capital (WACC) of the company. This process involves a lot of projections, and therefore requires very detailed understanding of company business, because in the end the valuation is determined by how accurate these estimates are. CFA prep guides (official guide, Schweser notes, etc.) provide in-detail explanation of how FCF is calculated and what can serve as a proxy for it, but in principle its formula is as follows: FCF = EBITDA - Tax Expenses - CAPEX - change i...

Investment Banking Series Post 4 Valuation, Part 1 1. What is it anyway? Valuation is the process of calculating and otherwise assessing the Enterprise Value (in case of equity) or any other appropriate metric to be used as a base for setting the fair price range for the offering. Along with the distribution network, the ability to produce the appropriate valuation is supposed to be the core expertise of an investment bank. There are books out there that would give you much detail on the valuation techniques. The one I would personally recommend is Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions . It's a step-by-step easy to follow practical description. I do not intend to go anywhere that far, and will just introduce the important concepts here. 2. The great myth and the not-so-impressive reality Valuation is often rumored to be a highly numerical and sophisticated procedure, both science and art, requiring in-depth understanding of financia...

Investment Banking Series Post 3 Pitch Books 1. What is it anyway? A pitch book is the paramount of days and nights of a banker's hard work. It is a marketing tool that tries to set apart basically very similar banks and to support the claim that THIS bank, and NO ANY OTHER should be selected to arrange the deal. They say pitch books used to be actual books, but in the present world they are Power Point presentations printed out and bound in a plastic cover. The main purpose of the pitch book is to deliver two messages to the prospective client: (1) "we understand your business very well", and (2) "when it comes to arranging your deal, we are the best fit". Both claims are usually weak at best, but they are made elaborately and extensively, and the resulting multi page document often looks impressive. 2. Typical structure A pitch book will have varying structure depending on what product is being proposed, but there is a lot of similarities. Below is o...

Investment Banking Series Post 2: Deal from Sourcing to Completion 1. How hard can it be? Very How hard is it to close a deal in investment banking? Very hard. It is extremely time-consuming and effort-intensive process. However, I believe that at least a large portion of that effort comes from sheer inefficiency and stunning arrogance of the management, but later on that. Let's concentrate on the workflow for now. 2. Typical workflow The order below is not a fixed one, but rather a guidance to what it may look like. The tasks will change from product to product, and from deal to deal, but this should give you a good idea of the process (and help me remember in the future). Sourcing A deal may be sourced from a newspaper article or a bold idea, but most commonly it comes from the corporate clients themselves. This is where the coverage bankers' ability to consume alcohol and entertain clients pays off, because they are often able to identify a business opportunity m...

Investment Banking Series Series Introduction I am starting a series of posts on investment banking. There is a dearth of books out there that tell about investment banking, some of them even actually written by i-bankers, and I am not in any way trying to compete with them, but merely want to reflect on what I was doing up until about a year ago, how it worked and what where the lessons I learnt while being there. This will be about the way it is done in Japan, and more specifically in Japanese companies, and this is very different from the way it is (or was until very recently) done on the Wall Street. This post will be an introductory one, outlining the investment bank's functions and typical departments. The following posts will go into more details on specific products and real-life situations. Post 1: Introduction to an Investment Bank 1. What does an investment bank do? This is a simple question the answer to which may prove rather elusive. Historically, inves...