AD Newsletter: January 2024
Letter from AD Leadership
Hi there,
As we step into the new year, the January 2024 edition of the Access Distributed Newsletter is here to guide you through the intricacies of finance recruitment. Our goal is to bring you valuable insights and advice to help you prepare for the upcoming summer analyst recruitment process in investment banking and private equity.
In this issue, discover upcoming virtual events to deepen your understanding of the Finance World and prepare for technical interviews. Dive into Aidan Burrell's comprehensive guide on key concepts for Investment Banking interviews, explore Jonathan Gary's insights into intrinsic and relative valuation, and benefit from Marcelo Shockey's networking wisdom.
Equip yourself with the knowledge and tools needed to excel in the dynamic landscape of finance recruitment. Happy reading and best of luck in your endeavors!
Warm regards,
Jasmine Anklesaria ✨📈
Getting Up To Speed: A Comprehensive Guide to Key Concepts in Investment Banking Interviews
Written by AD Alumni Fellow Aidan Burrell
In Investment Banking interviews, the technical assessment serves to evaluate candidates' in-depth understanding of fundamental concepts crucial to the role. It is essential to move beyond mere memorization and delve into the underlying theories of these technical concepts to facilitate adept problem-solving.
Among the key concepts frequently covered are financial statements, valuation, M&A fundamentals, and general industry knowledge. Let’s dive into some of these concepts:
Financial Statements
What are the 3 financial statements, and how do they tie together?
Oftentimes, you will be given an increase or decrease in a line item on the income statement and be asked to walk through how this affects all three statements. The ideal IB candidate understands how the balance sheet and income statements can be used together to build the cash flow statement.
In terms of the income statement, candidates are expected to analyze common line items and walk down to Net Income, EBITDA, EBIT, etc. Similarly, understanding how assets, liabilities, and shareholders’ equity fit together on the balance sheet and discerning how changes in one can affect the others is crucial. Recognizing the balance sheet as a snapshot at a specific point in time is also essential.
Candidates should identify operating, investing, and financing activities and understand their impact on cash flow when dealing with the cash flow statement. In financial accounting, an understanding of accrual basis vs. cash basis accounting timing differences is vital–this concept impacts all three statements, and it is crucial to be comfortable applying this concept. Furthermore, candidates should be able to calculate changes in net working capital and explain the impact of various accounting concepts on valuation.
Valuation
In terms of valuation, candidates need to navigate through the four common valuation methods, understand relative vs. intrinsic valuation (See “Definition of the Month”), and discern when to use each method. They should grasp the intricacies of Discounted Cash Flow (DCF) Analysis, Trading Comparables, Precedent Transaction Valuation, and Leveraged Buyout (LBO) Analysis.
Mergers & Acquisitions (M&A)
When it comes to Mergers & Acquisitions (M&A), candidates should differentiate between mergers and acquisitions, understand the motivations behind M&A, and recognize the roles of financial buyers and strategic buyers. Accretion/Dilution Analysis is another area of focus, where candidates need to comprehend the impact of an acquisition on earnings per share and grasp accretion and dilution concepts.
Industry Knowledge
Lastly, industry knowledge is crucial. Candidates are expected to stay abreast of industry news, be prepared to discuss recent M&A transactions, and understand key industry drivers and trends for specific industry interviews.
In essence, mastering these technical concepts goes beyond rote memorization, empowering candidates to confidently navigate complex questions and excel in the dynamic landscape of Investment Banking interviews.
Feeling overwhelmed by the list above? Don’t fret! Check-out Finance|able, an online finance educational platform founded by AD Co-Founder, Mike Kimpel. It’s the best way to learn how the Finance World works and prepare to crush IB/PE/IM interviews.
Definition of the Month: Intrinsic & Relative Valuation
Written by AD Alumni Fellow Jonathan Gary
In finance, intrinsic valuation often relies on methods such as Discounted Cash Flow (DCF) analysis. The DCF approach assesses the value of an asset by projecting its future cash flows and discounting them back to their present value using a specified discount rate. This method is a fundamental analysis tool used to estimate a company's intrinsic value based on its expected future cash flows.
On the other hand, the relative valuation methods are Comparable company analysis “comps” and precedent transactions. Comparable Company Analysis is a valuation method that assesses a company's value by comparing its financial metrics to those of similar publicly traded companies. Key financial metrics are analyzed, such as the Price-to-Earnings (P/E) ratio and Enterprise Value-to-EBITDA (EV/EBITDA). The selection of comparable companies considers factors like industry, size, growth prospects, and risk profile to ensure meaningful comparisons and derive a valuation range for the target company.
Precedent Transactions Analysis values a company by examining similar companies' pricing and financial metrics that have undergone mergers or acquisitions. Beyond final transaction prices, this method considers specific terms and conditions of past deals, providing insights into market dynamics and investor sentiment.
How they fit together: When presenting a company's valuation, investment bankers often create a "football field" that illustrates the valuation ranges derived from intrinsic and relative valuation methodologies.
AD Alumni Advice:
Networking Best Practices
Meet: Marcelo Shockey
University of Akron Class of 2024
AD Alumni Fellow (21-22 Cohort)
Hello, my name is Marcelo Shockey, and I am currently a senior studying finance at the University of Akron in Ohio. I was a part of the 2020–2021 Access Distributed cohort and have previous internship experiences in both Private Equity and Investment Banking. Coming from a non-target school, I had to be aggressive in my networking approach and also stay focused and organized. Having no family or family friends in finance, I heavily relied on third-party programs such as Access Distributed to establish the connections and gain the experiences I was seeking.
It's important to note that there is no one-size-fits-all formula for networking, as everyone has a unique situation based on factors like the university attended, personal connections, and hometown. I will share my perspective on networking, covering how to get started, best practices, and the approach that worked best for me.
Getting Started
Having a student status is advantageous when networking, as professionals are generally eager to support students.
Always remember to maintain a positive and "hungry to learn" attitude!
Networking Best Practices
Pay attention to detail, especially with recruiting season approaching, as typos can give bankers a reason not to schedule calls with you.
Ensure your resume is polished, easy to read, and to the point, as bankers spend less than 20 seconds reviewing resumes.
Use your calendar efficiently, sending out calendar invites once a day and time are agreed upon, to stay organized and facilitate rescheduling.
During the call, lead the conversation by introducing yourself with a thoughtfully prepared 60–90 seconds story. Following your introduction, shift the conversation to the other person, as the most effective informational calls involve the individual speaking for about 70% of the time – after all, they're the industry expert!
Maintain control of the conversation by posing insightful questions. A helpful guideline is to avoid asking questions that are readily available on the individual's LinkedIn or the firm's website, so be sure to conduct thorough research beforehand.
Sending thank-you notes is essential, as it not only shows politeness but also helps solidify connections, increasing the likelihood of future calls, recommendations, and warm introductions.
Keep a networking log for effective long-term tracking, including the person's name, contact information, details about the call, and follow-up information.
What Worked for Me
Coming from a non-target university with no alumni in the Finance World, I heavily relied on programs like Access Distributed to expand my network. Through this program, I gained mentorship that significantly expanded my professional connections.
When Networking, Seek Mentorship
My success in obtaining past internships is attributed to my mentors. Sending thank-you notes after calls played a crucial role in solidifying my connections with professionals, opening the door to future conversations. Even after securing an internship offer, it's important to maintain connections with those who assisted along the way.
Upcoming Events
Financeable Interview Prep Courses
In January, join AD Co-Founder, Mike Kimpel, as he conducts live classes to assist you in gearing up for Finance Recruitment.
Register Below:
1/11/24: IB Interview Prep - Accounting
1/18/24: IB Interview Prep - Valuation
2/5/24: IB Interview Prep - LBO
2/15/24: IB Interview Prep - M&A
Build Your Story Workshop - Thursday, February 22 2024 @ 7:30-9:00 PM ET
Register Here
Register today for Access Distributed’s Build Your Story Workshop! During this free virtual event, you will gain insights from talent and recruiting professionals, receive live feedback to help you develop your story, and meet other students from across the country. This event is free and open to all undergraduate students.
