Here's a common question:
"How do you value a company?"
There are a ton of ways to answer this. I'll just list a few ways to do it:
1. Discounted Cash Flow
2. Comparable Transactions
3. Comparable Companies
4. LBO valuation
5. Sum-of-the-parts
6. Liquidation value
There are even more but usually if you list five or six that is enough to sound smarter than the average American (one of many things that you could say to sound smarter than the average American I guess).
More interview questions to come...
Tuesday, September 23, 2008
Monday, September 22, 2008
Bulge Bracket vs. Boutique
In general my full-time interviews were actually less technical than my internship interviews. I think the type of interview you get (technical vs. fit) is very dependant on the interviewer and what type of mood they are in. In pretty much every place I've interviewed I've had a mix of interviews where some were very technical and some were not. As a general rule, the more senior you go, the less technical the interview will be. My toughest technical interviews were all with analysts or associates.
I want to make a quick comment about the whole boutique vs. bulge bracket issue. I've interviewed with and received offers from bulge brackets and top boutiques, and I think it would be helpful to look at the pros and cons of each.
Bulge Bracket Banks
Obviously the past week has drastically changed the landscape for bulge bracket banks. The positives of working for one of the uber-bulges is that most banks (and, based on this weekend, even Morgan Stanley and Goldman) will have a capital base to support their actions that is more steady than it has historically been. In other words, it's good to work for a place like JP Morgan because they have such a huge balance sheet that they can be a part of any deal, regardless of the size.
Bulge brackets are generally well-established and have very structured training programs and procedures in place. Everything is already planned out for your next two years. You'll be one of many thousands of employees, and the bank has learned how to best teach you the ropes.
Your bulge bracket experience will give you the opportunity to try out many different products (be it M&A, debt/equity offerings, IPOs, etc) and you will generally get a very broad experience. One downside to all of this is that you might feel like another cog in the machine. It can be hard to feel like you are making a significant impact when you have 14 people on a deal team. Sometimes your deals will involve people from many different groups across the bank. One deal I worked on this summer involved our industry coverage group, the M&A team, and the lev fin team. Each team played a part, and we all had to collaborate a lot to get the book across the finish line.
At a bulge bracket you are part of an analyst class that likely contains over 100 analysts. You build a huge network and if you are proactive you can make connections across the firm. You won't have a lot of "senior exposure" (although I think it's kind of overrated anyway) because there are so many levels between you and then MDs. This summer I don't even think I spoke to any MDs more than three times, let alone working closely with them on a deal. As an analyst you will work extensively with associates and some with vice presidents.
Boutiques
Boutiques are a different story. Most boutiques are relatively new (Lazard, if it qualifies as a boutique, being a notable exception). They don't have lending or trading platforms but focus solely on advisory work. Many of the top boutiques focus specifically on M&A and Restructuring. So you won't get a chance to model out a debt offering or an IPO, but if you are looking to go into Private Equity, it's M&A experience that will get you the job anyway.
The training programs at boutiques will typically not be as structured or long as the BBs. You will still receive training but will be required to learn more on the job than in the classroom. This is why many boutiques tend to favor analyst coming in with some kind of finance background or experience.
Deal teams at a boutique will usually be 3-4 people. There will typically be an analyst, associate, VP, and MD. There might be a few more people, but not usually. The analyst will typically "own the model," meaning that the analyst builds the model and makes any changes along the way. At the boutiques I talked to, the analysts told me that they build models from scratch, whereas bulge brackets tend to be more prone to using templates.
Boutiques have an analyst class of 10-25 analysts. Analysts are given significant responsibility on deals. The risk of boutiques is that deal flow is determined by your MDs more than the name of your bank, whereas at a bulge bracket like Goldman Sachs, sometimes you win deals based on your name and not so much on the MD.
Exit opportunities at the very top boutiques are generally very good (comparable to Goldman or MS). While at a bulge bracket you would generally need to be the top analyst in your group to get interviews at the top PE shops (unless you work in Goldman TMT or Morgan Stanley M&A), if you perform well at a top boutique you can get those same interviews.
So in the end there are risks/rewards with every decision. At a bulge bracket you have a large capital base and do deals with many products, while at a boutique you are focused exclusively on advisory work. Bulge brackets have large analyst classes and well-structured training programs, while boutiques have small classes and lean deal teams, forcing you to "learn as you go." Exit opportunities are similar, but are probably a little easier to come by if you can get into a top boutique as compared to a relatively strong group at a bulge bracket.
I want to make a quick comment about the whole boutique vs. bulge bracket issue. I've interviewed with and received offers from bulge brackets and top boutiques, and I think it would be helpful to look at the pros and cons of each.
Bulge Bracket Banks
Obviously the past week has drastically changed the landscape for bulge bracket banks. The positives of working for one of the uber-bulges is that most banks (and, based on this weekend, even Morgan Stanley and Goldman) will have a capital base to support their actions that is more steady than it has historically been. In other words, it's good to work for a place like JP Morgan because they have such a huge balance sheet that they can be a part of any deal, regardless of the size.
Bulge brackets are generally well-established and have very structured training programs and procedures in place. Everything is already planned out for your next two years. You'll be one of many thousands of employees, and the bank has learned how to best teach you the ropes.
Your bulge bracket experience will give you the opportunity to try out many different products (be it M&A, debt/equity offerings, IPOs, etc) and you will generally get a very broad experience. One downside to all of this is that you might feel like another cog in the machine. It can be hard to feel like you are making a significant impact when you have 14 people on a deal team. Sometimes your deals will involve people from many different groups across the bank. One deal I worked on this summer involved our industry coverage group, the M&A team, and the lev fin team. Each team played a part, and we all had to collaborate a lot to get the book across the finish line.
At a bulge bracket you are part of an analyst class that likely contains over 100 analysts. You build a huge network and if you are proactive you can make connections across the firm. You won't have a lot of "senior exposure" (although I think it's kind of overrated anyway) because there are so many levels between you and then MDs. This summer I don't even think I spoke to any MDs more than three times, let alone working closely with them on a deal. As an analyst you will work extensively with associates and some with vice presidents.
Boutiques
Boutiques are a different story. Most boutiques are relatively new (Lazard, if it qualifies as a boutique, being a notable exception). They don't have lending or trading platforms but focus solely on advisory work. Many of the top boutiques focus specifically on M&A and Restructuring. So you won't get a chance to model out a debt offering or an IPO, but if you are looking to go into Private Equity, it's M&A experience that will get you the job anyway.
The training programs at boutiques will typically not be as structured or long as the BBs. You will still receive training but will be required to learn more on the job than in the classroom. This is why many boutiques tend to favor analyst coming in with some kind of finance background or experience.
Deal teams at a boutique will usually be 3-4 people. There will typically be an analyst, associate, VP, and MD. There might be a few more people, but not usually. The analyst will typically "own the model," meaning that the analyst builds the model and makes any changes along the way. At the boutiques I talked to, the analysts told me that they build models from scratch, whereas bulge brackets tend to be more prone to using templates.
Boutiques have an analyst class of 10-25 analysts. Analysts are given significant responsibility on deals. The risk of boutiques is that deal flow is determined by your MDs more than the name of your bank, whereas at a bulge bracket like Goldman Sachs, sometimes you win deals based on your name and not so much on the MD.
Exit opportunities at the very top boutiques are generally very good (comparable to Goldman or MS). While at a bulge bracket you would generally need to be the top analyst in your group to get interviews at the top PE shops (unless you work in Goldman TMT or Morgan Stanley M&A), if you perform well at a top boutique you can get those same interviews.
So in the end there are risks/rewards with every decision. At a bulge bracket you have a large capital base and do deals with many products, while at a boutique you are focused exclusively on advisory work. Bulge brackets have large analyst classes and well-structured training programs, while boutiques have small classes and lean deal teams, forcing you to "learn as you go." Exit opportunities are similar, but are probably a little easier to come by if you can get into a top boutique as compared to a relatively strong group at a bulge bracket.
Saturday, September 20, 2008
How the Financial Statements are Related
Here is the pdf file I was talking about which shows how the three financial statements are connected. You'll probably never have an interview that covers every single connection, but it's good to know and understand anyway. Enjoy.
How the Financial Statements are Related
How the Financial Statements are Related
Thursday, September 18, 2008
How to be Remembered
Around this time of year, the investment banks start coming on campus to give presentations and meet potential employees. One of my friends working at Citi told me about a recruiting trip he recently went on to a well-known school. I asked him if he met anyone interesting, and he said that he was actually really not impressed with the students at the school.
"I was asked some uber-generic questions all night long, and felt like nobody really wanted to know anything about me or my job, they just wanted to go through the motions of talking to the recruiter."
I actually remember the days of being at those recruiting socials and I definitely am guilty of asking some lame questions to recruiters. Luckily, I'm working this semester so I won't even be attending a single one of those events. But in order to try and help you all out a little, I wanted to make a few suggestions about these types of events.
First of all, try to think about things from the recruiter's point of view. You're going to a school where you may or may not have attended, but either way you probably don't know more than a handful of people. You've been working for the past 70 hours straight and know that the work is just piling up while you're talking to some kid about "work/life balance." In the end you will have to sit down with your team and talk about anyone that stood out in your mind, and you'll probably have to go through a mountain of resumes before it's all over. What you're really looking for is to meet somebody unique that you can tell really wants to do banking, and also that you would feel fine recommending for further interviews.
Now, when thinking of things like this, you can easily make a few goals for yourself. First of all, you want to be prepared so that there's no question in the mind of the recruiter whether you know your stuff or not. Second, you want to ask smart questions that don't sound like you got them out of the Vault Guide. The recruiter has probably been asked, "So tell me what kinds of deals you've been working on" more times than he/she would want to repeat. Third, you want to have a really great resume to hand the recruiter so that when they take a look as you're talking to them, they'll be impressed enough to listen.
Last October, I brought my resume to a recruiter from Credit Suisse. He was actually just standing there taking resumes and critiquing them, telling students, "Change this. Take this off. You have a few mistakes here or there. If you ever turn in a resume like this you won't get a job on Wall Street..." I was a little nervous but had spent significant time getting my resume prepared for that night. When he took a look at my resume, he scanned it over and said, "Now this is a resume that I like to see. It's perfect."
My resume wasn't actually that great, but I had just prepared it in a way that it would look good. The recruiter told me that very night that he would get me interviews for an internship, which he did. I ended up getting an offer from CS.
One hard thing for me was knowing what kind of questions to ask. I think more important than having a list of questions already written down that you want to ask is just being able to carry on an interesting conversation with somebody. Instead of asking them, "Why do you like Goldman?" you could say something like, "I know that Goldman has a very collaborative culture. What kind of experiences have you had working across divisions to get a deal done?"
The point is that when you ask a question, you show that you have done a little more homework than everybody else. Most firms like to tell the world about about all of their accomplishments, so go to their website and take a few notes about what makes this bank unique.
You might ask about what the bank's relative strengths are compared to its peers. For example, "When you, Goldman, Morgan Stanley, and UBS come to a bake-off, what is it about Citi that will win the deal? What does Citi bring to the table that is unique?"
I don't think I need to make a list of questions you can ask, but just point out that if you just spend some time thinking a little before you go and talk, you can make a great impression.
"I was asked some uber-generic questions all night long, and felt like nobody really wanted to know anything about me or my job, they just wanted to go through the motions of talking to the recruiter."
I actually remember the days of being at those recruiting socials and I definitely am guilty of asking some lame questions to recruiters. Luckily, I'm working this semester so I won't even be attending a single one of those events. But in order to try and help you all out a little, I wanted to make a few suggestions about these types of events.
First of all, try to think about things from the recruiter's point of view. You're going to a school where you may or may not have attended, but either way you probably don't know more than a handful of people. You've been working for the past 70 hours straight and know that the work is just piling up while you're talking to some kid about "work/life balance." In the end you will have to sit down with your team and talk about anyone that stood out in your mind, and you'll probably have to go through a mountain of resumes before it's all over. What you're really looking for is to meet somebody unique that you can tell really wants to do banking, and also that you would feel fine recommending for further interviews.
Now, when thinking of things like this, you can easily make a few goals for yourself. First of all, you want to be prepared so that there's no question in the mind of the recruiter whether you know your stuff or not. Second, you want to ask smart questions that don't sound like you got them out of the Vault Guide. The recruiter has probably been asked, "So tell me what kinds of deals you've been working on" more times than he/she would want to repeat. Third, you want to have a really great resume to hand the recruiter so that when they take a look as you're talking to them, they'll be impressed enough to listen.
Last October, I brought my resume to a recruiter from Credit Suisse. He was actually just standing there taking resumes and critiquing them, telling students, "Change this. Take this off. You have a few mistakes here or there. If you ever turn in a resume like this you won't get a job on Wall Street..." I was a little nervous but had spent significant time getting my resume prepared for that night. When he took a look at my resume, he scanned it over and said, "Now this is a resume that I like to see. It's perfect."
My resume wasn't actually that great, but I had just prepared it in a way that it would look good. The recruiter told me that very night that he would get me interviews for an internship, which he did. I ended up getting an offer from CS.
One hard thing for me was knowing what kind of questions to ask. I think more important than having a list of questions already written down that you want to ask is just being able to carry on an interesting conversation with somebody. Instead of asking them, "Why do you like Goldman?" you could say something like, "I know that Goldman has a very collaborative culture. What kind of experiences have you had working across divisions to get a deal done?"
The point is that when you ask a question, you show that you have done a little more homework than everybody else. Most firms like to tell the world about about all of their accomplishments, so go to their website and take a few notes about what makes this bank unique.
You might ask about what the bank's relative strengths are compared to its peers. For example, "When you, Goldman, Morgan Stanley, and UBS come to a bake-off, what is it about Citi that will win the deal? What does Citi bring to the table that is unique?"
I don't think I need to make a list of questions you can ask, but just point out that if you just spend some time thinking a little before you go and talk, you can make a great impression.
Question about depreciation
Another classic question that I've gotten a few times is something like this:
"Imagine that you have a company and suddenly you find out that you reported your depreciation expense incorrectly. You now have an additional $10 million in depreciation. How would this change be reflected in all three financial statements?"
I've actually received some form of this question about six times as I've interviewed. As always, you want to keep things simple and just go through everything methodically. Here's how I might go about answering this:
"I'll start with the income statement. Your depreciation expense will increase by $10 million, which will decrease your operating income by $10 million. Assuming (to make life easier) that you have a 40% tax rate, then your net income will decrease by $6 million after accounting for the tax shield you get from added depreciation expense.
"This net income will flow onto the statement of cash flows, so the net income will be decreased by $6 million. But, you will add back the $10 mm in depreciation so your net change in operating cash flows will be a positive $4 million.
"On the balance sheet, your accumulated depreciation increases by $10mm, so your net PP&E will decrease by $10mm. The cash balance increases by $4 million (from the cash flow statement), so the asset side of the balance sheet nets to a negative $6mm. No cash is actually paid out, but in essence your tax shield increases by $4mm so your cash position increases. On the liability/equity side, your net income, which decreased by $6mm, flows into retained earnings and therefore balances with your assets."
One time at Lazard I was asked, "You have been depreciating your assets using a double-declining method, but you now change to a straight-line method. What does this do to the financial statements?"
This question is similar but there's just one more little caveat. Can you think of it?
I've got a pretty cool pdf file that shows how all of the financial statements are connected. I'll post it on here soon.
"Imagine that you have a company and suddenly you find out that you reported your depreciation expense incorrectly. You now have an additional $10 million in depreciation. How would this change be reflected in all three financial statements?"
I've actually received some form of this question about six times as I've interviewed. As always, you want to keep things simple and just go through everything methodically. Here's how I might go about answering this:
"I'll start with the income statement. Your depreciation expense will increase by $10 million, which will decrease your operating income by $10 million. Assuming (to make life easier) that you have a 40% tax rate, then your net income will decrease by $6 million after accounting for the tax shield you get from added depreciation expense.
"This net income will flow onto the statement of cash flows, so the net income will be decreased by $6 million. But, you will add back the $10 mm in depreciation so your net change in operating cash flows will be a positive $4 million.
"On the balance sheet, your accumulated depreciation increases by $10mm, so your net PP&E will decrease by $10mm. The cash balance increases by $4 million (from the cash flow statement), so the asset side of the balance sheet nets to a negative $6mm. No cash is actually paid out, but in essence your tax shield increases by $4mm so your cash position increases. On the liability/equity side, your net income, which decreased by $6mm, flows into retained earnings and therefore balances with your assets."
One time at Lazard I was asked, "You have been depreciating your assets using a double-declining method, but you now change to a straight-line method. What does this do to the financial statements?"
This question is similar but there's just one more little caveat. Can you think of it?
I've got a pretty cool pdf file that shows how all of the financial statements are connected. I'll post it on here soon.
Wednesday, September 17, 2008
What a week
The past week has been one for the ages. We will probably never see another span of carnage on Wall Street like we have seen for the past 10 days. With Fannie and Freddie going under, followed by Lehman, Merrill, and now AIG, the entire finance world is changing. And with Morgan Stanley and Goldman down well over 20% today, who knows if they will even outlast this crazy time.
With all of this turmoil, it becomes even more necessary to have a great resume and be ready for interviews. A quick update - my kidney stone is no longer in my body, but the effects of the little rock are still being felt today. Kidney stones suck!! Also, I got some offers - one at another bulge bracket bank and one from a top boutique. So that was GREAT news given the other things going on this week. Now the tough part is deciding where to go. I am definitely blessed to have options this year.
So I thought I would write about some of the other interview questions I've faced over the past few months, as well as some of the ways I've answered these questions. Keep in mind that I'm not an expert and could very well miss some things. That said, I've received an offer from every firm with which I've interviewed, both for internships or full-time, so I feel like I can at least take a crack at some of these questions.
The most common technical question I've gotten at every bank I've interviewed with is "walk me through a DCF." I think everybody knows in their mind what a discounted cash flow model does, but what I've found is that there's a certain way to answer this question that makes your life easier. When I first started interviewing I really wanted to show people that I know what I'm talking about, and I went into great detail about every part of a DCF calc. What happened though was that I would get bogged down in the details and end up not sounding very smart.
Now when I answer this question, I like to begin with a very simple answer and allow the interviewer to drill down however he/she would like to. For example I might say something like this:
"The goal of a DCF model is to derive the enterprise value of the firm. I do this by calculating the unlevered free cash flows of the firm, then project them forward for about five years (or whatever time horizon you are looking at). I then calculate a terminal value (TV), and discount the TV and the FCFs back to the present value at the cost of capital to get my enterprise value."
Done. At this point, the interviewer knows that I understand the DCF, and they are free to ask me deeper questions. Some interviewers I've had will stop me as I go along to ask questions, but most let me go to this point and then say something like, "Ok great. Can you tell me how you would calculate the free cash flow of a company?"
"Sure. Starting with EBITDA, you subtract D&A, then multiply by (1-tax rate) to get rid of the tax cash, then add back D&A, take out CAPEX and the change in net working capital, and you have free cash flows."
"And what is net working capital?"
"Current assets less current liabilities."
"Great. How do you calculate a terminal value?"
"Well it depends on the deal. If it's a strategic deal, you'll probably use a perpetuity model since they want the asset for the long term. If it's a financial deal the sponsor will want to sell in the terminal year and you'll use a multiple, like EV/EBITDA."
You get the picture. I just give the answers in a way that shows that I know what I'm saying but I don't try to tell it all at once. They might ask you about how to calculate a discount rate (use WACC), how to calculate WACC, how to get CAPM, and even how to unlever/relever beta. Whatever it is, just be ready for it, but start basic and work your way into the nitty gritty.
One more question about accretion/dilution that I got this summer was something like this: "If you own a company and want to do a quick back-of-the-envelope calculation of acc/dil, how would you do it given a particular target? In other words, what information would you need to do a quick calc?"
"Well a P/E ratio would be great."
"That's right. So lets say your company has a P/E of 18 and the target's P/E is 21. Will the deal be accretive or dilutive? Why?"
"Dilutive because their P/E is higher than mine. In essence I would have to pay more per dollar of earnings than my own company is worth, so the EPS would decline."
Here are a few more random interview questions:
"What's the square root of 2,025?" (The answer doesn't have to be right on - it's 45 - but you just have to be close. They want to see how you can out loud reason through some mental math)
"What is 2/3 + 3/4?" (Just take a deep breath and think back to seventh grade - you can do this!)
"So you worked a little in a fund. Pitch me a stock." (On this one I pretty much always go with my favorite stock that I've bought - PARL - because it's an interesting company to talk about. I would suggest that you are ready to talk about a few investment ideas, and also that you pick companies that the interviewers have never heard of. You don't want to say "GM" and then find out that you're talking to the MD on that account)
"If you had $1 Billion to invest for your school, how would you do it?" (Again you can pretty much say whatever you want, but don't be stupid and say 'Short Goldman with the whole fund because I don't believe in the pure play model!' Just be rational with how you answer most questions and you'll be fine)
I'll be posting more questions/answers in the next little while. Sorry again for the long delay. I'm working at Treasury so you can all imagine what a week it's been around here with Fannie, Freddie, Lehman, Merrill, and AIG all blowing up. Anyway, keep the comments coming about the types of posts you'd like to see.
With all of this turmoil, it becomes even more necessary to have a great resume and be ready for interviews. A quick update - my kidney stone is no longer in my body, but the effects of the little rock are still being felt today. Kidney stones suck!! Also, I got some offers - one at another bulge bracket bank and one from a top boutique. So that was GREAT news given the other things going on this week. Now the tough part is deciding where to go. I am definitely blessed to have options this year.
So I thought I would write about some of the other interview questions I've faced over the past few months, as well as some of the ways I've answered these questions. Keep in mind that I'm not an expert and could very well miss some things. That said, I've received an offer from every firm with which I've interviewed, both for internships or full-time, so I feel like I can at least take a crack at some of these questions.
The most common technical question I've gotten at every bank I've interviewed with is "walk me through a DCF." I think everybody knows in their mind what a discounted cash flow model does, but what I've found is that there's a certain way to answer this question that makes your life easier. When I first started interviewing I really wanted to show people that I know what I'm talking about, and I went into great detail about every part of a DCF calc. What happened though was that I would get bogged down in the details and end up not sounding very smart.
Now when I answer this question, I like to begin with a very simple answer and allow the interviewer to drill down however he/she would like to. For example I might say something like this:
"The goal of a DCF model is to derive the enterprise value of the firm. I do this by calculating the unlevered free cash flows of the firm, then project them forward for about five years (or whatever time horizon you are looking at). I then calculate a terminal value (TV), and discount the TV and the FCFs back to the present value at the cost of capital to get my enterprise value."
Done. At this point, the interviewer knows that I understand the DCF, and they are free to ask me deeper questions. Some interviewers I've had will stop me as I go along to ask questions, but most let me go to this point and then say something like, "Ok great. Can you tell me how you would calculate the free cash flow of a company?"
"Sure. Starting with EBITDA, you subtract D&A, then multiply by (1-tax rate) to get rid of the tax cash, then add back D&A, take out CAPEX and the change in net working capital, and you have free cash flows."
"And what is net working capital?"
"Current assets less current liabilities."
"Great. How do you calculate a terminal value?"
"Well it depends on the deal. If it's a strategic deal, you'll probably use a perpetuity model since they want the asset for the long term. If it's a financial deal the sponsor will want to sell in the terminal year and you'll use a multiple, like EV/EBITDA."
You get the picture. I just give the answers in a way that shows that I know what I'm saying but I don't try to tell it all at once. They might ask you about how to calculate a discount rate (use WACC), how to calculate WACC, how to get CAPM, and even how to unlever/relever beta. Whatever it is, just be ready for it, but start basic and work your way into the nitty gritty.
One more question about accretion/dilution that I got this summer was something like this: "If you own a company and want to do a quick back-of-the-envelope calculation of acc/dil, how would you do it given a particular target? In other words, what information would you need to do a quick calc?"
"Well a P/E ratio would be great."
"That's right. So lets say your company has a P/E of 18 and the target's P/E is 21. Will the deal be accretive or dilutive? Why?"
"Dilutive because their P/E is higher than mine. In essence I would have to pay more per dollar of earnings than my own company is worth, so the EPS would decline."
Here are a few more random interview questions:
"What's the square root of 2,025?" (The answer doesn't have to be right on - it's 45 - but you just have to be close. They want to see how you can out loud reason through some mental math)
"What is 2/3 + 3/4?" (Just take a deep breath and think back to seventh grade - you can do this!)
"So you worked a little in a fund. Pitch me a stock." (On this one I pretty much always go with my favorite stock that I've bought - PARL - because it's an interesting company to talk about. I would suggest that you are ready to talk about a few investment ideas, and also that you pick companies that the interviewers have never heard of. You don't want to say "GM" and then find out that you're talking to the MD on that account)
"If you had $1 Billion to invest for your school, how would you do it?" (Again you can pretty much say whatever you want, but don't be stupid and say 'Short Goldman with the whole fund because I don't believe in the pure play model!' Just be rational with how you answer most questions and you'll be fine)
I'll be posting more questions/answers in the next little while. Sorry again for the long delay. I'm working at Treasury so you can all imagine what a week it's been around here with Fannie, Freddie, Lehman, Merrill, and AIG all blowing up. Anyway, keep the comments coming about the types of posts you'd like to see.
Tuesday, September 9, 2008
The Resume
Alright. So here are a few thoughts about resumes. As any person can quickly find out through some Google searches, there are plenty of sites with tons of advice about how to write a great resume for investment banking. I'm debating about posting various versions of my own resume up here (with the names taken off of course) so people can see how my resume has evolved over the past year and a half.
I think the important thing with resumes is that you spend the time NOW to get it into shape. No matter if you're a senior or a junior, this is VITAL to getting interviews and jobs. In addition, when you go to visit people already in banking, they will almost always ask to see your resume at some point. If your resume isn't already "bankified" then you're in trouble. On the other hand, if you're a junior and you can send somebody a resume that looks ready and it's only September - you are in a great position.
I know that for juniors especially it seems almost unnecessary to spend so much time on your resume when you won't even have to turn it in for a few more months, but it is well worth it. Plus, you'll constantly be updating your resume as you gain new experience or think of better ways to describe what you've already done. I'm still changing mine all the time to better reflect who I am and what I've done. The key is that your resume, no matter how little experience or leadership you have, meets the basic banker standard.
Last June I thought that my resume was solid. I had spent a while working it over and I was sure it was awesome. I had read all of those sites on the internet and really tried to follow the advice there. Then the President of the Investment Banking Club sent me his resume as an example, and I was embarrassed that he had ever seen my resume. Just the format of his resume made mine look very basic. I totally remade my resume based off of his format, and my resume continues to resemble that format today.
A quick word about using other people's resumes to make your own. Obviously it's a STUPID idea to just copy what other people have written. Think about it - when you get into an interview anything on there is fair game. If you've embellished or exaggerated or even just flat out put down stuff that you haven't done, the interviewer will be able to tell right away and you immediately lose any chance you might have had. It's also just dishonest. That said, I don't see any problem with getting ideas from other resumes. Like I said - the current format of my resume is based on a resume I saw over a year ago. There are certain styles of describing things that I have imitated from other resumes. You have to make it your own, but there's nothing wrong with getting ideas from other people. Just NEVER copy and be totally honest, and you'll be fine.
I took a class when I first got into the business school about writing and we did a section on resumes. The teacher talked about the importance of having lots of white space and even drew a "golden triangle" on a resume to show the concept. This could not be farther from the truth on a banking resume. You basically have only one sheet of paper to define your entire life. You should use every possible bit of space you can. Of course, it has to be clean and aesthetically pleasing, but you really have to pack things in from top to bottom.
Here are some key ideas when you write a resume. Like I said, you can find this stuff all over the place, but it's worth another mention.
First of all, Bankers like results. One of the big mistakes that I've seen on a lot of resumes is that people just list bullet points of what they did (I've definitely been guilty of this as well). Not only do you need to list what you've done, but you need to tell what the result of your work is. You need to show that because of you, things got better. Banks want to hire people that add value and make a difference, so be sure that as much as you can you talk about results, not just experiences. When you spread those comps this summer, what was the point? When you built that DCF, was it used in the presentation? Did the client go through with the deal? Results matter.
Another thing is that bankers love to quantify things. As often as you can, add numbers to your experiences. This relates to the results part. Talk about how much more efficient your company is now that you're there. Talk about how many security systems you sold last summer, and how much more that was above the average. List what percentile your ACT score was. Just do whatever you can to quantify and add context to the words you put on the paper.
Unless you have a really great and relevant experience, I wouldn't put anything more than 4-5 bullets for any one job/experience. The exception to this would be under your "Personal" or "Interests" or whatever kind of section at the bottom of the resume. Here you just kind of list all of the random accomplishments and interests that you have, including languages you speak, awards/certifications/skills you have attained, and (if you want) interests you have. I tend not to put my interests on the resume. I figure putting down what sports team I like or what I do in my spare time isn't what's going to get me a job. I've heard stories about how interviewers see something on the resume that they totally relate with, but in the end I believe that they will take somebody with solid experience and great qualifications over someone who likes the same TV show as they do. It can be a good way to start conversations though, and pretty much all of my friends have an "Interests" bullet on their resume.
When I was really trying to get my resume up to snuff, I read all of the suggestions online and tried to do everything they said. But, like I wrote above, this still wasn't enough. It took me actually seeing and talking to somebody who had already gone through the process of getting an internship and full-time job for me to realize what my resume needed to look like. I'm still changing and updating things on my resume, but I feel confident that whenever I send someone my resume, they will give it a good look. It's important that you don't just turn in your resume for a job without getting some outside feedback. The best thing is to get somebody that knows about banking to look at your resume. If the person don't know what it means to do a sum-of-the-parts valuation, then they might not give you the best feedback.
So here's the deal. I've been getting some requests from people to look at their resume. I've seen tons of resumes (including reviewing resumes this summer for full-time candidates) and can give solid advice on what bankers are looking for. There are various online resume review services that are all very expensive. Mergers and Inquisitions has a good one but it's $200. If anybody wants an independent, line-by-line look at their resume, send it my way. I can make suggestions, give you some ideas, and help you get your resume looking great. And instead of charging $200 or more, it'll only cost $30.
The reason I'm charging for it is obvious - time is precious and we all have to support ourselves! That said, I want to offer a high-quality review for much less than what is available today. Here's how it would work:
You get your resume prepared. You can take your personal info off if you want. A lot more important than your address is what your resume actually says!
When you're ready, you pay the $30 through PayPal and then send me your resume. I'll go through it line-by-line and return specific comments, suggestions, and ideas that will help your resume get noticed. If you have questions, need clarification, or want me to help you change anything, just send it back and we'll do that as many times as you want until the resume is pristine and ready to be sent to any bank on the street. Often you might not know anyone at a bank, so your resume is the only chance you have of getting an interview.
If you have further questions or are ready to send me your resume, email me here.
Regardless of whether you have me look at your resume or not, make sure that before you send it to a bank, you feel totally confident that they would want to interview after they have seen your resume.
I will continue to write posts about interview questions, networking, lifestyle, a little about my current job at the US Treasury, and anything else I feel is relevant. As always, keep commenting and let me know what you'd like to hear more about. The next post will be more about interview questions I've had and some ideas on how to go about answering them.
I think the important thing with resumes is that you spend the time NOW to get it into shape. No matter if you're a senior or a junior, this is VITAL to getting interviews and jobs. In addition, when you go to visit people already in banking, they will almost always ask to see your resume at some point. If your resume isn't already "bankified" then you're in trouble. On the other hand, if you're a junior and you can send somebody a resume that looks ready and it's only September - you are in a great position.
I know that for juniors especially it seems almost unnecessary to spend so much time on your resume when you won't even have to turn it in for a few more months, but it is well worth it. Plus, you'll constantly be updating your resume as you gain new experience or think of better ways to describe what you've already done. I'm still changing mine all the time to better reflect who I am and what I've done. The key is that your resume, no matter how little experience or leadership you have, meets the basic banker standard.
Last June I thought that my resume was solid. I had spent a while working it over and I was sure it was awesome. I had read all of those sites on the internet and really tried to follow the advice there. Then the President of the Investment Banking Club sent me his resume as an example, and I was embarrassed that he had ever seen my resume. Just the format of his resume made mine look very basic. I totally remade my resume based off of his format, and my resume continues to resemble that format today.
A quick word about using other people's resumes to make your own. Obviously it's a STUPID idea to just copy what other people have written. Think about it - when you get into an interview anything on there is fair game. If you've embellished or exaggerated or even just flat out put down stuff that you haven't done, the interviewer will be able to tell right away and you immediately lose any chance you might have had. It's also just dishonest. That said, I don't see any problem with getting ideas from other resumes. Like I said - the current format of my resume is based on a resume I saw over a year ago. There are certain styles of describing things that I have imitated from other resumes. You have to make it your own, but there's nothing wrong with getting ideas from other people. Just NEVER copy and be totally honest, and you'll be fine.
I took a class when I first got into the business school about writing and we did a section on resumes. The teacher talked about the importance of having lots of white space and even drew a "golden triangle" on a resume to show the concept. This could not be farther from the truth on a banking resume. You basically have only one sheet of paper to define your entire life. You should use every possible bit of space you can. Of course, it has to be clean and aesthetically pleasing, but you really have to pack things in from top to bottom.
Here are some key ideas when you write a resume. Like I said, you can find this stuff all over the place, but it's worth another mention.
First of all, Bankers like results. One of the big mistakes that I've seen on a lot of resumes is that people just list bullet points of what they did (I've definitely been guilty of this as well). Not only do you need to list what you've done, but you need to tell what the result of your work is. You need to show that because of you, things got better. Banks want to hire people that add value and make a difference, so be sure that as much as you can you talk about results, not just experiences. When you spread those comps this summer, what was the point? When you built that DCF, was it used in the presentation? Did the client go through with the deal? Results matter.
Another thing is that bankers love to quantify things. As often as you can, add numbers to your experiences. This relates to the results part. Talk about how much more efficient your company is now that you're there. Talk about how many security systems you sold last summer, and how much more that was above the average. List what percentile your ACT score was. Just do whatever you can to quantify and add context to the words you put on the paper.
Unless you have a really great and relevant experience, I wouldn't put anything more than 4-5 bullets for any one job/experience. The exception to this would be under your "Personal" or "Interests" or whatever kind of section at the bottom of the resume. Here you just kind of list all of the random accomplishments and interests that you have, including languages you speak, awards/certifications/skills you have attained, and (if you want) interests you have. I tend not to put my interests on the resume. I figure putting down what sports team I like or what I do in my spare time isn't what's going to get me a job. I've heard stories about how interviewers see something on the resume that they totally relate with, but in the end I believe that they will take somebody with solid experience and great qualifications over someone who likes the same TV show as they do. It can be a good way to start conversations though, and pretty much all of my friends have an "Interests" bullet on their resume.
When I was really trying to get my resume up to snuff, I read all of the suggestions online and tried to do everything they said. But, like I wrote above, this still wasn't enough. It took me actually seeing and talking to somebody who had already gone through the process of getting an internship and full-time job for me to realize what my resume needed to look like. I'm still changing and updating things on my resume, but I feel confident that whenever I send someone my resume, they will give it a good look. It's important that you don't just turn in your resume for a job without getting some outside feedback. The best thing is to get somebody that knows about banking to look at your resume. If the person don't know what it means to do a sum-of-the-parts valuation, then they might not give you the best feedback.
So here's the deal. I've been getting some requests from people to look at their resume. I've seen tons of resumes (including reviewing resumes this summer for full-time candidates) and can give solid advice on what bankers are looking for. There are various online resume review services that are all very expensive. Mergers and Inquisitions has a good one but it's $200. If anybody wants an independent, line-by-line look at their resume, send it my way. I can make suggestions, give you some ideas, and help you get your resume looking great. And instead of charging $200 or more, it'll only cost $30.
The reason I'm charging for it is obvious - time is precious and we all have to support ourselves! That said, I want to offer a high-quality review for much less than what is available today. Here's how it would work:
You get your resume prepared. You can take your personal info off if you want. A lot more important than your address is what your resume actually says!
When you're ready, you pay the $30 through PayPal and then send me your resume. I'll go through it line-by-line and return specific comments, suggestions, and ideas that will help your resume get noticed. If you have questions, need clarification, or want me to help you change anything, just send it back and we'll do that as many times as you want until the resume is pristine and ready to be sent to any bank on the street. Often you might not know anyone at a bank, so your resume is the only chance you have of getting an interview.
If you have further questions or are ready to send me your resume, email me here.
Regardless of whether you have me look at your resume or not, make sure that before you send it to a bank, you feel totally confident that they would want to interview after they have seen your resume.
I will continue to write posts about interview questions, networking, lifestyle, a little about my current job at the US Treasury, and anything else I feel is relevant. As always, keep commenting and let me know what you'd like to hear more about. The next post will be more about interview questions I've had and some ideas on how to go about answering them.
Sunday, September 7, 2008
Resume post to come...
Hey everybody. Turns out that this whole kidney stone thing is more painful than I originally thought. I've written most of the resume post but near the end felt like taking a knife and cutting out my kidney to stop the pain. Needless to say, I didn't finish the post. It'll be coming...
Saturday, September 6, 2008
Ouch
Well as if things couldn't get any weirder, check this out.
And, by the way, I'll be posting later on today about resumes. Sorry for the long breaks between posts.
So on Thursday night I took a bus from DC to New York because I had final rounds at a bank. I stayed with a good friend who just started at a bulge bracket bank and has been working like crazy. He didn't even get home till after 3am and that has been par for the course for him since he's started. I guess that's what you have to expect. The amazing thing is that in addition to all the work he's doing, he's made time to build some sweet models in preparation for private equity interviews coming in a few months. Props to him!
So I had the final rounds on Friday. It was pretty standard - there were six interviews of about a half an hour each. Three of them were with managing directors, one with a principal, and two with associates. Like other places, the associates and the principal gave me pretty technical interviews, and the managing directors just wanted to hear about my life, talk about their past experiences, and answer questions about the firm.
The technical stuff was actually pretty challenging - probably the toughest I've ever had. They based a lot of the questions off of what's on my resume, so one of the first things an associate asked me about was accretion/dilution. This girl was sharp - she worked at Miller Buckfire doing restructuring, then went to Goldman's sponsers group for two years, then went to McKinsey for two years advising on corporate finance, then finally went to Harvard Business School and on to her current job. Nice background. She had me walk her through different scenarios such as 100% cash, 50/50, and 100% stock, and asked me to talk about what would make the deal accretive or dilutive in each scenario. The only thing I needed her help on was remembering how assets are written up or down in a purchase and how that can affect accretion or dilution.
She then asked me about a DCF model I built over the summer. Usually I've just been asked how to walk through a DCF, which I did for her. But along the way she would ask me things like, "So on this deal, what were the COGS? What were the revenue drivers? What kind of operating expenses were there? When talking about discounting, she wanted to know what discount rate I used and why/how I got to that rate. She asked if we discounted at beginning/end of year or if we used the mid-year convention. I said mid-year because cash flows don't all come at the beginning or end of the year, so mid-year tends to smooth it out. She said that was right and said, "What about the terminal value?" I answered, "Well that one you discount from the end of year because you want to discount the full last year before you sell." She responded, "Exactly right - that's a very common mistake so good job." Whew!
The other associate I interviewed with gave me a case study. He said something like, "Assume you have a company that owns 15 coal refineries in North America, the rights to build more refineries in 10 other places, and then you own an electrical power plant in South Africa where the price of electricity swings 1000% percent a day. How would you value this company?"
I said I would do a sum-of-the-parts, which was correct, but then he wanted to know how I would value each piece. The coal refineries are pretty solid so I said I would use a traditional DCF with steady-state assumptions. The rights to build were dependent on how rare they are, so I said I would have to use some comps and decide what the real estate was worth, as well as finding out how feasible it would be to build. Lastly, the South African asset could be valued using a DCF, but you would have to use a really high discount rate to account for the swings in value. I also said you could use comps to see what other people are discounting similar assets at.
He seemed to be ok with my answers, and I took another deep breath. Thank goodness!
Overall the rest of the time I was just asked to walk through my resume. One guy asked me what my two greatest strengths are as an analyst. I said my initiative and ability to learn quickly. I wasn't really asked anything else other than things specific to my resume. Luckily I have enough varied financial experience that it usually provides plenty to talk about over a half an hour and the interviewers don't have the time to get crazy with thier questions.
This firm is pretty selective so they were only interviewing one other guy with me. They sent the two of us along with four analysts out to lunch after our interviews. That was a cool experience because we just got to shoot the breeze with the analysts and ask them what it was "really" like working there. From what I can tell it sounds like an awesome place.
So sorry if you aren't all interested in what a final round interview is like, but I thought I would share some of the questions that were covered. I was hoping for some brain teasers but I didn't get any.
Anyway, the crazy stuff happened after I left the interview. I got back on the bus to go down to DC, and immediately my lower abdomen on the right side started to hurt. My back was also sore, but I figured that it was the horrible seats on the bus more than anything else. The girl I was sitting next to could tell that I was in a lot of pain and kept asking me if I was alright.
A few times I went in the bathroom stall at the back of the bus and just sat there because it was more comfortable than my reclined seat. I was in the worst pain I've ever felt - it was excruciating. And there was nothing I could do to alleviate it - no matter how I stood or sat the pain was still almost unbearable. I didn't know what to do - I couldn't go anywhere and I was on a bus going down a highway. Finally after three hours we stopped to drop some people off in Baltimore. I grabbed my stuff and just got off the bus. I ran to a taxi near the bus stop and said, "Take me to the hospital!" I think it kind of startled the taxi driver because he drove like a maniac on the way over - I guess he didn't want me to die in the back of his cab.
I got to the hospital and there were probably 80 people waiting in front of me. Some of them had already been there for eight hours. I signed in and told the nurse that I was in terrible pain. She put me at the top of the priority list, but I knew that even at the top of that list I would still be waiting for a while. I got some blood drawn and gave a urine sample, then just sat and waited to be called. About four hours later they called me back. After sitting there waiting for another hour in the hospital bed, they finally came in and gave me some medicine to ease the pain. Wow - that was the worst 5-6 hours of my life by far. Nothing I've ever felt compares with that pain.
I got a CT scan and it turns out that I have a kidney stone! I thought those only appeared in older people, but apparently somehow I got a kidney stone. I've heard it said that the pain is comparable to giving birth, so to all of you women out there, I bow down and thank you for that wonderful service you provide to humanity. You are amazing to handle that multiple times!
I finally was released at about 3:30 am and was wondering how I was going to get back to DC. When I ran off the bus I wasn't really thinking ahead about the fact that after I left the hospital I would still be an hour away from DC. Luckily, my dad had made a few calls in the meantime and some guys from my church, whom I had never met before, just showed up and took me all the way home. People in the Church are just like that - willing to help a total stranger. It's amazing.
So now I'm at home with some narcotics and things are better than yesterday. The stone is still inside of me somewhere but the doctor said that the worst pain comes when the stone moves from your kidney to your bladder, so hopefully the worst part is over for me.
This isn't really what I expected to do during over the weekend, but I've also learned to expect crazy stuff to come up all the time.
Let me know if you like hearing about interviews and I'll post some more questions from various interviews I've had over the past few months.
And, by the way, I'll be posting later on today about resumes. Sorry for the long breaks between posts.
So on Thursday night I took a bus from DC to New York because I had final rounds at a bank. I stayed with a good friend who just started at a bulge bracket bank and has been working like crazy. He didn't even get home till after 3am and that has been par for the course for him since he's started. I guess that's what you have to expect. The amazing thing is that in addition to all the work he's doing, he's made time to build some sweet models in preparation for private equity interviews coming in a few months. Props to him!
So I had the final rounds on Friday. It was pretty standard - there were six interviews of about a half an hour each. Three of them were with managing directors, one with a principal, and two with associates. Like other places, the associates and the principal gave me pretty technical interviews, and the managing directors just wanted to hear about my life, talk about their past experiences, and answer questions about the firm.
The technical stuff was actually pretty challenging - probably the toughest I've ever had. They based a lot of the questions off of what's on my resume, so one of the first things an associate asked me about was accretion/dilution. This girl was sharp - she worked at Miller Buckfire doing restructuring, then went to Goldman's sponsers group for two years, then went to McKinsey for two years advising on corporate finance, then finally went to Harvard Business School and on to her current job. Nice background. She had me walk her through different scenarios such as 100% cash, 50/50, and 100% stock, and asked me to talk about what would make the deal accretive or dilutive in each scenario. The only thing I needed her help on was remembering how assets are written up or down in a purchase and how that can affect accretion or dilution.
She then asked me about a DCF model I built over the summer. Usually I've just been asked how to walk through a DCF, which I did for her. But along the way she would ask me things like, "So on this deal, what were the COGS? What were the revenue drivers? What kind of operating expenses were there? When talking about discounting, she wanted to know what discount rate I used and why/how I got to that rate. She asked if we discounted at beginning/end of year or if we used the mid-year convention. I said mid-year because cash flows don't all come at the beginning or end of the year, so mid-year tends to smooth it out. She said that was right and said, "What about the terminal value?" I answered, "Well that one you discount from the end of year because you want to discount the full last year before you sell." She responded, "Exactly right - that's a very common mistake so good job." Whew!
The other associate I interviewed with gave me a case study. He said something like, "Assume you have a company that owns 15 coal refineries in North America, the rights to build more refineries in 10 other places, and then you own an electrical power plant in South Africa where the price of electricity swings 1000% percent a day. How would you value this company?"
I said I would do a sum-of-the-parts, which was correct, but then he wanted to know how I would value each piece. The coal refineries are pretty solid so I said I would use a traditional DCF with steady-state assumptions. The rights to build were dependent on how rare they are, so I said I would have to use some comps and decide what the real estate was worth, as well as finding out how feasible it would be to build. Lastly, the South African asset could be valued using a DCF, but you would have to use a really high discount rate to account for the swings in value. I also said you could use comps to see what other people are discounting similar assets at.
He seemed to be ok with my answers, and I took another deep breath. Thank goodness!
Overall the rest of the time I was just asked to walk through my resume. One guy asked me what my two greatest strengths are as an analyst. I said my initiative and ability to learn quickly. I wasn't really asked anything else other than things specific to my resume. Luckily I have enough varied financial experience that it usually provides plenty to talk about over a half an hour and the interviewers don't have the time to get crazy with thier questions.
This firm is pretty selective so they were only interviewing one other guy with me. They sent the two of us along with four analysts out to lunch after our interviews. That was a cool experience because we just got to shoot the breeze with the analysts and ask them what it was "really" like working there. From what I can tell it sounds like an awesome place.
So sorry if you aren't all interested in what a final round interview is like, but I thought I would share some of the questions that were covered. I was hoping for some brain teasers but I didn't get any.
Anyway, the crazy stuff happened after I left the interview. I got back on the bus to go down to DC, and immediately my lower abdomen on the right side started to hurt. My back was also sore, but I figured that it was the horrible seats on the bus more than anything else. The girl I was sitting next to could tell that I was in a lot of pain and kept asking me if I was alright.
A few times I went in the bathroom stall at the back of the bus and just sat there because it was more comfortable than my reclined seat. I was in the worst pain I've ever felt - it was excruciating. And there was nothing I could do to alleviate it - no matter how I stood or sat the pain was still almost unbearable. I didn't know what to do - I couldn't go anywhere and I was on a bus going down a highway. Finally after three hours we stopped to drop some people off in Baltimore. I grabbed my stuff and just got off the bus. I ran to a taxi near the bus stop and said, "Take me to the hospital!" I think it kind of startled the taxi driver because he drove like a maniac on the way over - I guess he didn't want me to die in the back of his cab.
I got to the hospital and there were probably 80 people waiting in front of me. Some of them had already been there for eight hours. I signed in and told the nurse that I was in terrible pain. She put me at the top of the priority list, but I knew that even at the top of that list I would still be waiting for a while. I got some blood drawn and gave a urine sample, then just sat and waited to be called. About four hours later they called me back. After sitting there waiting for another hour in the hospital bed, they finally came in and gave me some medicine to ease the pain. Wow - that was the worst 5-6 hours of my life by far. Nothing I've ever felt compares with that pain.
I got a CT scan and it turns out that I have a kidney stone! I thought those only appeared in older people, but apparently somehow I got a kidney stone. I've heard it said that the pain is comparable to giving birth, so to all of you women out there, I bow down and thank you for that wonderful service you provide to humanity. You are amazing to handle that multiple times!
I finally was released at about 3:30 am and was wondering how I was going to get back to DC. When I ran off the bus I wasn't really thinking ahead about the fact that after I left the hospital I would still be an hour away from DC. Luckily, my dad had made a few calls in the meantime and some guys from my church, whom I had never met before, just showed up and took me all the way home. People in the Church are just like that - willing to help a total stranger. It's amazing.
So now I'm at home with some narcotics and things are better than yesterday. The stone is still inside of me somewhere but the doctor said that the worst pain comes when the stone moves from your kidney to your bladder, so hopefully the worst part is over for me.
This isn't really what I expected to do during over the weekend, but I've also learned to expect crazy stuff to come up all the time.
Let me know if you like hearing about interviews and I'll post some more questions from various interviews I've had over the past few months.
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