As second-year MBA students chatter at cocktail parties, one of the major topics of discussion is who landed investment banking offers. Although the reputation of investment banking has taken a beating following the 2008 financial crisis, corporate finance jobs are still an incredible way to gain valuable business experience and earn a handsome paycheck.
Since the financial crisis, many perceive investment banking to have changed forever, and in many ways, it has. But there will still be IPOs, mergers and leveraged buyouts and a need to raise capital to grow businesses, and that means there will be jobs for those who have what it takes to succeed in corporate finance.
For the MBA, the typical entry job into the corporate finance department is an associate position. It’s a demanding slot, but it’s one rung above an analyst position, pays well and leads to great client exposure and business experience. So what will it take for an MBA to secure an associate position?
From B-School to I-Banking
Yes, corporate finance looks for bright individuals who can clearly articulate business insights and who will dazzle clients with social skills. But at the associate level, investment banks are also looking for MBAs that have strong finance experience and are driven and disciplined.
In terms of experience, bankers are ideally looking for candidates with previous corporate finance experience. Such experience could be a pre-MBA stint as an analyst or a summer internship with an investment bank. Firms also tend to value candidates with Big Four accounting experience, commercial banking experience or other positions that require significant exposure to finance and accounting.
Similar to the analyst hiring process, interviews for associate positions can be intense, and the ante is upped for candidates who have completed graduate programs and will be expected to work more closely with clients. Associate candidates should put in several hours of practice interviews and be prepared for all sorts of questions. For those who have already gone through the interview process as an analyst, the interview won’t be as intimidating (otherwise, get ready!).
Interviews may involve several rounds, culminating in a “super Saturday” round in which the top candidates meet with all the bankers at the firm for another round of interviews and socializing – giving the firm an opportunity to see which candidates are the best cultural fit.
As with most interviews, candidates must be prepared to impress the firm with their intellect and skills, but more importantly, they must prove that they are a likeable person that will work well with the firm’s employees. For candidates who receive offers, it’s time to get ready for life as an investment banking associate.
The Corporate Finance Quarterback
There’s a good reason why associates earn a healthy salary and a large bonus each year. In short, they are the quarterbacks of the corporate finance office. They may have analysts to whom they can assign projects, but they have to juggle multiple projects from multiple bankers with complicated schedules. Managing the analysts is no easy task either, as each of them are pushed to the max with their project workloads.
Like analysts, associates may start their day at 8 am and not finish it until 1 or 2am – and sometimes may not go home at all. They come in on the weekend to stay on top of projects and ensure that documents and presentations are completed with enough time for thorough editing. Associates usually put in as much time as analysts – often 80 to 100 hours a week at New York firms or 60 to 80 hours at firms off of Wall Street.
The Deal Cycle
Associates play a key operational role in the deal cycle of the corporate finance department. In the deal cycle, investment bankers – the vice presidents and managing directors – will either approach or be approached by companies with ideas for potential transactions. These deals may include IPOs, follow-on offerings, private placements, mergers and acquisitions.
Bankers will set up a meeting with the company called a pitch, in which they pitch the services of the firm to the company and present their analysis of the feasibility of the potential transaction.
At the pitch, the bankers will present the potential client with a pitch book – usually a hard-copy PowerPoint presentation that describes the credentials of the bank along with a detailed analysis of the market in which the company operates and often a valuation of the company itself.
If the company is impressed with the firm and interested in pursuing a deal, then it will engage the firm to execute the transaction. Depending on the type of transaction and the conditions of the market, these transactions can take anywhere from a few months to a few years to complete. At any point in time, bankers can be working on several pitches and deals all at once.
What do Associates Do?
Analysts tend to work on the front end of the deal cycle, working on pitch books for the bankers. Associates also work on the front end of the deal cycle, overseeing and editing the work of analysts in the preparation of pitchbooks.
But associates also assist in the execution of deals – preparing sales documents for various transactions, editing prospectuses and even discussing due diligence materials with potential purchasers in M&A and other transactions. As associates gain the respect of senior bankers, they may get to accompany the senior bankers on pitches and become more involved in business development.
A first-year associate may initially perform many of the same analyses as analysts – comps, DCFs, LBO, etc. – but associates eventually transition to more senior level work. Rather than cranking through the template financial models that analysts work with, some may redesign these models or build models specifically for particular deals.
Much of the legwork that associates perform involves spreading client financials to share with potential investors or drafting private information memoranda for M&A transactions or private placements. Because of the nature of this work, associates often work closely with clients, speaking with CEOs, CFOs and other members of the management team to assemble relevant information for sales documents.
Associates quickly learn to charm clients while at the same time leaning on them to provide timely, detailed information for sales documents. Corporate finance transactions can be extremely stressful on clients (and associates), and associates must be able to navigate tough situations where clients have become fatigued and emotional by the deal process.
The Perks of Being an Associate
Despite all the pressure and long hours, there are some payoffs for associates who stick around. Depending on the firm, starting salaries for associates can range from $100k to $150k, but when you add in bonuses that are often north of 50%, total compensation can range from $150k to $250k.
Many firms have a policy that when employees have to stay at work past 7pm, they get their dinner paid for. Like analysts, associates stay past 7pm nearly every night, so free dinners can quickly add up to a lot of money.
Other perks often include reimbursement for cell phone or blackberry bills, free cab rides for late trips home and the occasional opportunity to celebrate with other bankers at a lavish closing dinner.
If an associate chooses to leave the investment banking world, their experience can often be leveraged to move into positions that would normally require more experience. Investment banking is incredibly rigorous work with associates wracking up double the hours of the average worker and performing their work at an intensity level that is among the highest in the business world. It is no wonder that they have an easy time excelling in other careers.
For associates who hang around, two or three years of experience usually leads to a promotion to a vice president position. Hours for vice presidents may be a bit lower, but travel is a good bit more.
A high-performing vice president can make the jump to senior vice president or managing director after several years. Although the hours and seniority of these positions may be slightly more appealing than an associate position (senior bankers can still be found at the office on many weekends), they also bear much more responsibility for bringing in new business.
Like any career, anyone considering an associate position at an investment bank should look beyond just pay and prestige and think about whether or not they will enjoy the work. Some of the most valuable benefits investment banking has to offer are the incredible experiences of working with companies during pivotal times – and the character that those experiences build.
Adam Fish, aka Professor Fish, writes on educational finance topics at Finance Ocean – an educational resource to help people broaden their knowledge of finance.
A vital number that every business owner and finance director should know is their monthly Break-Even. This is the point where the business generates sufficient profit from sales to exactly cover its fixed overhead costs. Higher sales and the business will make a profit; lower sales and there will be a loss.
Fixed overheads, as the name suggests, are the costs that tend not to vary in line with turnover. These include administrative staff salaries, property costs, insurances, stationery, equipment rental, motor expenses, depreciation, bank charges etc. When calculating the monthly fixed overhead, always remember to allocate a portion of financial costs such as accountant’s fees which are billed to you once a year.
To work out your profit Break-Even sales point, you only need two pieces of financial information:
1) Total fixed overhead costs
2) The gross profit percentage (GP% or gross margin)
The gross profit percentage is calculated from the average profit that a business makes on each sale. So if you sell a product or service for £250 and your variable costs are £175, then the gross profit is £75 and the GP% 30%. If you made ten sales, the gross profit would be 10 x £75 = £750 but the GP% would still be 30%.
Now let’s assume that total fixed overhead costs each month average £25,000. To calculate the sales required to Break-Even, divide the overhead costs by the GP%. £25,000 divided by 30% = £83,333.You now know that the business has to generate at least £83,333 of sales each month to avoid making a loss.
Note that the Break-Even point is not set in stone. It is a financial information tool for the business owner to use and react to. If the business is struggling to consistently generate more than the £83,333 sales needed to generate a profit, then the business owner aware of Break-Even knows that he is losing money and can immediately take remedial action.
The quickest way to reduce Break-Even is to reduce costs. If you could reduce fixed costs from £25,000 to £20,000 per month, Break-Even sales would fall from £83,333 to £66,666, a significant difference.
Clearly the other way to reduce the Break-Even point is to increase your gross margin. Ways to do this might include putting up your prices, finding cheaper suppliers or introducing higher GP% product or service lines. If the GP% could be increased from 30% to 33%, then Break-Even on fixed costs of £25,000 would be £71,428.
Combining both strategies ie cutting fixed financial overheads to £20,000 and increasing the GP% to 33% would result in a new Break-Even sales of £60,606.
What we have discussed above is PROFIT Break-Even. A variation of this, one which most business directors do not understand or appreciate, is CASH Break-Even. This can literally make the difference between business success or failure.
Break-Even recognises that fixed overhead costs include non cash items such as depreciation. More importantly, it also picks up other cash outlays that do not appear within overheads, indeed they do not appear within the profit and loss account of the business at all!
Take for example a Road Haulier who buys a lorry for £100,000. The lorry has normally has a working life of 10 years so is depreciated in the profit and loss account at £10,000 per year. The haulier can’t afford to buy the lorry outright and enters into a finance agreement to pay for the lorry over 4 years.
Ignoring the impact of interest on the loan, cash repayments against the finance agreement are £25,000 per year. In this situation cash outlays of £25,000 exceed the depreciation overhead by £15,000. Based on a GP% of 30%, this means that sales have to be £50,000 per year higher to achieve CASH Break-Even than PROFIT Break-Even. Something worth knowing don’t you think?
To conclude, calculating the PROFIT and CASH Break-Even sales points for your business is vital for helping manage cash flow. Making Break-Even as low as possible achieves two great outcomes. It maximises the opportunity to make profit/generate cash and, just as importantly in harder economic time, it considerably reduces the risk of business failure.
The job market is full of competition these days. It is quite difficult to get into the job of your choice. Your aim should always be clear. It is important to decide about the field in which you want to go from the very beginning.
You must choose your career very carefully. Lots of people make mistakes in choosing their career and hence they have to suffer a lot. So find out the field in which you are interested. Always make sure that you love your job.
This way you can reach to the top. Finance jobs have become quite popular these days. Lots of people are entering into this field because of the wide range of prospects in this field. There are different kinds of opportunities waiting for you in this field.
If you want to get into finance then you must have a good hold over math. These kinds of jobs are gaining more importance these days because of the finance jobs salary. The salary package is quite attractive.
In the beginning you must always try for the entry level finance jobs. These kinds of entry level jobs will help you learn the job and have a better idea about the kind of work you need to do. Other than this, you will also gain some experience in this field.
If you want to go up the ladder of success then experience is very much essential. You can try for the bigger companies as well as the bigger salaries of you have enough experience in this field.
Corporate finance jobs have also become quite popular these days. Before you enter into this field you need to learn about the top opportunities available in the finance jobs. It is important to have finance jobs description before you join.
1. One of the most popular and sought after jobs is the banking jobs. The banks usually have branches in every city and it belongs to the financial sector.
2. You can also work as an auditor if you want to join the financial sector. Auditors can be of two types. You cam either be an internal auditor or an external auditor.
3. The job of an underwriter can also help you have a good career in the financial field. But whichever job you choose in this field you need to make sure that you are responsible.
4. You can also enter into the payroll job. This is also a job which requires a great amount of responsibility. These people are there are to make sure that the employees get paid.
5. You can also get the job regarding private equity. This job might be a bit complex but is highly paid.
6. You can also join the finance jobs as an accounts assistant. You need to have certain qualifications for this field.
7. Financial director is the other job opportunity that you can get.
8. You can also choose to be a business analyst.
9. Management accountant post is also attractive.
10. Credit controller can also be one of your choices.
If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.
In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.
Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.
Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.
Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.
Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.
In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.