Archive for the ‘Boutique Banks’ Category

Lazard Operating Revenues Jump 67% Year over Year: Core Investment Banking Coming Back

Sunday, May 9th, 2010

Lazard, famed investment bank and legacy of Bruce Wasserstein recently reported earnings that blew investors away.  Operating revenues jumped 67% from one year earlier.  Lazard advises on mergers & acquisitions, restructurings, and to a lesser extent, capital raisings.  It operates from 40 cities across 25 countries throughout Europe, North America, Asia, Australia, and Central and South America, focusing on two business segments: Financial Advisory and Asset Management (explained below).

According to Bloomberg, “Lazard Ltd., the biggest non-bank merger adviser, rose in New York trading after posting adjusted earnings that beat analysts’ estimates on operating revenue that jumped 67 percent from a year earlier.

The loss for the first three months of 2010 was $33.5 million, or 38 cents a share, compared with a loss of $53.5 million, or 77 cents, in the same period a year earlier, the Hamilton, Bermuda-based company said today in a statement. Adjusted earnings were 46 cents a share, beating the 18-cent average estimate of 12 analysts in a Bloomberg survey.

Lazard’s revenue from advising on mergers and acquisitions climbed from a year earlier even as companies completed a lower value of deals in the quarter. Excluding special charges, the firm’s compensation ratio fell to 60 percent of revenue, compared with 75 percent in the first quarter of 2009.

“The report should give investors a booster shot of confidence on two important fronts,” Oppenheimer & Co. analyst Chris Kotowski said in a note to investors. “First, that the rebound in M&A activity is happening, albeit in fits and starts. Second, that the company is developing discipline around its compensation and other costs.”

Lazard rose 57 cents, or 1.5 percent, to $38.78 at 4 p.m. in New York Stock Exchange composite trading. The shares gained 28 percent last year after falling 27 percent in 2008.

Revenue Increase

Operating revenue rose 67 percent from a year earlier to a first-quarter record of $456.9 million. Operating revenue from financial-advisory services climbed to $269.1 million as fees from advising on both mergers and restructuring jumped more than 50 percent.

Revenue from merger and acquisition and strategic advisory climbed 53 percent from a year earlier to $147.6 million. That’s down 13 percent from the fourth quarter of 2009.

Asset management revenue climbed 78 percent from a year earlier to $183.7 million. Assets under management increased 4 percent to $135 billion from Dec. 31, with net inflows of $3 billion in the quarter.

“Both financial advisory and asset management had their best first quarters ever,” Chief Financial Officer Michael Castellano said in an interview. “We’re continuing to gain global market share in the M&A business.”

Compensation costs climbed 35 percent from a year earlier to $275.5 million. The firm also recorded a one-time $87.1 million expense tied to staff reductions.

‘Right Manpower Complement’

“Over the last two years, in addition to aggressively hiring senior bankers, we’ve also right-sized the firm in both asset management and the financial-advisory business, to make sure we have the right skill sets for the new world,” Castellano said. “I think we’ve now got the right manpower complement to be able to drive growth in both of the businesses.”

Kenneth Jacobs was named chief executive officer in November after the death of Bruce Wasserstein, the preeminent Wall Street dealmaker who took Lazard public in 2005. Jacobs, who has worked at the firm for 22 years, had served as deputy chairman and CEO of North American businesses since 2002, shortly after Wasserstein arrived.

Lazard said last month that Castellano will retire on March 31, 2011. He will be replaced by Matthieu Bucaille, who served as deputy chief executive officer of Lazard Freres Banque in Paris.

Financial Advice

Lazard has been using its restructuring-advisory business to counter weakness in mergers and acquisitions. It was the second-ranked adviser in 2009 bankruptcy liquidations, according to Bloomberg data, and advised debtors or creditors in the top 10 Chapter 11 bankruptcies in 2009.

Companies worldwide completed $358.9 billion of deals in the first quarter, down 25 percent from the same period in 2009 and 52 percent from the first quarter of 2008, data compiled by Bloomberg show.

Lazard was the seventh-ranked financial adviser on announced deals and 12th-ranked on completed takeovers in the first quarter. The firm advised on completed deals totaling more than $33.9 billion, including Kraft Foods Inc.’s acquisition of Cadbury PLC.

Lazard employees own more than a quarter of the firm, excluding the estate of Wasserstein. Because the stakes owned by employees can be converted into common stock, the company reports earnings as though the stakes were fully exchanged instead of treating them as minority interest.

Evercore Partners Inc., the investment bank founded by former U.S. Deputy Treasury Secretary Roger Altman, reported earnings last week that beat analysts’ estimates as advisory revenue climbed from a year ago.

Lazard Business Breakdown

Financial Advisory

The Company offers corporate, partnership, institutional, government and individual clients across the globe an array of financial advisory services regarding mergers and acquisitions (M&A), and other strategic matters, restructurings, capital structure, capital raising and various other corporate finance matters. During the year ended December 31, 2009, the Financial Advisory segment accounted for approximately 65% of its consolidated net revenue. It has operations in United States, United Kingdom, France, Argentina, Australia, Belgium, Brazil, Chile, Dubai, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Panama, Peru, Singapore, South Korea, Spain, Sweden, Switzerland, Uruguay and mainland China.

The Company advises clients on a range of strategic and financial issues. When it advises companies in the potential acquisition of another company, business or certain assets, its services include evaluating potential acquisition targets, providing valuation analyses, evaluating and proposing financial and strategic alternatives and rendering, if appropriate, fairness opinions. It also may advise as to the timing, structure, financing and pricing of a proposed acquisition and assist in negotiating and closing the acquisition. In addition, the Company may assist in executing an acquisition by acting as a dealer-manager in transactions structured as a tender or exchange offer. When the Company advises clients that are contemplating the sale of certain businesses, assets or their entire company, its services include advising on the appropriate sales process for the situation, valuation issues, assisting in preparing an offering circular or other appropriate sales materials and rendering, if appropriate, fairness opinions. It also identifies and contacts selected qualified acquirors, and assists in negotiating and closing the proposed sale. It also advises its clients regarding financial and strategic alternatives to a sale, including recapitalizations, spin-offs, carve-outs, split-offs and tracking stocks.

For companies in financial distress, the Company’s services may include reviewing and analyzing the business, operations, properties, financial condition and prospects of the company, evaluating debt capacity, assisting in the determination of an appropriate capital structure and evaluating and recommending financial and strategic alternatives, including providing advice on dividend policy. It may also provide financial advice and assistance in developing and seeking approval of a restructuring or reorganization plan, which may include a plan of reorganization under Chapter 11 of the United States Bankruptcy Code or other similar court administered processes in non-United States jurisdictions.

When the Company assists clients in raising private or public market financing, its services include originating and executing private placements of equity, debt and related securities, assisting clients in connection with securing, refinancing or restructuring bank loans, originating public underwritings of equity, debt and convertible securities and originating and executing private placements of partnership and similar interests in alternative investment funds, such as leveraged buyout, mezzanine or real estate focused funds. In addition, it may advise on capital structure and assist in long-range capital planning and rating agency relationships.

Asset Management

The Company’s Asset Management business provides investment management and advisory services to institutional clients, financial intermediaries, private clients and investment vehicles around the world. As of December 31, 2009, total assets under management (AUM) were $129.5 billion, of which approximately 82% was invested in equities, 14% in fixed income, 3% in alternative investments and 1% in private equity funds. During 2009, approximately 36% of its AUM was invested in international investment strategies, 46% was invested in global investment strategies and 18% was invested in United States investment strategies. As of December 31, 2009, approximately 89% of its AUM was managed on behalf of institutional clients, including corporations, labor unions, public pension funds, insurance companies and banks, and through sub-advisory relationships, mutual fund sponsors, broker-dealers and registered advisors, and approximately 11% of its AUM, as of December 31, 2009, was managed on behalf of individual client relationships, which are principally with family offices and high-net worth individuals.

The Company competes with Bank of America, Citigroup, Credit Suisse, Deutsche Bank AG, Goldman Sachs & Co., JPMorgan Chase, Mediobanca, Morgan Stanley, Rothschild, UBS, The Blackstone Group, Evercore Partners, Moelis & Co., Greenhill & Co., Alliance Bernstein, AMVESCAP, Brandes Investment Partners, Capital Management & Research, Fidelity, Lord Abbett, Aberdeen and Schroders.

Pali Capital Files for Bankruptcy – Bankruptcy Filings Attached

Friday, April 2nd, 2010

Pali Capital, a well known boutique investment bank and underwriter recently filed for bankruptcy after a failed merger attempt.  The firm was founded in 1995 by former MDs at Merrill Lynch.

According to Bloomberg, “Pali Holdings has filed for bankruptcy protection after failing to sell its boutique securities firm, Pali Capital.

Pali’s Chapter 11 petition, filed in federal Bankruptcy Court in Manhattan on Thursday, listed $716,300 in assets and $31.8 million in debts.”

More from Bloomberg:

“Pali Holdings filed the instant Chapter 11 bankruptcy case to obtain protection from its creditors while it continues to liquidate and wind down Pali Capital,” Gerald Burke, a director of Pali Holdings, said in an affidavit filed with the bankruptcy petition.

The privately held company was in talks to sell the brokerage business to ex-Bear Stearns Companies finance chief Samuel Molinaro and had told shareholders it might go out of business without a sale or cash infusion.

The parent company, based in New York, had an estimated loss of $18.3 million in 2009 and said in a Jan. 14 letter to shareholders obtained by Bloomberg News that it could run out of money by the end of February. The broker-dealer Pali Capital, with expertise in derivatives, fixed income, and investment banking, said Feb. 16 that it would begin to wind down operations.

According to the SF Chronicle “When a brokerage fails, the Securities Investor Protection Corp. names a trustee to protect assets and return customers’ cash and securities. When Lehman Brothers Holdings Inc. filed Chapter 11 in 2008, the SIPC appointed lawyer James Giddens as brokerage trustee. The bank’s North American brokerage business and associated real estate were then sold to London-based Barclays Plc for $1.54 billion.

The largest unsecured creditor named in the Pali Holdings filing was Panama-based Mandeville Holding Ventures Co.

Four CEOs

Pali Holdings has had four chief executive officers or co- CEOs in the past 17 months and its chairman stepped down in December. The firm focused on equity and fixed-income sales, trading and research for institutional clients such as money managers and hedge funds. The company had offices in London, San Francisco, Newport Beach, Chicago and five other U.S. locations, according to its Web site.

Pali Holdings received $3 million of “emergency bridge financing” in November and has lost about $40 million in the past two years, according to the company’s letter, signed by directors Kevin Fisher and Burke.

Pursue Alternatives

Shareholders, including former Pali CEO Bradley Reifler, wrote in response that the company should pursue alternatives to a sale, such as a recapitalization. In their undated letter, signed by Reifler, Wolfgang Stolz and John Staddon and also obtained by Bloomberg News, the shareholders requested a special meeting be held to elect a new board.

Molinaro, the former Bear Stearns executive, was helping Braver Stern Securities Corp. negotiate the potential purchase of Pali Capital and was to become CEO of the combined firm, overseeing about 250 people, people familiar with the talks have said. Molinaro was Bear Stearns’s chief financial officer from 1996 until 2008, when JPMorgan Chase & Co. purchased the company to save it from bankruptcy.

Separately today, New York-based JPMorgan filed a $4.5 million lawsuit in New York State Supreme Court in Manhattan against Pali and Reifler, alleging a loan default.

“Pali was responsible” for the debt, Reifler said in a telephone interview. “When I left in October 2008, there was $66 million in cash, and the loan should have been paid from those funds.”

The case is In Re Pali Holdings Inc., 10-11727, U.S. Bankruptcy Court, Southern District of New York (Manhattan)”

According to ZeroHedge,

The reason for the bankruptcy was provided in the filed affidavit as follows: “Pali Capital experienced consistent pre-tax losses commencing with the second quarter of 2008 and continuing through and including the fourth quarter of 2009, caused by among other things, a substantial slowdown in sales and trading by Pali Capital’s primary institutional clients. These losses are projected to continue into at least the first quarter of 2010. As a result, it was difficult for Pali Capital to maintain adequate levels of excess regulatory net capital to support normal business operations, although Pali Capital is in compliance with its minimum regulatory net capital requirements through February 28, 2010.” So after 4 CEOs in 17 months all Pali is left with is a list of secured and unsecured creditors. And in probably not the wisest move for the privacy of said creditors, the firm has listed the home addresses of Kevin Fisher, Ari Nathan, Leon Brenner and some other rather high profile financiers.

List of largest secured creditors (and home addresses):

Pali Bankruptcy

New UBS Alumni Investment Bank Princeridge Takes Over ICP Capital

Thursday, March 11th, 2010

After meeting two managing directors from PrinceRidge in Boston, I can definitely vouch for the fact that it is a very respectable firm with great people.  They will continue to grow in this market because of their expertise in high yield issuance, restructuring, and trading.  ICP is a solid acquisition because of its focus in structured products and asset management.

According to Ms. Shenn of Bloomberg, “PrinceRidge Holdings LP, run by former UBS AG executives John Costas and Michael T. Hutchins, is taking over the capital-market operations of ICP Capital, the broker and asset manager focused on structured products.

ICP Capital, majority owned by Chief Executive Officer Thomas Priore, will become one of six senior partners that own PrinceRidge and the combined business will operate under the PrinceRidge name, Costas said today in a telephone interview. Both firms are based in New York.

ICP, which has 60 employees in the units in New York, Chicago, Los Angeles, London and Copenhagen, is teaming with PrinceRidge after losing the head of its trading and investment- banking business, Carlos Mendez. PrinceRidge is attempting to position itself to capitalize on a “once in 50-year opportunity” to create a sizable “boutique” securities firm, as it expects only four or five of about 180 smaller competitors to grow into mid-size rivals to Wall Street’s “mega-players,” Costas said.

“There will be a tremendous consolidation and a shaking out among these 180 players, and the conclusion we clearly came to is we are stronger together, and can increase the probability of us being one of the winners,” he said.

PrinceRidge Chairman Costas, 53, and CEO Hutchins, 54, last year reunited to start their firm after running UBS’s hedge fund Dillon Read Capital Management LLC, which the Swiss bank wound down in 2007 as the credit crisis began roiling debt investors. Costas earlier led UBS’s investment bank.

‘Shouting Match’

PrinceRidge now has 85 employees, Costas said. ICP, which was founded as a Bank of New York affiliate in 2004 and became independent in 2006, has about a dozen workers in its separate asset-management unit, said Priore, 41.

Mendez left ICP after a “shouting match” with Priore last month, industry newsletter Asset-Backed Alert reported March 5. Mendez confirmed his departure in a telephone interview today and declined to comment further.

Priore declined to comment on Mendez’s departure, saying his company could have explored other options including raising capital.

“We chose this route because we think it really speeds up our evolution by a couple of years,” Priore said.”

Houlihan Lokey Starts Capital Markets Franchise

Monday, November 30th, 2009

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Former Drexel deal maker Jess Ravich has started a capital markets franchise for restructuring powerhouse, Houlihan Lokey.  Ravich, who graduated from Wharton and Harvard Law School was part of the DBL executive committee and ran high yield trading from 1988 to 1990.  He sat next to junk-bond legend Michael Milken.

Ravich will build the debt capital markets group at HL and will focus on private placements of both equity and debt, as well as new issuances of high yield securities, bank debt and investment grade debt.  As head, Ravich is also working on building syndication relationships.

~IS

For more information, please visit HL’s website…

For more information, please refer to the NOv. 13th edition of IDD…

The Ins and Outs of Investment Banking: Part I

Tuesday, November 17th, 2009

investment_banking

What is investment banking?

Companies need cash in order to expand and grow. Investment banking, also known as I-banking claims the responsibility of raising capital through the selling of securities (debt and equity) for these companies and advises them on financing and merger alternatives.  Some of the biggest players are Goldman Sachs, JP Morgan and Morgan Stanley.  (For a complete list of I Banks, please check the investment banking link on the forum)  Most of these I-banks are headquartered in New York City, the investment banking capital of the world.

The Breakdown

Most investment banks can be broken down into these areas:

  • Corporate Finance:  The bread and butter of an investment bank, corporate finance can be broken down into two areas: mergers and acquisitions and underwriting.  In M&A, bankers assist in the negotiation and structuring of mergers between companies.  Underwriting involves the process of raising capital for firms via selling either equity (stocks) or debt (loans and bonds).
  • Capital Markets: The role of this department is to manage the interaction of bankers in corporate finance with those in sales and trading.  Professionals are responsible for understanding recent transactions and using this information to formulate new transactions.
  • Sales:  Salespeople take the role of the classic retail broker (develops relationships with the individual and sell stock/stock advice), the institutional salesperson (manage larger groups of assets such as pension funds or mutual funds), or the private client sales (provide money management services for very wealthy individuals).
  • Trading:  Responsible for facilitating the buying and selling of stocks, bonds, and other securities.  Traders have two distinct roles in a company: (1) providing liquidity, where they act as a market maker by providing clients with the ability to buy and sell a security on demand, and (2) proprietary trading: taking on a trading position on behalf of the firm.  In proprietary trading, traders risk the firm’s principal.
  • Research: Analysts follow stocks and make recommendations to outside investors on whether to buy, sell, or hold securities.  Analysts typically cover one industry and will focus on approximately 20 companies.
  • Syndicate: This group is the link between corporate finance and sales.  This group exists to facilitate the placement of securities in a public offering.  Syndicate is also referred to as primary sales as securities are placed in the hands of the investors for the first time.

Commercial Banking and Investment Banking: What’s the difference and why do some firms have both?

Commercials banks: May legally take deposits for checking and savings accounts from customers.  The actual process is relatively straight forward- you (the customer) deposits cash into the bank which in turn pays you an interest rate (ex: 1-4%).  The bank then loans that money out to other customers looking to buy a house or finance a car at a higher interest rate (7-14%).  The bank’s profit is generated by charging a higher interest rate to borrowers than the interest rate they pay to depositors.  Examples of commercial banks include Bank of America, Chase, and Wachovia.  All loans made between commercial banks and individuals are contracts and are legally binding.  The terms of the contract (how much the bank will lend you and at what interest rate) is determined by the bank based largely in part according to your credit history.

Investment Banks: Unlike a commercial bank, an investment bank does not have an inventory of cash deposits to lend out to individuals or corporations.  Rather, investment banks work to match buyers or securities to sellers.  They also offer advisory services on mergers and acquisitions.  However, larger corporations that are in need of cash may also seek an I-bank to sell equity or debt (stocks or bonds) on behalf of the company to the general public.

Thanks to the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, banks can now consolidate both commercial and investment banking into one firm (i.e. merger of Citicorp and Travelers Group into CitiGroup).  The largest bank with both sides today is JP Morgan after it merged with Chase bank.  The synergies created with merging both sides have caused these companies to grow at astounding rates.

Landing a Job in Investment Banking

The first step to obtaining a position in investment banking is having an understanding the industry.  Finance is a very competitive field with a lot of pressure and long hours.  However generously compensated through large salaries and equally great bonuses, I-banking is incredibly competitive and imposes a lot of pressure on employees.  Make sure to go on information interviews, read publications, and ask questions.  Some questions to ask include:

  • What is a typical day like?
  • What are the hours each week?
  • What is the future of the industry in the next five years?
  • What sectors of finance are hiring now?
  • How easy is it to move horizontally in the firm?  Vertically?
  • What is so exciting about this job?
  • What is the corporate culture like?
  • What is the typical career track?

If this is a field that seems appealing, checking in with career services, alumni, friends, and family is the next step.  Many finance companies recruit at targeted business school and accept resumes through the career center.

After you’ve landed the interview, the most important part is making a good impression.  At this point, you can be assured that the recruiter already thinks you have some basic skills necessary for the job.  Don’t be put off by the pressure and prepare as best you can by reading about the firm and the industry (see publications below).  Also, be confident as a career in I-banking making countless multi-million dollar decisions and your recruiter wants to see that you are confident in yourself to handle this position.

The Hiring Process

There are generally two parts to any finance interview which can be broken down into “the fit part” and “the technical part”.

Fit:  This part of the interview involves the recruiter assessing your personality and deciding if you are a good fit with the company.  Companies typically have very strong cultures that differentiate them from the competition and the interviewer needs to know if you share the same values and that you are the type of person he/she would like to work with.  Remember to emphasize your work ethic and dedication to the job.  However, being overly enthusiastic about something like long hours is overdoing it and your recruiter will see right through you.  Instead, be honest and acknowledge some of the negatives and your ability to deal with them.  Also, this is a very analytical field and requires a lot of number crunching.  Make your interviewer aware of these skills through past experiences, school work, or other jobs.

Technical:  This part of the interview is an evaluation of your finance knowledge.  If you do not do well in this part of the interview, the recruiter may either assume that you have no interest in this field, or that you are not competent enough to handle the position.  There are certain topics your interviewer may question you on including valuation techniques, basic accounting concepts, market valuation, discounted cash flow, capital asset pricing model, and NPV.   Your recruiter may also give you scenarios and ask you to work through a problem (also known as a case interview.  Please see “Mastering the Case Interview”)

Before any interview always remember to prepare properly through research of both the firm and the industry.  Know your position and what would be expected of you.  Also come prepared with questions to ask your interviewer to show you have an interest in the position and to get some more inside information. (Don’t ask questions that can be answered by visiting their website)  Practice in front of a mirror, friends, coworkers, or family.  Most important of all, be confident.  Recruiters want to see that you can handle this high stakes, high pressure job.

Trends in I-Banking

Bank Mergers: Beginning in 2003 with the acquisition of FleetBoston by Bank of America, M&As became the latest trend in I-Banking.  The following year JP Morgan became the second largest bank by acquiring Chase.  That same year, Wachovia acquired SouthTrust Corp.  More recently, there have a been a few notable M&As in the financial services industry that have caused several changes in banking structure.  For example, in 2008 Bank of America announced its acquisition of Merill Lynch, creating a firm with a breadth of financial services and increased opportunities to its customers.

In demand Skills: With the financial services industry slowly starting to recoup as the economic crisis slows, certain skills are in demand.

  • Financial Institutions Group Bankers:  Those that specialize in arranging mergers and acquisitions and other deals between insurance companies, banks, and distressed pools of capital.
  • Trading Technology: There is a growing need for those with the technology skills to devise and code trading models.  The growth of high frequency algorithmic trading may account for up to 40% of daily stock exchange volume.
  • Fundamental Credit Analysis: There is a high demand for in house credit skills due as participants of trading are still wary of credit risk.

For more insight into the I-Banking world, the following publication and sites are available:

  • Wall Street Journal
  • Business Week
  • The Banker (online)
  • Investor’s Business Daily/Investors.com
  • Kiplinger Magazine
  • Forbes
  • Money Magazine
  • The Financial Times

~Catherine B.

For more information on the field of I-banking and detailed analysis of positions, please visit Vault.


Common Interview Questions

Sunday, November 15th, 2009

timemachineinterview

This covers general interview questions encountered in most job interviews.  While these are generic questions, the answers should still remain relevant to the position being sought and should reflect a desire to work in the specific industry.

1. Tell me about yourself.

The most common interview and probably the hardest to answer.  This is a chance to give the interviewer a very brief rundown of your past including education, previous job titles, goals and experiences all specifically related to the position in which you are applying for.

2. What specific goals have you set for yourself/where do you see yourself in five years?

Striking a balance between honesty and ambition is key.  Honesty is important as interviewers can often tell when a candidate is lying to them, but keep the goals relevant to a professional career and most importantly, to the job you are applying for.  For example: “I hope to stay at the company and expect that in five years, I’ll make a significant advance in the organization.”

3. How has your college experience prepared you for a career in business/finance?

Discuss the key skills you have developed during your four years at the university in addition to the experiences you have had outside the classroom such as positions in clubs, organizations, etc.  Make sure to keep these experiences related to the industry.  Anything in a leadership position is usually a safe bet.

4. What has been your most rewarding accomplishment?

This is a great time to impress the interviewer with professional accomplishments.  Demonstrating success through use of quantitative data is usually the best way to go.  For example: During my time at Investment Bank X I was able to increase the rate of return by 10% for one of my private wealth client’s portfolios.

5.       Describe what you’ve accomplished toward reaching a recent goal for yourself.

Employers want to see that you are proactive.  Highlight a past experience in which you created a plan of action for yourself to achieve a goal.  Ex: Going back to school or taking a training course, forming a team, etc.

6. Tell me about a major problem you’ve had and how you handled it?

This is the part of the interview where the interviewer is looking for problem solving/conflict management skills.  Describe an instance in which you had to take an immediate plan of action to alleviate a situation.  Try to keep names out of the story such as former employers and companies, and don’t play the blame game.  This is also a way for the employer to see how you handle pressure.  Finance is a very stressful, high stakes industry and your manager needs to know that he/she can count on you to remain calm under a variety of situations.  Remember to mention the end result (using measurable data again is a great way to demonstrate progress/improvement)

7. What are Your Weaknesses?

Turn a negative into a positive. Pick out qualities that can be seen as both good and bad and no matter what, always give examples of how you are working to improve your behavior.

8. What is your desired salary?

Prior to the interview, conduct thorough research on the salaries of those in related positions with similar work experience.  While salaries will vary due to location, experience, size of firm, etc., having a relative range shows your employer you are prepared.

9.       Why did you decide to seek a position in this field?

Researches the company first so you have a good idea of what the firm offers its clients and employees, and then match those to your own personal goals and values.  Employers also want to see passion.  They don’t want to hire someone that just wants a job, so prove you’ve done your research on both the position you are applying for an the industry.

~Catherine B.

Please go to Quint for more information…

Mastering the Case Interview

Sunday, November 15th, 2009

vault-tag

The case interview is an analysis of a business question.  This is a very interactive process in the sense that the interviewer presents you with a business problem and asks you for your opinion on how to solve it.  Interviewers are not necessarily looking for an answer, but more a thought process that is both analytical (use of data and real life concepts) and creative (“out of the box thinking”).  In general, there are three types of case interviews.

Business Case:  You are presented with a business scenario and asked to analyze it.  In most interviews, the case is presented orally, but may be supplemented with handouts or slides.  Sometimes, this will also be a group case in which you are asked to collaborate with 5-6 other people.

Guesstimates: These cases ask you to make educated guesses on questions/situations that at times may not even seem relevant.  For example, “Approximately how many watermelons do you think are sold each year in the US?”  These questions test your ability on making rough calculations.

Brainteasers:  These questions are meant to test analytical skills, creative skills, and ability to cope under pressure.

What are interviewers looking for?

Leadership Skills: Demeanor throughout a case interview is a good determinant of your leadership abilities.  In many positions you may be asked to work in a team or direct others.  Employers want to see that you have the ability to stand strong during pressuring times.  Be confident in your interview, ask strong questions, and take charge.

Analytical Skills: While determining a solution, don’t lose sight of quantifiable data.  Derive a viable solution through breaking down data and formulating a pattern.

Presentation Skills: Interviewers are looking to see how well you can present your findings in front of potential clients.  They’ll be watching closely to see if you stumble over your words, use fillers such as “um” and “like”.  If you find yourself lost, take a deep breath and pause.  It’s better to pause than to ramble.

Energy: Qualifications are useless unless you are energetic and passionate.  Interviewers are looking for a firm handshake, bright eyes, a warm smile, and zest.

Attention to Detail: Displaying this trait is best noticed through how you logically approach the case by picking up on facts and themes.  You also want to be prepared.  If possible, take notes.

Quantitative Skills: You’ll eventually be dealing with number and interviewers are looking for your ability to manage and manipulate these numbers.  This is where many guesstimate questions appear.

Flexibility: This is an important characteristic of any employee.  Your flexibility is tested when an employer might introduce a new piece of information in the middle of the case.  They will analyze how you rework your solution and analysis according to the new information.

Maturity: Employees will be of all age ranges.  The interviewer is testing your ability to interact with those that might be a few years to decades older than you.  Avoid childish stories or anecdotes about your old fraternity days.

Intelligence: Simply put, your interviewer wants someone who is quick to learn and pick up facts and ideas.  The case interview shows your employee how receptive you are to the above mentioned factors and how in depth you can go with you own analysis.  Don’t be afraid to ask questions, but avoid asking elementary questions repeatedly.

Which type of case to expect

Most undergrads will be faced with guestimates and brainteasers and open ended questions as employers aware of the student’s limited professional experience.  Whatever case you are faced with, be sure to back up your answer with logic and data.

Strategy

Tips for answering business cases successfully

  1. Take Notes:  If presented orally, you should take notes so you can refer back to data.
  2. Make no Assumptions:  Don’t make assumptions as you are being placed in the shoes of someone in your desired position.  Ask as many relevant questions as you need to obtain an accurate picture of the scenario.  You are not expected to know everything about a case presented for example the industry being described.  The interviewer may not divulge all information, but it never hurts to ask logical questions.  You are also taking charge of the case, displaying your confidence.
  3. Listen to the answers:  In many cases, people get so nervous they forget to listen to what they are being told.  Don’t make a mental list of questions in your head while the interviewer is giving you information as you will be sure to miss some key points.
  4. Make eye contact:  Maintaining eye contact is a sign of confidence and authority.  Eventually if placed in the position, you may have to present your findings in front of a large audience.  Case interviewers want to see that you have the ability to present and take charge.
  5. Take your time: It’s ok to request a minute to collect your thought and take in information.  However, don’t sit silent for 10 minutes as most case interviews (especially those for undergrads) are usually 15 minutes.
  6. Discuss your approach: Don’t keep your logic a secret as this is what interviewers are looking to see.  This allows you to keep your thinking straight and demonstrate your ability to conceptualize complex ideas.  While many are not comfortable with thinking out loud, this is an important part of the case interview.  Employers want to hear how you formulate your thoughts.  It’s also a good insight into your problem solving thought process.  Try practicing at home to minimize fillers.
  7. Summarize Your Conclusion: Don’t lose sight of the main idea.  While you may make great points throughout the case, you want to summarize in the end so clarify your points and recap details of your analysis.  This also keeps things fresh in the mind of the employer.
  8. Remember your objective:  Always remember what you were asked.  People tend to stray as they come up with more and more ideas.  Don’t forget what you were asked.  There is nothing worse than creating a great solution to a problem you were not presented
  9. Don’t get nervous:  Sometimes interviewers may interrupt your analysis with a conflicting point.  There are two reasons for this: 1. They want to see how you defend your point. 2. You are blatantly wrong on a point and they are correcting your assumption (refer back to tip #2).  In any case, don’t get nervous.  Remember, case interviewers are looking for those that work well under pressure.

What about group interviews?

When encountered with this scenario, employers are looking to see how you work with others.  It’s also a great situation to assess your leadership skills.  Listen to everyone’s point and don’t bully other candidates.  While you want to be proactive, you don’t want to come off as too dominating.

How to Think Through the Case

  • Weigh the pros and cons. This allows you to uncover the tradeoffs you’re going to have to make in your analysis.
  • Break down a complex case into simpler parts. 
  • Interpret the numbers you are given.  If presented with quantifiable data, incorporate it into your analysis. 
  • Fill in the blanks.  While questions are encouraged, the interviewer will intentionally leave out information for the purpose of seeing how well you interpret data.  It is up to you to fill in these blanks with educated conclusions.

Types of Business Cases

These are some typical kinds of business cases.  Candidates may be presented with a combination.

  1. Falling Profit Case:  This type of case asks you to explore the possible reasons for a company’s dip in profits.  This case tests your analytical skills and other business concepts such as industry knowledge and understanding of financial statements.
  2. New Product Introduction: You may be asked to recommend a strategy for introducing a new product to the market.  This tests your knowledge on brand management, supply chain, industry knowledge, communication channels.
  3. Entering a new market/Entering a new geographic market: Similar to the new product introduction case, these case types call on your ability to draw on industry knowledge, and market dynamics.
  4. Site Selection: You must analyze the decision to locate a plant at a new facility. This calls on your understanding of global markets, regulatory environments, import/export environment, and labor restrictions.
  5. Mergers & Acquisitions: You must determine whether or not a merger/acquisition is viable.

Preparation

Before attending your interview, make sure to brush up on some business concepts that will prove useful.  Some things to know include:

  • Financial Statements: Income statement, balance sheet, cash flow, and statements of retained earnings
  • Cost Benefit Analysis
  • Net present value
  • Capital asset pricing model
  • Porter’s Five Forces
  • SWOT Analysis
  • Product Life Cycle Curve
  • The 4P’s
  • 2 x 2 Matrix
  • BCG Matrix

Most interviews will be very familiar with these concepts as they are common practice.  Use them sparingly as you don’t want to treat the interview like a classroom.

~Catherine B.

Please visit Vault.com for more information on case interviews…

The Stress Interview

Sunday, November 15th, 2009

business-anxiety

The stress interview can be just that-stressful.  Encountered by many hopeful graduates entering the financial services industry, these types of interviews are made to assess one’s ability to survive under pressure.  In many cases, the interviewer may create a calm and pleasant atmosphere, and then suddenly turn around, asking hostile questions, or ones that may not even seem relevant.  The interviewer is going to expect you to possess the qualities and personality to handle stressful situations with the general logic that those who can’t handle stress interviews can’t handle stressful jobs.

These stressful and hostile questions can be coupled with bizarre and sometimes impossible tasks to test one’s problem solving abilities as sited in William Poundstone’s book, “How Would You Move Mount Fuji: How the World’s Smartest Companies Select the Most Creative Thinkers”.  In some scenarios, an interviewer may ask an applicant to open a window-a simple and casual request.  However, the window cannot open.  In this case, the interviewer assesses how the individual responds to the roadblock, a common tactic employed by the former Lehman Brothers.  A more discreet tactic of stress interviews takes place before questions are even asked.  Employers may ask the individual to take a seat at a long conference table, making note of where the interviewee sits.  According to some Wall Street brokers, lions sit at the head, sheep sit on the side.  Smith Barney was known for asking the famous question of how to measure four gallons of water, in three and five gallon containers.

Sample stress interview questions:

Why do you have such a low GPA?

-          If your GPA is not as high as expected, talk about the other great things you have accomplished such as extracurricular activities, internships, on campus groups, etc.

Why were you fired from your previous position?

-          Be honest as employers can easily find out this information.  Calmly explain your side of the situation and what you have learned from it.

How many taxi cabs are there in New York City at any given time?

-          While there is an actual answer for this, you are not expected to know it.  Questions like this are asked to uncover how you approach a problem.

How do you handle rejection?

-          Talk about an experience and the lessons you learned whether it be rejection from a professional organization, previous job.  Always make sure to emphasize what you have learned from it and how you moved on.

Why were you out of work for so long?

-          Fill in unemployment gaps with useful experiences.  If you took time off to travel, talk about your experiences and the people you met, where you went, and what you saw.  If you volunteered somewhere, talk about that.  Make sure your interviewer knows that while you were not in the job market, you were still filling your time with constructive activities.

Sell me this computer on my desk.

-          Often employers will spring this question on you especially if you are applying for a sales position.  No matter what you say, remain calm and collected as this a tactic employed to test how you act under pressure.

What interests you least about this job?

-          Don’t fall into this trap of naming activities because what you like least, your interviewer might like the most.  Instead, make note of how you are interested in learning all aspects of the business and are open to new opportunities.

What kinds of people do you not like to work with?

-          Employers don’t want people who are prone to conflict.  While people don’t always get along, it is important to reassure your employer that you are a team player and can easily blend in with the company.

Do you feel you are overqualified for the job?

-          If you feel you are overqualified, you wouldn’t be applying for the position.

What do you like least about your current job?

-          Again, don’t fall into the trap of naming certain tasks.  Remain positive about your experiences.

How many manholes are there in the US?

-          Another question you are not required to have an actual numerical answer to, but be creative with how you approach your answer and always use logical reasoning.

Some tips to overcoming stress interviews include:

Don’t be too direct- don’t blame your coworkers, employers, friends, family, etc.  The interviewer wants to see you own up to situations and demonstrate adversity when encountered with a problem.

Stay positive even when asked a negative question.  Turn negatives into positives when asked about previous positions, detailing skills you have acquired that will help you in your new job.

Remain calm and collected.  Interviewers are looking to throw you off and you should demonstrate your ability to cope with the desired position.

~Catherine B.

For full articles and more stress interview questions, check out:

Efinancial Careers, Associated Content, Human Resources, Indobase


Prepackaged Bankruptcies – Part 1

Friday, November 13th, 2009

Charter Logo

In 1983, when Charter Company filed bankruptcy, the $1.8 billion conglomerate with more than 180 subsidiaries shocked the nation.  By hiding pending debt maturities in unconsolidated subsidiaries, Charter was able to fool investors until it was too late. Twenty-six years later, the Charter bankruptcy has been dwarfed by the bankruptcies and restructurings of financial conglomerates such as AIG, Lehman Brothers, and CIT.  CIT, with over $60 billion in financial assets was the latest victim of the financial crisis.  If the firm hadn’t waited until November to file, thousands of merchants would have not been able to finance their inventories before the 2009 holiday season.  CIT is the fifth largest company by assets to enter bankruptcy.  After agreeing to a prepacked bankruptcy process, investors will receive 70 cents on the dollar in the form of new senior debt and equity in the reorganized firm.  If the company has been allowed to fail like other financial institutions, unsecured claims would have received less than 10 cents on the dollar.

Fred Hodara of Akin Gump Strauss Hauer and Feld LLP recently interviewed with Bloomberg to comment on how prepacked bankruptcies pay off because working with management helps shape better solutions for creditor committees.

According to Moody’s Investor Services, the out of court restructuring recovery rate in bankruptcy for senior lenders may be as little as 35 cents on the dollar.  Corporate defaults have climbed to 239 this year, and the number is estimated to increase well into 2010.  The 12-month forecast for High Yield defaults is about 6.9%.   Usually, as default rates increase, recovery rates fall.  Prepacked bankruptcy negotiations with company management teams have been saving investors about 5% of their capital versus standard filings.   These cooperative negotiations are up more than 26x over the past two years, according to Moody’s.   A study by ratings agencies of prepacked bankruptcies from 1989 to 2009 shows a 54.6% recovery rate, versus a 49.6% recovery rate for standard bankruptcy procedures.

In prepacked bankruptcies, management teams work with lenders to set up plans before a company has the chance to file for Chapter 11.  The first prepackaged bankruptcy was probably that of Dallas based Republic Health Corp.  This form of negotiation became more popular in the 90s as a way to quickly recover on failed leveraged buyouts.

The major advantage of “prepacks” is that they save substantial time and disruption, versus a regular Ch. 11 bankruptcy filing.   In a prepacked bankruptcy, votes for a reorganization plan have already been solicited and agreed upon before Ch. 11, speeding up the process.  The average Ch. 11 case is rarely completed within a year and it can take up for three for a company to emerge from it.  The longer a case usually takes, the more the intrinsic value of a company deteriorates.

More updates on the prepacked bankruptcy process will follow…

Please see Bloomberg for full news update…

Please see Ohio Business Law for more information about bankruptcy…

Comprehensive List of Investment Banks

Sunday, November 8th, 2009

Wall Street

A.G. Edwards Keefe, Bruyette & Woods
ABN Amro KeyCorp
Allen & Company Kidder, Peabody & Co.
Allegiance Capital Corporation KPMG Corporate Finance
AllianceBernstein Kleinwort Benson
Allianz Kuhn, Loeb & Co.
Alpha Omega Capital Partners L.F. Rothschild
Ambrian Ladenburg Thalmann
Babcock & Brown Lazard
Baird Lazard Capital Markets
Bank of America Merrill Lynch Lee, Higginson & Co.
Bank of NY Mellon Leerink Swann
Bank of Nova Scotia Lighthouse Capital Advisors
Bank Leumi USA Lincoln International
Barclays Lloyds TSB Group plc
BB&T Corp. M&T Bank
BCC Capital Partners Macquarie Bank
Bengur Bryan & Co. McColl Partners
Blackstone Group McGladrey Capital Markets
BMO Miller Buckfire
BNP Paribas Moelis & Co.
Boenning & Scattergood Mizuho Financial Group
Breckenridge Group Monte dei Paschi di Siena
Brisbane Capital Montgomery & Co.
Broadpoint Securities Montgomery Securities
Brookwood Associates Morgan Grenfell
Brown Brothers Harriman Morgan Joseph & Co.
Brown Gibbons Lang & Co. Morgan Keegan
Brown, Shipley & Co. Morgan Stanley
C.V. Lemmon & Co. Mosaic Capital
C.E. Unterberg, Towbin N M Rothschild & Sons
Calyon National City Corp.
Caymus Partners Needham & Company
Canaccord Adams Neuberger Berman, LLC
Cantor Fitzgerald Newbury Piret
Caris & Company Newsouth Capital Management inc.
Carnegie, Wylie & Company NIBC
Cascadia Corp. Noble Bank
CIBC Nomura
Citigroup Oppenheimer
Close Brothers Group P&M Corporate Finance
Comerica Park Lane
Commodities Corporation Penn Capital Group
Cowen Group, Inc. Perella Weinberg Partners
Credit Suisse Peter J. Solomon Company
Curtis Financial Group Petrie Parkman & Co.
D.A. Davidson & Co. Piper Jaffray
Deka Bank PNC Financial Services
Deloitte & Touche Corporate Finance Prarie Capital Advisors
Deutsche Bank Provident Capital Advisors
Dominion Partners Provident Healthcare Partners
Dresdner Kleinwort Prudential Securities
Duff & Phelps Putnam Lovell
E. F. Hutton Rabobank
Edgeview Partners Regions Financial Services
Evercore Partners Raymond James
Fifth Third Bancorp. Robert Fleming & Co.
Financo, Inc. Robert W. Baird & Company
First Horizon National Corp. Robertson & Foley
Focus Enterprises Robertson, Stephens
Fortis Bank Royal Bank of Canada
Fox-Pitt, Kelton Royal Bank of Scotland
Friedman Billings Ramsey Rutberg & Co.
G.H. Walker & Co. Ryan Beck & Co.
Gemini Partners Sagent Advisors
Genuity Capital Markets Salman Partners Inc.
Gerard Klauer Mattison Salomon Brothers
Goldman Sachs Sandler O’Neill + Partners
Grace Matthews Saxo Bank
Greenhill & Company Schroders
Greif & Co. Scotia Bank
Growth Capital Partners Shoreline Partners
Grupo Santander Societe Generale
GulfStar Group Soundview Technology Group
GW Equity SPP Capital Partners
H. B. Hollins & Co. Stephens Inc.
Harpeth Capital Stifel Nicolaus
Halsey, Stuart & Co. St. Charles Capital
Hambrecht & Quist SunTrust Banks, Inc.
Hambros Bank Susquehanna International Group, LLP (SIG)
Harris Williams & Company SVB Alliant
Harris, Forbes & Co. T. Rowe Price
Headwaters MB TD Securities
Heritage Capital Group The DAK Group
Herrera Partners ThinkEquity Partners, LLC
Hilco Corporate Finance, LLC ThinkPanmure LLC
Houlihan Lokey Howard & Zukin Thomas Weisel Partners
HSBC Toronto-Dominion Bank
Hyde Park Capital Advisors Transparent Value
Imperial Capital, LLC Trenwith Securities
ING Group Triangle Capital Partners
Investec TSG Partners, LLC
Investment Technology Group UBS AG
Ironwood Capital Unicredit
J. & W. Seligman & Co. Union Bank of California
Janes Capital Partners Vercore
Janney Montgomery Scott Verdant Partners
Jefferies & Co. Webster Financial Corp.
JMP Securities Wells Fargo
Jordan, Knauff & Company White Weld & Co.
JPMorgan Chase William Blair & Company
Kaupthing Bank WIT Capital
KBC Bank WR Hambrecht+ Co