Breaking Into Wall Street Exam Questions & Answers (All Technicals) 400 Questions & Answers: A+ Guide Solution
Breaking Into Wall Street Exam Questions &
Answers (All Technicals) 400 Questions &
Answers
You’ve never worked in finance before. How much do you know about what
bankers actually do?
(Ans- I’ve done a lot of research on my own.
Based on that, I know that bankers advise companies on transactions –
buying and selling other companies, and raising capital. They are “agents”
that connect a company with the appropriate buyer, seller, or investor.
The day-to-day work involves creating presentations, financial analysis and
marketing materials such as Executive Summaries.
Let’s say I’m working on an IPO for a client. Can you describe briefly what I
would do?
(Ans- You meet with the client and gather basic information – such as their
financial details, an industry overview, and who their customers are. You
meet with other bankers and the lawyers to draft the S-1 registration
statement – which describes the company’s business and markets it to
investors. You receive some comments from the SEC and keep revising
the document until it’s acceptable. You spend a few weeks going on a
“road show” where you present the company to institutional investors and
convince them to invest. The company begins trading on an exchange
once you’ve raised the capital from investors.
How much do you know about the lifestyle in this industry? Do you know
how many hours you’re going to work each week?
(Ans- I’ve done my homework and I understand it’s going to be an 80-100
hour per week job but I’m not afraid of that.
Can you tell me about the different product and industry groups at our
bank?
(Ans- Being a bulge bracket bank, Credit Suisse offers pretty much
anything a client could ask for. Restructuring, M&A, LevFin, Debt and
Equity Capital Markets. Some specific groups – Financial Sponsors, ECMS,
DCMS, Ultra High Net Worth (UHNW). Some specific industries –
healthcare, industrials (my previous interviewer), financial institutions, etc.
What’s in a pitch book?
(Ans- It depends.
- Bank “credentials” (similar deals they’ve done to “prove” their expertise).
- Summary of a company’s options (“strategic alternatives” in bankerspeak).
- Valuation and appropriate financial models (for example, if you’re
pitching for an IPO you might show where the IPO proceeds would go). - Potential acquisition targets (buy-side M&A deal) or potential buyers
(sell-side M&A deal). This is not applicable for equity/debt deals. - Summary and key recommendations.
How do companies select the bankers they work with?
(Ans- Usually based on relationships. When it comes time to do a deal, the
company calls different banks it has spoken with and asks them to “pitch”
for the business. This is called a “bake-off” and the company selects the
“winner” afterward
Walk me through the process of a typical sell-side M&A deal.
(Ans1. Meet with company, create initial marketing materials like the Executive
Summary and Offering Memorandum (OM), and decide on potential
buyers. - Send out Executive Summary to potential buyers to gauge interest.
- Send NDAs (Non-Disclosure Agreements) to interested buyers along
with more detailed information like the Offering Memorandum, and respond
to any follow-up due diligence requests from the buyers. - Set a “bid deadline” and solicit written Indications of Interest (IOIs) from
buyers. - Select which buyers advance to the next round.
- Continue responding to information requests and setting up due
diligence meetings between the company and potential buyers. - Set another bid deadline and pick the “winner.”
- Negotiate terms of the Purchase Agreement with the winner and
announce the deal.
Walk me through the process of a typical buy-side M&A deal.
(Ans1. Spend a lot of time upfront doing research on dozens or hundreds of
potential acquisition targets, and go through multiple cycles of selection
and filtering with the company you’re representing. - Narrow down the list based on their feedback and decide which ones to
approach. - Conduct meetings and gauge the receptivity of each potential seller.
- As discussions with the most likely seller become more serious, conduct
more in-depth due diligence and figure out your offer price. - Negotiate the price and key terms of the Purchase Agreement and then
announce the transaction.
Walk me through a debt issuance deal.
(Ans1. Meet with the client and gather basic financial, industry, and customer
information. - Work closely with DCM / Leveraged Finance to develop a debt financing
or LBO model for the company and figure out what kind of leverage,
coverage ratios, and covenants might be appropriate. - Create an investor memorandum describing all of this.
- Go out to potential debt investors and win commitments from them to
finance the deal.
How are Equity Capital Markets (ECM) and Debt Capital Markets (DCM)
different from M&A or industry groups?
(Ans- ECM and DCM are both more “markets-based” than M&A. In M&A
your job is to execute sell-side and buy-side transactions, whereas in
ECM/DCM most of your tasks are related to staying on top of the market,
following current trends, and making recommendations to industry and
product groups for clients and pitch books.
In ECM/DCM you go more in-depth on certain parts of the deal process,
but you don’t get as broad a view as you might in other groups.
What’s the difference between DCM and Leveraged Finance?
(Ans- They’re similar and there is some overlap but Leveraged Finance is
more “modeling-intensive” and does more of the deal execution with
industry and M&A groups on LBOs and debt financings. DCM, by contrast,
is more closely tied to the markets and tracks trends and relevant data.
Explain what a divestiture is.
(Ans- It’s when a company decides to sell off a specific division rather than
sell the entire company. The process is very similar to the sell-side M&A
process, but it tends to be “messier” because you’re dealing with a part of
one company rather than the whole thing. Creating a “standalone operating
model” for the particular division they’re selling is extremely important, and
the transaction structure and valuation are more complex than they would
be for a “plain-vanilla” M&A deal.
Imagine you want to draft a 1-slide company profile for an investor. What
would you put there?
(Ans- “Put the name of the company in the header, then divide the slide
into 4 equal parts. The top-left is for the business description,
headquarters, and key executives. Put a stock chart and the key historical
and projected financial metrics and multiples on the top right. The bottom
left can have descriptions of products and services, and the bottom right
should have key geographies with a color-coded map to make it look
pretty.”
Let’s say you had $10 million to invest in anything. What would you do with
it?
(AnsIt depends.
- Always ask what the investor or business goals are.
- Always ask if there are any constraints, limitations, time horizons, or any
other limiting factors.
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