Investment Banking

My first relaxed weekend ! Haven't gone to office YET. How Strange ! :)

It was great to chat with Vinay on Skype after such a long time - I really hope I don't lose touch with my best friends - reminds me to pick up the damn phone and start calling - however busy I am !

Okay - I want to write about investment banking, specifically the traditional division("the banking side") that helps companies raise funds and advises on mergers. I assume(possibly wrongly) that we are NOT the people everyone loves to hate [ who happen to be "traders", "structurers" who built xotic...err...toxic..instruments ]

So, one of my biggest realizations about investment banking is that it is so much about strategy ! In b-school, we seem to put "corporate finance" and "strategy" in separate silos and make incorrect impressions that people good at 'strategy' should only be 'doing consulting' and the highly numerate guys should blindly pick anything that remotely 'has finance' !

You couldn't be more wrong.

If I had my way, I would rename every course in business school that calls itself "Corporate finance" into "Corporate strategic finance". Now, that, would make more sense.

Finance is one of the biggest drivers of company strategy -
You might have a great idea for a product or a service, but if you don't "make numbers" ( call it profits, returns, valuations - if you like ) your business will perish sooner or later. When you ask a question : does a decision make business sense - more often than not, you are implicitly looking at 'financial' metrics (NPV's, IRR's, bottomline - whatever name you give it )
On the funding side, you might shoot down a really great idea, just because you may not have the resources or the capital to finance it.

So, it is important not to forget that finance drives strategy and strategy drives finance. In the couple of months I have spent in investment banking, this is something I have strongly come to believe.

So investment bankers are essentially : Story Tellers of Strategy.

If I have to explain my profession to a bright school kid, I would show him a copy of the Financial Times, especially the page with all the numbers - equity values, interest rates, etc etc...

Assume he asks : What do I do with this set of random numbers ?

I would simply say, my job is to build a story around them. That's what bankers do - they get data from various sources ( financials, stock prices, market trends, macro-economics) , neatly arrange them in such a way that they make sense or rather, help them build a story.

Later they print out some nice looking copies of that storybook (which is sometimes known as a 'pitchbook' in their jargon) and try to sell that story to a client.

You know, it actually starts with " Long long ago........
And ends with ..............." And the two (companies) will live happily (married) ever after !!