The Investment Banking Landscape (TOP Firms and Categories)

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In this video i’m going to teach you a quick and easy framework that you can use to categorize the top investment banks in the world now as you can expect most people are concerned with working at the best investment bank that they can they want to work at a firm that will improve their career and give them lots of exit opportunities but i think depending on

The constraints that you have in your own career whether that’s a particular geography you want to work in or a particular industry the key people that are actually identified as the best firms might differ for example if you want to work in a specific industry like healthcare or technology or if you want to move back home and then work in a specific geography

Then there’s not always going to be every investment bank available and investment banks are essentially financial advisors that advise companies on corporate finance decisions and financial transactions so that can entail actually quite a few different things investment banks can help companies ipo if they’re a private company they can help them do m a if they

Want to acquire another business they can also help them sell their business in a sell-side transaction they’ll also do things like help your business raise debt or have equity research cover your company they’re essentially there to help you with all matters related to corporate finance so that being said when looking at the investment banking landscape i would

Generally boil it down to four categories and then within those categories you kind of get there from two axes so first we have characteristics of business model broadly speaking in investment banking there’s two major kinds of businesses there are these businesses that have balance sheets and as such can help you raise financing more easily they can take on

Their own underwriting risk when they are doing deals and that’s companies like goldman sachs morgan stanley at sort of the middle market level you might have jeffries in rbc relatedly you’ll find that a lot of these bulge bracket firms actually deal a lot with other parts of the business as well oftentimes they’ll also have divisions devoted to personal wealth

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Management equity research sales and trading and more so on one side we have these bulge brackets that kind of offer everything under the sun so if you’re in the investment banking division at one of these bulge brackets you might theoretically be exposed to a broader range of deals you might do an ipo or a certain kind of financing and then an m a and deal with

Many different parts of the business these bulger brackets also tend to have the longest history and often the largest geographical breadth so these companies will have presences in different continents and oftentimes it helps them work on more complex deals so under this category we have what is known as middle market investment banks and the main difference between

Bulge brackets and middle market investment banks is honestly really scale for example if these middle market firms continue to grow over time there’s no reason why they wouldn’t be considered a bulge bracket and conversely if the lower performing bulge brackets continue to perform lowly sometimes they won’t be considered a bulge bracket anymore now there’s no

Really strict definition of what constitutes the middle market and it might depend on where you are in the world as a rough kind of heuristic i often think about it as sub 1 billion dollar enterprise value companies and you’ll see that the average deal size for the bulge brackets tends to be well north of this while some of these middle market companies a lot of

The times are dealing with smaller businesses some notable mid-market firms include places like rbc macquarie as well as hsbc and you’ll often see a trend that a lot of these firms tend to be dominant in one geography like rbc in canada or macquarie in australia but then on the global scale they’re still treated much more like middle market firms again something

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That can change over time so that’s one side of the chart these are firms that again have balance sheets on the other side we have investment banks without balance sheets and the big category here is known as elite boutiques often self-described as independent advisors the primary difference here is that elite boutiques do not have balance sheets that means they

Focus more on pure financial advisory often times on mna transactions many elite boutiques internally will actually refer to themselves as independent advisors the main reason here is that they’re independent and they don’t have competing interests one of the main complaints that you’ll hear about bulge brackets is because they have so many different divisions they

Often compete for different incentives from a career perspective you’ll find if you’re at an elite boutique you’ll primarily be doing m a or maybe restructuring but you won’t get very much exposure to ipos and financings which can be a hindrance on your overall skill set but many people still choose to go to elite boutiques for a couple of reasons i think the big

One is that they tend to pay more at the junior level it might only be a difference of maybe 10 to 20 percent but as you scale up you’ll see that elite boutiques really do pay a larger percentage of the deal profits to the deal team and the investment bankers themselves it’s a classic comparison of bureaucracy these larger investment banks often have many different

Divisions and lots of big offices while the comparison is often that elite boutiques can focus on just doing deals focus on doing investment banking and executing on high quality advice some top elite boutiques include places like evercore centreview in pjt now the fourth category of investment bank is regional boutiques so again if you want to work in a very

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Specific geography there might only be a couple of quality investment banks in your area and as such the best place to work is actually one of these regional boutiques and honestly the only real difference between this category and elite boutiques again is scale most of the time these regional boutiques will be focused on specific geography or only be working

On kind of these middle market or smaller deals again that doesn’t make them a worse place to work many of the times you’re actually getting more autonomy and more responsibility at a relatively smaller firm these regional boutiques generally won’t have a balance sheet as well so they’re also just focused on m a restructuring and other corporate finance advice i

Would say from a career perspective as i’ve gotten older i’ve seen more people actually gravitate towards regional boutiques but oftentimes you can also get a little bit more of a title bump because these smaller firms tend to incentivize larger players to join their firm by giving them good titles and potentially more economics so this was actually a pretty neat

Categorization of the world of investment banking in reality you’ll actually find a lot of different kinds of businesses that sometimes only offer a specific function that investment bank might for example merchant banks and corporate banks might be involved in some of the lending or can help with the ipo but might not be able to advise on things like m a so the

Actual list of competitors and the mosaic of finance as a whole might really depend on where you are in the industry if you’re interested in learning more about the technical side of things you should check out some of our great courses online at where we teach things like valuation how to build your own resume and private equity modeling thank

You for watching this video and i will see you in the next one you

Transcribed from video
The Investment Banking Landscape (TOP Firms and Categories) By Peak Frameworks