Investment Banking after MBA: The Complete Guide
What is Investment Banking?
Investment banking(IB) is probably the most prestigious and coveted profession in the financial sector. This charm of the domain comes from its high profile nature and handsome revenues. In contrast, IB is one of the most challenging jobs, given its long work hours and high stress working environment. Some investment bankers work for about 80 to 100 hrs a week. The title of the job is a bit misleading and says little about the daily challenges of the job.
Investment banking is used as an umbrella term for various services provided by a particular firm. In simplest terms, Investment banking offers services that help individuals/companies to raise capital and provide financial consultancy services. IB can raise funds or capital using stocks or bonds. IB firms help companies through mergers and acquisitions. They evaluate long-term pros and cons, the value of the company, etc., to advise the client on the timing of a merger or an acquisition. They also provide additional services related to finance, such as drafting documents, asset evaluation, equity research, and FICC services (fixed income instruments, currencies, and commodities).
Advantages of becoming a Investment Banker
There are many benefits of becoming an Investment Banker. First of all, the salary is very high.
Secondly, by working in a high stakes high pressure environment, you will be able to upgrade your technical and soft skills. This will make you even more suitable to other jobs in the eyes of a recruiter.
Moreover, investment banking has lots of big names involved. This can be a good opportunity for you to build your network.
What salaries do Investment Bankers Receive?
Post-MBA to understand the handsome salaries of these individuals, we need to know how these firms make money. Investment banking firms charge a commission based on the value of capital or asset. In other words, they get a percentage of funds they raise or the money involved in the process of acquisition or merger. Higher the capital involved in these deals higher the reward for the firm. This directly translates to colossal bonuses and a high-stress working environment common in these firms.
The size of the deal directly affects the amount of bonus an investment banker will receive. Typically, an Investment banker gets a base salary depending on their position and a bonus depending on their work as well as the size of the deals. The starting salary for an Investment banker in India is about ten lakhs per annum without bonuses, which is about 150% higher than the average starting salary in India. In the US, the starting salary is about $85k to $100k without the bonuses.
How does an MBA help you get into investment banking
IB provides financial services to the firms. Thus knowledge of finance and business is an absolute necessity. An MBA is a terminal degree in business, which means it is the highest level of education you can achieve in business. For people from a non-business background, MBA serves as a golden opportunity to get into IB post MBA.
MBA also helps business graduates increase their chances to get into Investment Banking after MBA. Top IB firms tend to choose employees who freshly graduated top of the class from an MBA school. The chances of getting into an Investment banking firm are low, but an MBA increases your chances to get into them. We will discuss how investment banking post-MBA is such a highly regarded path.
How does an MBA ease your path into the Investment banking sector?
To understand how does an MBA helps graduates follow a career in Investment banking, we need to understand several points.
What Is The Scope of Investment Banking?
To understand the scope of IB, we have to understand the roles of an Investment banker in depth.
- Raising capital/Underwriting: Underwriting is a practice to raise capital through an IPO that sells bonds or stocks to investors on behalf of the company.
- Mergers and acquisition consulting: IB firms help companies search and evaluate various options for mergers or complete acquisitions. Investment bankers use their extensive network and negotiation skills to find opportunities and the best deals for their clients.
Thus, IB has a timeless scope. As long as there are companies and opportunities for any kind of business, IB would remain valuable. The client’s worth an investment banking firm is working for directly affects how much the firm will make on a particular project or deal.
India is not different from any other market. There are giant firms, both local and global, working in India. And being a developing country with a massive population, opportunities for businesses are colossal.
Chances of getting into Investment banking are as low as one in a hundred, which means getting into an Investment banking firm isn’t an easy job. People aspiring for Investment banking need to make the right choices.
How does an MBA ease your way into Investment banking? To understand why MBA before Investment banking, we need to know what are the necessary skills for people in Investment banking.
- Financial modelling – Ability to execute a wide range of financial modelling tasks like constructing 3-statement models, discounted cash flow (DCF) models, LBO models, and other types of financial models.
- Business valuation – Ability to use a vast arsenal of evaluation methods such as comparable company analysis, precedent transactions, and DCF analysis.
- Presentations and pitchbooks – Capacity to make powerpoints and pitchbooks anew to pitch ideas to clients and negotiate with other businesses.
- Transaction documents – Preparing documents such as a confidential information memorandum (CIM), confidentiality agreement, investment teaser, term sheet, building a data room, and many such documents.
- Relationship management – Working with existing clients with underwriting or new mergers and acquisitions and keep them satisfied with the firm.
- Sales and business development – Using a network to find new clients and pitching them ideas and become their service provider, and providing value-added services that will ultimately help the firm gain new businesses.
- Negotiation – Ability to negotiate on behalf of clients for a transaction or M&A and help them gain the most profit out of a particular deal.
How does an MBA help in building Investment Banking skills?
An MBA program is specifically designed to prepare students to be successful in the field of business. Thus, courses are designed to impart the necessary skills for business and finance. So, getting into investment banking post an MBA would give you all these skills.
- Technical skills: MBA has an equal focus on theoretical skills. The knowledge and skill about finance and business evaluation are core for people who want Investment banking jobs post MBA. An MBA focuses on primary skills such as accounting, statistics, and finance, which are essential to understand more challenging concepts. A student who is thinking about a post MBA investment banking career path can take other specialised courses that will help him get into an IB firm. The candidate needs to have theoretical knowledge about the financial models to help him execute them easily when at work.
Secondly, he needs to study valuation methods, which will help him carry out the core work of an Investment banker, which is mergers and acquisitions. And lastly, he needs to have enough knowledge about financing to be able to draft documents for the clients. All of these courses are taught by the top MBA schools in India.
2. Practical skills: An MBA emphasises practical learning to develop specific skills in the candidates. Practical skills such as networking, negotiation, relationship management are an essential asset in investment banking. We have seen above how these skills are vital for people who are thinking about post MBA investment banking opportunities.
MBA greatly enhances the network of the student through a large number of colleagues, alma mater, faculties, and the clientele which MBA students worked with. This vast network of MBA graduates comes into play when searching for new clientele, businesses, and opportunities for mergers and acquisitions.
3. Negotiation skills: MBA offers a separate course that deals in negotiations. The course is a mix of theory and practice and helps students gain insight into negotiation tactics. Exposure to real-world businesses during an MBA also enhances the negotiation abilities of the candidates.
4. Presentations and pitchbooks: An MBA involves a large number of projects and case studies, which develop document drafting capabilities of the student. A presentation made by an MBA graduate outclasses presentations made by people from other fields of work. Pitch Books, which help pitch specific ideas to the clients, drafting is added to the arsenal of an MBA graduate.
5. Soft Skills: An MBA is known to enhance the soft skills of the students. These soft skills are an incredible asset to Investment banking firms all around the world. These softs skills are, but not limited to, critical thinking, leadership, teamwork, analytical skills, and work ethics. These skills help individuals to engage with others and get meaningful work done. Thus they become an essential asset for you to land an investment banking job post MBA.
6. Work experience: It is critical for people who want investment banking jobs post MBA to land an investment banking firm internship. Students doing MBA get an opportunity to get training at the end of the first year; they must opt for an IB firm internship. This provides you with the double benefit of gaining experience and knowing the ins and outs of an IB firm. This will give candidates a significant advantage over others during the recruitment process.
7. Adaptability and long working hours: Strenuous and challenging academic calendar of an MBA helps graduates cope with stressful environments at an investment banking firm. Not only does it prepare the graduates for a stressful working environment, but it also gives a boost to the confidence of the candidates. MBA students learn to adapt to difficult working conditions and odd hours; IB is no different. With long and irregular working hours, a candidate needs to have good adaptability to work in those conditions. With the increasing amount of global businesses, it is the recruiters need to hire with high adaptability.
Specialisations to get into Investment banking after an MBA
AFTER AN MBA, several MBA specialisations are more suited for a career path in investment banking. Best MBA colleges for investment banking in India provide these specialisations.
- Finance leadership, and
All these specialisations focus on the skills needed in the respective field. However, these skills are congruent with the skills required to get into Investment banking post MBA.
How can I get a job as an Investment Banker?
Getting into investment banking isn't easy, as there is a lot of competition. However, with the right skills and determination, you can definitely succeed.
To get a job as an Investment banker-
- You need to develop the right skills
- Land an internship at an investment banking firm
- Network a lot
- Study properly during your MBA
MBA associate investment banking salary
Salaries of individuals vary based on the firm. However, MBA graduates can directly get hired as an associate where starting salary can be as high as $100k to $120k. MBA professionals can also move higher up into the leadership, increasing their wage exponentially. Post MBA Investment banking compensation is even higher, as the bonus depends upon the role the employee plays in a particular deal.
Post MBA investment banking career path becomes more comfortable as they already have the skills required to move up the corporate ladder, exponentially increasing their salaries as well as compensation or bonus. A managing director can get up to $1M salary with bonuses of more than $10M. This makes Investment banking one of the highest paying jobs available.
There is no denying that the path to investment banking jobs post MBA gets easier. An MBA increases the already low chances of getting into Investment banking, which is about one per cent, exponentially. Summarising the reason for the aforementioned fact is that MBA guides the candidates in the right direction.
Firstly, an MBA provides the candidates with all the technical knowledge needed to go into Investment banking. Secondly, students develop all the practical skills and soft skills valued highly in the Investment banking sector. Not only does an MBA provide these skills, but it also provides students with the necessary exposure to the Investment banking sector. It is totally up to the student to choose the right specialisation, subjects, and internships, which would increase his chances of getting into the firm. And lastly, MBA primes the students for long work hours and stressful environments due to its rigorous and challenging academic curriculum.
Investment banking recruiters look for certain qualities inside the candidates, such as willingness to work for long hours, excellent ability to draft documents, create presentations and pitchbooks, and excellent command over finance, accounting, and financial modelling. MBA graduate’s skills are second to none when it comes to these skills. Thus it is natural that the post MBA investment banking opportunities rise.
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