A plain-English breakdown of what investment bankers actually do, who they work with, and why it matters
Investment banks are financial intermediaries that help companies, governments, and institutions raise capital (money) and execute major financial transactions. Think of them as the advisors and dealmakers behind mergers, IPOs, and large-scale financing.
Almost everything an investment bank does falls into one of two buckets:
Mergers & Acquisitions. The bank advises companies that want to buy another company (the "buyer" or "acquirer") or companies that want to sell themselves (the "seller" or "target"). The bank helps figure out:
Helping companies raise money. There are two ways:
Large companies looking to acquire competitors, sell divisions, go public, or raise debt. Think Fortune 500 companies — Apple, Google, Johnson & Johnson.
Firms that buy companies using borrowed money (leveraged buyouts), improve their operations, and sell them for a profit 3–7 years later.
Sovereign wealth funds, pension funds, and governments that need help issuing bonds or managing large-scale financial programs.
Startup founders looking to sell their company or take it public through an IPO. The bank helps them maximize the sale price.
Banks organize their teams in two ways. Understanding this is critical for networking and interviews because you will be asked which group interests you.
Teams that specialize in a specific sector of the economy. They develop deep expertise in one industry and advise clients within it.
Teams that specialize in a specific type of transaction regardless of industry. They have deep expertise in the mechanics of deals.
The largest, most prestigious global banks. They work on the biggest deals across all industries and geographies.
Smaller firms that focus exclusively on advisory (M&A). No capital markets, no trading, no lending — just pure advisory. Often considered equally or more prestigious than bulge brackets for M&A work.
Firms that advise on mid-sized transactions (typically $50M – $500M deal value). Great training and often easier to break into.
First-year analysts at bulge brackets earn $110K–$120K base salary + $80K–$150K bonus = $190K–$270K total compensation right out of college. Few other entry-level jobs come close.
Two years in IB opens doors to private equity, hedge funds, venture capital, corporate development, and MBA programs at top schools. IB is the single best "launch pad" career in finance.
You will learn financial modeling, valuation, deal structuring, client management, and how to work under extreme pressure — skills that are valued everywhere in business.
You will work alongside some of the smartest, most driven people in finance. Your analyst class becomes a lifelong professional network spanning PE, VC, hedge funds, and C-suites.
Buy companies, improve them, sell them for profit. The #1 most common exit for IB analysts. Recruiting starts during your first year as an analyst.
Invest in public markets (stocks, bonds, derivatives). More common for analysts from industry groups or those with strong investing/stock pitch skills.
Invest in early-stage startups. More common for TMT group analysts or those with tech/startup backgrounds.
Work inside a large corporation doing M&A and strategy. Better work-life balance, lower pay, but interesting strategic work.
Top MBA programs (HBS, Wharton, Stanford GSB) heavily recruit former IB analysts. Two years of IB + a top MBA is a well-worn path to senior roles.
Some analysts get promoted to Associate and continue climbing the IB ladder toward VP, Director, and ultimately Managing Director.
Understand the career ladder in investment banking — from Analyst to Managing Director — and what each level actually does
The entry-level role. Hired straight out of undergrad (or post-MBA in some cases). You are the workhorse of every deal team.
Typically 80–100+ hours per week. Expect to work most weekends and be "on call" at all times. During live deals, the hours can spike above 100.
Promoted from analyst or hired post-MBA. You shift from "building" to "reviewing and managing." You oversee the analysts and serve as the bridge between junior and senior bankers.
The transition from "doer" to "relationship manager." VPs run deal teams on a day-to-day basis and are the primary point of contact for clients during active transactions.
The "proving ground" before MD. Directors focus on winning new mandates (business development) while still overseeing deal execution. Not all banks have this title separately.
The top of the investment banking hierarchy. MDs are the rainmakers — their primary job is to bring in new business. They maintain deep relationships with CEOs, CFOs, and PE firm partners, and they are the face of the bank to its most important clients.
Compensation at the MD level varies enormously based on the number and size of deals closed. Top-producing MDs at bulge brackets can earn $5M–$10M+ in good years.
IB recruiting is notoriously early and structured. Here is exactly when things happen and what you need to do at each stage.
The 10-week summer internship between your junior and senior year is the primary path into IB. Most full-time analyst offers come from converting a summer internship (conversion rates range from 70–90%).
This distinction matters a lot in IB recruiting. Here is what it means and how to navigate it.
Schools where banks actively recruit on campus. They host info sessions, have dedicated campus recruiters, and fill a significant portion of their analyst class from these schools.
Examples: UPenn (Wharton), NYU (Stern), U Michigan (Ross), Georgetown (McDonough), Duke, Cornell, UVA (McIntire), Columbia, Harvard, Stanford, Yale, Princeton, Dartmouth
Schools where banks do not recruit on campus. You will need to break in through networking, cold outreach, and securing referrals from alumni or contacts you build yourself.
Strategy: Network relentlessly, get a strong sophomore internship at a boutique or MM bank, ace your technicals, and let your work speak for itself. Plenty of non-target students break into BB/EB firms every year — it just takes more effort.
Submit your resume and cover letter through the bank's careers portal. Some firms also require a HireVue (pre-recorded video interview) at this stage.
Usually 30–45 minute phone or video interviews. Mix of behavioral ("Why IB?", "Walk me through your resume") and technical questions ("Walk me through a DCF", "What happens when depreciation goes up by $10?").
An in-person day at the bank's office (or virtual equivalent). You have 3–5 back-to-back interviews with bankers at different levels (Analysts, Associates, VPs, MDs). Each interview is 30 minutes. Questions get progressively harder and more technical as the seniority of the interviewer increases.
Decisions come within days of your Superday. Some firms call the same evening. If you receive an offer, you typically have 1–2 weeks to decide (sometimes less during accelerated timelines).
The core technical knowledge you need for IB interviews — explained in plain English with examples
This is the foundation of everything in IB. You must know all three statements, what they measure, and how they connect to each other.
Measures profitability over a period of time
Shows whether the company made or lost money. Starts with revenue (all the money coming in) and subtracts costs in layers to arrive at net income (the bottom line).
COGS: Cost of Goods Sold — the direct cost of producing what the company sells
EBIT: Earnings Before Interest and Taxes — measures operating profitability before financing
EBITDA: EBIT + Depreciation & Amortization — a proxy for cash flow from operations, widely used in IB
A snapshot of what the company owns and owes at a single point in time
The fundamental equation: Assets = Liabilities + Shareholders' Equity. This must always balance.
Assets: Cash, accounts receivable, inventory, property, equipment, intangible assets (patents, goodwill)
Liabilities: Accounts payable, debt (short-term and long-term), deferred revenue
Equity: Common stock + retained earnings (accumulated net income minus dividends paid)
Tracks the actual cash moving in and out of the business
Net income is an accounting concept and can be manipulated. The cash flow statement shows what actually happened with cash. Broken into three sections:
CFO: Net income adjusted for non-cash items (D&A, changes in working capital). This is the cash generated from running the business.
CFI: Cash spent on / received from buying and selling long-term assets (CapEx, acquisitions, asset sales)
CFF: Cash from debt issuance/repayment, stock issuance/buybacks, and dividend payments
Investment bankers use three primary methods to determine what a company is worth. You need to understand all three and be able to explain when you would use each one.
What it is: Value a company by looking at what similar, publicly traded companies are worth right now. Think of it like pricing a house by looking at what similar houses in the neighborhood recently sold for.
How it works:
When to use: When there are good publicly traded comparables. Most common starting point for any valuation.
What it is: Value a company by looking at what similar companies were acquired for in past M&A transactions. Like comps, but instead of current trading values, you use actual deal prices.
How it works:
Key difference from comps: Precedent transaction values are usually higher because they include a "control premium" — buyers pay extra to gain full ownership and control of a company.
What it is: Value a company based on the present value of its expected future cash flows. This is the most theoretically rigorous method because it values a company based on its own fundamentals, not based on what others are worth.
How it works:
Core concept: $100 today is worth more than $100 in five years because of the time value of money. The DCF accounts for this by "discounting" future cash back to present value.
This is one of the most frequently tested concepts in IB interviews. You need to know the difference cold.
The value of the company that belongs to shareholders only. It is what you would see on a stock ticker.
Formula:
Share Price × Total Shares Outstanding
Think of it as: "How much would it cost to buy all the company's stock?"
The value of the entire business to all capital holders (shareholders AND debt holders). This is the theoretical "takeover price."
Formula:
Equity Value + Net Debt + Preferred Stock + Minority Interest – Cash
Think of it as: "How much would it cost to buy the whole company and pay off all its debt?"
An LBO is when a private equity firm buys a company using a significant amount of borrowed money (debt, or "leverage"), improves the company's operations, and sells it for a profit in 3–7 years.
PE firm buys a company for $1B, putting up $300M of their own money (equity) and borrowing $700M (debt). The company's own cash flows will be used to repay the debt over time.
The PE firm works with management to cut costs, grow revenue, improve margins, and optimize the capital structure. They want to make the company more valuable.
After 3–7 years, the PE firm sells the company (to another PE firm, a strategic buyer, or via IPO). If they sell for $1.8B and the debt has been paid down to $400M, the PE firm's equity is now worth $1.4B — a 4.7x return on their $300M investment.
Practice answering these until you can deliver them smoothly and conversationally:
Project free cash flows for 5–10 years, calculate a terminal value (either using a perpetuity growth method or exit multiple method), discount both back to present value using WACC, and sum them up to get enterprise value. Subtract net debt to get equity value, divide by shares outstanding to get implied share price.
Income Statement: Operating income and pre-tax income both decrease by $10. With a 25% tax rate, net income decreases by $7.50. Cash Flow Statement: CFO starts with net income (down $7.50), but we add back the $10 of depreciation (non-cash), so cash flow from operations increases by $2.50. Balance Sheet: PP&E decreases by $10 (higher accumulated depreciation), cash increases by $2.50, and retained earnings decrease by $7.50. Assets go down $7.50, liabilities unchanged, equity down $7.50 — balanced.
Weighted Average Cost of Capital. It is the blended rate of return a company must earn to satisfy both its debt holders and equity holders. Formula: WACC = (E/V × Re) + (D/V × Rd × (1–T)), where E = equity, D = debt, V = total value, Re = cost of equity, Rd = cost of debt, T = tax rate.
EV/EBITDA is capital-structure neutral, so use it when comparing companies with different amounts of debt. P/E is affected by leverage, so only use it when capital structures are similar. EV/EBITDA is the most common multiple in IB.
Stable, predictable cash flows (to service debt). Low capital expenditure requirements. Market leadership or strong competitive position. Opportunities for operational improvement. Strong management team. Low cyclicality — the business should not crater during recessions.
IB behavioral questions are predictable. Here are the exact questions you will be asked and how to answer them effectively.
This is the single most important behavioral question. You will be asked this in every interview. Your answer should hit three points:
Tell a specific story about a class, a conversation, a project, or an experience that introduced you to finance and dealmaking. Generic answers like "I've always been interested in finance" are weak.
The deal exposure, the steep learning curve, the client advisory work, the analytical rigor. Pick 1–2 specific aspects and explain why they resonate with your background and interests.
Connect your answer to the specific bank and group you are interviewing with. Mention a recent deal, a specific person you spoke with, or a particular strength of the bank.
This is your opportunity to tell your story in 2–3 minutes. Structure it as a narrative, not a list of jobs.
Where you grew up, where you go to school, what you study, and one interesting personal detail that makes you memorable.
Connect each experience to the next. Show how each step logically led you toward IB. "After my accounting class sparked my interest in financial analysis, I joined the investment club, which led me to a boutique internship, where I worked on a real M&A deal and realized I wanted to do this full-time."
Land on why this specific bank and group is the next logical step in your story.
Prepare specific, structured answers (using the STAR method) for each of these:
Pick a specific team project (class, club, internship). Describe your role, a challenge the team faced, what you specifically did, and the outcome. Emphasize collaboration and how you dealt with different work styles.
Show initiative and ownership. Could be leading a club event, a group project, or a work initiative. Focus on how you motivated others and the result you achieved.
Show resilience and problem-solving. Could be a tight deadline, a disagreement with a teammate, or a project that went off the rails. Focus on how you handled the pressure and what you learned.
Pick a real weakness that is not a dealbreaker for IB (not "I hate working long hours" or "I'm bad with numbers"). Show self-awareness and describe concrete steps you are taking to improve. Example: "I tend to take on too much work myself instead of delegating — I've been working on this by..."
Always have 1–2 recent deals prepared. Know: who is buying/selling, the deal value, the strategic rationale (why does this deal make sense), and your own opinion on whether it was a good deal. Read the Wall Street Journal, Bloomberg, or Financial Times daily.
How to structure, write, and polish a resume specifically for investment banking roles
IB resumes follow a very specific format. Deviating from these conventions signals that you are not familiar with the industry.
Even if you have a PhD and 10 years of experience, your IB resume must be one page. Period.
Education → Experience → Leadership & Activities → Skills & Interests. Education comes first (until you have 3+ years of full-time work experience).
Black and white only. No colors, no graphics, no icons. Use Times New Roman, Garamond, or Calibri. Font size 10–11. Consistent margins (0.5–0.75 inches). No creative layouts.
Unlike tech resumes, IB resumes always include GPA. If your cumulative GPA is below 3.5, also include your major GPA if it is higher. A 3.7+ cumulative GPA is considered strong for IB.
If you scored above a 1500 SAT or 34 ACT, include it in the education section. Some banks still ask about standardized test scores, especially for non-target candidates.
IB resume bullets should emphasize financial analysis, quantitative skills, attention to detail, and the ability to work under pressure. Here are before/after examples for common experiences:
These terms signal to recruiters that you understand the IB landscape. Weave them naturally into your bullets:
IB resumes almost always include an "Interests" line at the very bottom. This might seem trivial, but it serves an important purpose: it gives the interviewer something non-technical to ask about and helps them gauge your personality.
Networking is the #1 factor that separates candidates who break into IB from those who don't — especially from non-target schools
At most banks, an internal referral pushes your resume to the top of the pile or directly to the hiring manager. Without one, your resume may never be seen among thousands of applicants.
Bankers want to hire people who are serious about IB. If you have spoken with five people at a bank, that signals commitment that a cold application alone cannot.
You will learn which groups are hiring, what the team culture is like, what questions they ask in interviews, and what they value in candidates. This intel is invaluable.
If banks do not recruit at your school, networking is literally the only way in. Hundreds of non-target students break into BB/EB firms every year through networking alone.
They were recently in your shoes, can relate to your experience, and often have the most influence on first-round interview decisions. They are also the most likely to respond to cold outreach.
Alumni from your school who work at banks you are targeting. They have a natural reason to help you. Search LinkedIn for "[Your School] + [Bank Name]."
VPs are busier but can provide more strategic insights about the group and often have direct input on hiring decisions. Only reach out after you have built a base of analyst/associate contacts.
They manage the process but do not make the hiring decision. Still worth connecting with to stay informed about deadlines and events.
Keep your outreach short, specific, and respectful of their time. Here is a template that works:
Subject: [Your School] Student — Quick Question About [Bank] [Group]
Hi [First Name],
My name is [Your Name] and I'm a [year] at [School] studying [Major]. I came across your profile on LinkedIn and noticed you're an analyst in [Group] at [Bank].
I'm very interested in IB, particularly [specific area — e.g., "healthcare M&A" or "TMT coverage"], and would love to learn more about your experience in the group. Specifically, I'm curious about:
Would you be open to a quick 15–20 minute call at your convenience? I know your schedule is busy and I really appreciate any time you can spare.
Thank you,
[Your Name]
Go a layer deeper. Do not ask questions you could have Googled. Here are strong questions organized by topic:
"What surprised you most about the day-to-day work once you actually started as an analyst versus what you expected going in?"
"How would you describe the culture of your specific group compared to other groups at the bank? What makes the team dynamics unique?"
"What types of deals has your group been most active on recently, and has the deal mix shifted at all over the past year?"
"If you could go back to when you were recruiting, what is the one thing you wish you had done differently or started earlier?"
"Is there anyone else on your team or at the bank you'd recommend I reach out to?" (This is how you expand your network through warm introductions.)
Within a few hours of your call, send a brief thank-you email referencing a specific point from the conversation. Do not just say "Thanks for your time" — show you were listening.
Follow up with a relevant update: "I took your advice and started reading about [topic] — found this article interesting and thought you might enjoy it too." Or share a relevant deal that just happened.
"I just submitted my application for the [Bank] summer analyst program. I wanted to let you know since we spoke about the group — I would really appreciate it if you could put in a word."
Use our Networking Script Builder to generate personalized cold emails and coffee chat questions tailored to IB professionals.
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