Investment Banking Associate MBA Interview

Investment banks mainly refer to financial institutions engaged in securities issuance, underwriting, trading, enterprise restructuring, mergers and acquisitions (M&A), investment analysis, venture capital (VC), project financing, and other businesses.

The types of investment banks include independent professional investment banks, investment banks owned by commercial banks, all-around banks, and financial companies established by large transnational corporations.

Investment banks have produced investment banking businesses around securities issuance and underwriting. 

Most securities companies will regard equity, M&A, and financing as investment banking businesses, while fixed-income and innovation businesses are placed in other departments.

The simplest explanation to help understand what an investment bank does is to compare investment bankers with residential real estate agents.

The real estate agent represents the owner of the house. The investment banker represents the owner of the company.

The real estate agents will decorate the house and make it look good before the sale. Investment bankers do the same thing as real estate agents, but the difference is that they are packaging a company.

Real estate agents can help buyers find the house they want, line up for a mortgage and sign a contract. When an investment bank represents a buyer, it does the same thing. 

The difference is that an investment bank can find a company and borrow money to raise funds for the acquisition.

Both parties will advise customers on current market trends and valuation indicators and formulate strategies for whether to be cautious in making acquisitions or divestitures at any given time.

It is a promising industry with a relatively high salary. However, many people try to find a position in investment banks, making it more difficult to compete with others.

In such a situation, having a good understanding of their interview becomes very important, which can help you stand out and gain more opportunities. 

This article will introduce the key interview questions you can ask in an investment banking job interview, which provides suggestions for your preparation.

Investment Banking Associate MBA Interview: Behavioral Questions

It is similar to college or university applications to some extent. Companies always want to recruit the right people, and behavioral questions can help them know if you are the one they are looking for.

When it comes to behavioral problems, there are main types to prepare for:

1. Your experiences

Have a good understanding of your own stories, experiences, and backgrounds, and be a person who "may not have unique stories, but must be able to tell stories." 

We should learn how to show our advantages and strengths and present a good impression to the interviewer.

2. Resume details

People in investment banks like to look at details and know almost everything about you. Therefore, you should know 100% of all the details on your resume and be able to make a good presentation. 

At the same time, we should adapt to the situation, combine our ability and background with the requirements of the position, and advocate where we are appropriate. 

You can be a good candidate only when your skills and personality can be fully utilized in the work environment.

3. Background of the Company

You should have a good understanding of the company you are applying for. You can always win by knowing yourself and your enemy. 

Before the interview, you should do enough work for the company by mastering the company's history, culture, working atmosphere, recent transactions, news, and senior management information. 

Suppose you combine the company's cultural values and characteristics and imperceptibly match the values you can provide them in the dialogue process. In that case, you will have more opportunities to be their preferred choice.

4. Investment bank itself

You should have a good understanding of the investment banking industry, including the nature of the industry, the major changes that have taken place, and the future development trend.

5. Understand the interviewer's background if possible

Suppose you can know the interviewer's background in advance, congratulations! That is perfect for you to find common topics and create a better communication atmosphere. 

This is a key part of the interview. But, again, you are in a situation where you and the interviewer are communicating, so it is very important to make a good first impression for the subsequent interview process.

Investment Banking Associate MBA Interview: Technical Questions

Technical questions always appear unpredictable in an interview with investment banks, but the key points of this type of question remain stable.

When sorting out technical questions of investment banks, we should consider and prepare in combination with the daily work of investment bank analysts so we will not be lost in many questions. 

In daily life, we can attempt to think of ourselves as analysts of investment banks and think about what knowledge and abilities we will need in each specific work, then try to gain the knowledge we need. 

For example, Excel is the most necessary basic skill in building financial valuation models. In this case, mastering Excel keeps you calm when you are asked to model in a job interview.

Let's look into some types of technical questions. 

A. Valuation questions

1. How to evaluate the company? 
   Here are some tips. Don't say there are several valuation methods, but specifically describe DCF's allocation, income, and cost.
   Don't talk about the valuation methods for manufacturing or asset operation enterprises, but talk about how to value growth enterprises with uncertainty, which have short order cycles and can't determine the order quantity.
2. How to estimate the management expenses?
3. How to estimate the financial expense?
4. Questions about the WACC formula, such as: How did you determine WACC for valuation at that time?

B. Report form question. 

Here, you may be asked to summarize some problems with financial statements. In this case, you can follow the following steps:

1. The impact of an account change on the financial statements, such as the impact of the change in the old account on the three statements.
   There may be some special issues. For instance, equipment (fixed assets) purchased last year was suddenly scrapped in March this year, which impacted the tables in the past two years.
2. Recall the Balance Sheet.
3. State the financial indicators to which a growth enterprise should pay attention.
4. Some theoretical knowledge like the EBITDA formula/ROA formula, etc.

Examples of technical questions

Here are two specific examples of technical questions:

1. How to calculate the numerator and denominator of the P/E ratio?

P in the P/E ratio directly uses market cap, and E uses net income attributable to controlling shareholders.

The company's financial report has three net income indicators:

• Net income
• Net income attributable to controlling shareholders.
• Net income attributable to minority interest.

Assume Company A (with x shareholders) and Company C hold 80% and 20% of Company B's equity, respectively, and Company B's net income is 100 dollars. 

Then company A gets 80 dollars, company C gets 20 dollars (net income attributable to minority interest), and the shareholders of company A get net income attributable to controlling shareholders.

Another concept is structural subordination. Because company A and company C will get dividends faster, the shareholders of company A are structurally differentiated compared with company C.

2. Why is US stocks' valuation higher than Hong Kong stocks?

Don't be fooled by the interviewer if you come across similar questions.

There is a tricky point in this question. If we look at the average PE multiple of the market index, US stocks are indeed higher than Hong Kong. 

The reason is not that the company operates badly but that many companies in the US stock market are highly valued. 

For example, among the top 50 American heavyweight stocks, there are many Internet companies whose valuations are naturally high. In contrast, most Hong Kong companies are in this field of real estate finance. 

The difference in the composition of the index is significant. If you look at the valuation of the same company or business, such as Biopharmaceutical, its US and Hong Kong shares are the same.

Reminder: Hong Kong and the United States should not be viewed separately. The regulatory rules, investor groups, stock trading rules, and listing procedures of Hong Kong and the US markets are very similar.

Suggestions from an interviewer in an investment bank

Some special and relative suggestions from an interviewer who used to work in an investment bank. Usually, the interviewer will pay attention to

1. Review and consideration of your work

In most internships, interns will review their previous work before the interview. Therefore, it is good to see what key points to look at in the due diligence, the specific content, and the solution ideas involved in the feedback questions answered. 

However, they usually do not know what to do and how to further process the interns' work after finishing it. 

During the internship, the tutors are not responsible for telling you everything. Still, if the intern has thought about this aspect or asked the previous tutors, it will give them an advantage in the interview. 

The due diligence of investment banks is a logically closed loop, which means there is an operation guide. 

Every action has its meaning and purpose. Therefore, after various results in the previous step, how to deal with the next step is also methodological, and a clear understanding will let the interviewer know your depth.

2. A good expression of theoretical knowledge

Most young job searchers may have short and weak points, which is understandable. However, it takes a lot of energy to learn and accumulate, and there is a big difference between practice and theory, so it is human nature to "whitewash" it. 

However, some students may not be good at whitewashing. For example, some students will say that their accounting foundation is solid, or "I have reviewed the CPA/Insurance agency exam for N months." 

This statement is not good because the accounting and insurance agency exams are broad concepts. It is easy to ruin a good impression if you cannot make it in the following technical questions they ask.

Besides, accounting and insurance are also relatively difficult topics. So when the interviewer asks two questions about accounting or directly asks several current laws and regulations, you may not be able to give a good answer.

3. Some special skills

There was once an interview where the interviewer met two students who could work with Python programming. 

They are finally appreciated by all three interviewers, which makes it clear that it is important to have some skills, such as IT programming, in such a job interview. 

Now, it is common to have more research and internship experience. However, only a few people apply for MBA-related positions in an investment bank with such a skill. 

Python, R language, and other technical tools, which can help speed up the work process, have become popular since the 2000s and will become a trend in the future.

Investment Banking Associate MBA Interview tips

Here are some tips you should consider when preparing for an investment banking associate job interview.

1. Gain experience in investment banking

When it comes to the interview for the retention project, the competition is fierce, and the project schedule for candidates is tight, so it is very important to have relevant experience in investment banking. 

The project team's expectations will certainly depend on the requirements of the regular employees. In short, they must be at least a skilled worker. A simple explanation will help them understand what to do and achieve. 

You need to manage other inexperienced interns and complete the trivial but heavy workload, such as sampling, flow checking, walk-through testing, checking related parties, checking violations of laws and regulations, and taking patents. 

It would be inefficient if you still had to spend much time teaching your performance like those new students.

2. Be fully prepared for your resume content

Many of the investment bank's experienced employers like to pay much attention to details in your experience. Any statement in your resume can be asked carefully. 

In this case, to do a good job in this interview, your preparation should only be detailed to the same degree as the employers do. 

There are some points you must think about when preparing to answer some questions about your personal experiences:

• Why did you want to do this work?
• How did you do this work? How did you help your team?
• Did you find any problems in your project? How did you deal with them, and what was your conclusion?
• What were the gains and reflections of your work?
• If possible, extend the practice to the theoretical level with your professional knowledge to show your understanding of this field.

Reviewed and edited by Parul Gupta | LinkedIn

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