A Career in Investment Banking

Lafayette CollegeEaston, PA

November 8, 2013

2

Career Path / Education

2011 – Today BMO Capital Markets (Bank of Montreal)

2007 – 2011 Banc of America Securities / BAML

1992 – 2007 Citigroup Investment Banking (Salomon Brothers)

1991 MBA, Finance, NYU – Stern

1987 – 1992 Bank of New York, Strategic Planning

1984 – 1987 KPMG Peat Marwick – CPA (NY)

1984 Lafayette College, A.B., Economics

3

Investment Banking Job Description

Buying other companies (or merger)

Selling businesses

Raising money (stock and bond offerings)

Assist Companies (the client)

in:

4

Investment Banking

Clients Pay Fees for Products and Services

Financial advisory (Buy / selling companies; M&A) Source idea (pitch) Negotiate transaction (execute) Valuation analysis (fairness opinion)

Underwriting / Capital Markets (Raising money) Assume the risk of distributing securities to investors Structure the security Market and sell to investors

– Valuation

5

Underwriting / Capital Markets

Issuer Options:

Borrow (Bond)

Sell ownership (Stock)

Hybrid (Convertible Bond)

Objective:

Company XYZ

InvestmentBank

Investor

Raise $Cash $

Security

Cash $

Security

Coordinates between Issuer and Investor

Determine appropriate size / price

Owner of security

6

How a Security is Priced

Issuer Investor

HIGH price

Underwriting Commission

LOW Price

Sales commission

Traders

InvestmentBanker

CapitalMarkets

Salesforce

Investment Bank DeterminesMarket-Clearing Price

ResearchAnalyst

7

Investment Banking Careers

Corporate Finance Investment Banker

Trading Trader

Sales Bond / Equity Salesperson

Research Research Analyst (FI and Equity)

Product Specialist Capital Markets

8

Career Path / Education Requirements

CollegeFinancialAnalyst

Earn MBA

InvestmentBanking EntryLevel Position

Yes

Business Degree Finance Accounting Mathematics

Liberal Arts English History Economics

Go to Business School?

Crunch numbers

Long hours

Great learning experience

Program lasts 2–3 years

No

Career Choices:

Return to investment bank as Associate

Private Equity

Hedge Fund

Economist

Strategic Planning

Accounting

Select group promoted from Analyst to Associate

Other finance jobs, eg, hedge fund, private equity

9

The Path to Success

Highly analytical Comfortable with math Make the complex simple

Marketing / sales Idea generation / “break new ground” Make the simple interesting

Attention to detail Pitch books Prospectuses

Persistence / teamwork Maintain client relationships One out of ten pitches may land an assignment Competitive "fire"

10

Rewards of the Job

Creativity is encouraged

Every day and every deal is different

Meet interesting people

You see the results of your work in the newspaper

Travel

11

Challenges of the Job

The client is always right

The client has many “friends”

Long hours

“Roadmaps” don't apply Answers / agenda often not obvious

Travel

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Companies That Provide Investment Banking

Traditional Investment Banks

Universal Banks

Include Other Banking Services and Other Businesses (Credit Cards)

13

ECM 43.43% 4.80% 7.72% 5.13% 6.90% 2.78% 2.57% 2.39% 0.85% 1.92% 0.17% 1.56% 1.56% 0.02% 0.93% 0.95% 0.06% 0.33% 0.48%

M&A 38.52% 1.51% 6.31% 4.43% 5.44% 3.83% 1.81% 2.24% 0.41% 1.77% 1.15% 0.60% 0.49% 1.87% 0.52% 0.27% 0.30% 0.70% 0.11%

DCM1 43.29% 7.47% 5.30% 7.30% 5.94% 3.92% 4.41% 3.16% 1.41% 0.31% 0.55% 0.40% 0.10% 0.05% 0.04% - 0.32% 0.07% 0.09%

LOAN 43.83% 7.70% 4.04% 5.74% 4.05% 3.01% 3.82% 3.11% 2.17% - 0.80% 0.02% - - - - 0.44% - -                                     

YoY(bps) +291 -24 -94 -32 +25 -17 -50 -2 -9 -15 -12 -2 -2 +5 -7 -9 +9 -5 -3

BMO Target Market

Fee Share by Firm, TTM: % of Market, Companies with EV $200MM – $5Bn (incl. Loan Syndications)

Companies with EV $200MM – $5BnTotal IB Fees, TTM = $17,818MM

42.58%

Firms outside of the top 9 competed for $6.3Bn

remaining IB fee wallet in F13; ~2x size of Canadian market

Source: Dealogic, US IB Fees incl. Loan Synd (DCM, ECM, M&A, LOAN); TTM as of October 30, 20131. DCM excludes investment grade issuance

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My Lessons Learned

1. Understand before being understood

2. Make the complex simple; and make the simple interesting

3. Consider the source

4. Ask the second question

5. Sleep on it

6. Lead by example, not by cloning

7. Don’t oversell familiarity

8. Engage in face to face

9. Everyone’s allowed to have a bad day

10.Think different

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Appendix

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Issuing Common Stock (Ownership)Today

Ownership of Company

Sell Ownership

Earnings of Company

Earnings

100% $10

80%

20%

$8.00

$2.00

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Issuing Debt (Bond)Today

Ownership of Company

Ownership

Earnings of Company

Pay Interest

100% $10

100% $9.00

$1.00

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Borrow Versus Sell Ownership Comparison

Earnings Today Company's Earnings Next Year

$10.00 ZERO $1.00 $10.00 $20.00

Borrow

$10.00 $9.00 You Get: ($1.00) ZERO $9.00 $19.00

$1.00 Interest Bondholder: $1.00 $1.00 $1.00 $1.00

Sell Ownership of 20%

$10.00 $8.00

You Get: ZERO $0.80 $8.00 $16.00

Shareholder: ZERO $0.20 $2.00 $4.00

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DECS: Debt Exchangeable into Common Stock

U.S. West

FSA Insurance

InvestorInterest

Choice to Exchange Interest for Stock

Owns