THE DEFINITION OF AN INVESTMENT BANKING ANALYST

Analysts are usually recent undergraduates, with some of them likely to return to school for an MBA before resuming their investment banking career. Being recruited straight out of collage by default means that you have to be prepared for a lot of grunt work and long hours; this will also be the case if you are a career switcher like moving from IT to investment banking.

THE BASICS

JP Morgan for example notes on its website that it expects its investment banking analysts to perform corporate valuation analyses, to build detailed financial models, to prepare presentation materials for use in client meetings, to participate in all stages of transaction executions, as well as to coordinate efforts with deal team members across the investment bank.

Or, to put it in much simpler terms, the investment banking skills that you need to have during your first year as an investment banking analyst include the ability to work with PowerPoint and Excel spreadsheets, including writing macros in VBA. Make sure your financial modeling skills are polished and ready to go. Other tasks that you most likely will have to perform include digging for information in various sources and organizing stuff such as conference calls, presentations and meeting. You should also know your way around a copy machine and will have to come to terms with the fact that despite all your qualifications you will be asked to do stuff such as getting coffee and burgers for your superiors.

As for the average amount of working hours, while there is a recent trend which has seen bulge bracket firms such as Goldman Sachs discourage analysts from working weekends, still, you can expect to work between 80 and 100 hours during your first year.

THE VARIABLES

While the job of the junior analyst is pretty much the same regardless of the investment bank, there are some factors which could make your first year either easier or more difficult, the most important being the banker or bankers that you end up working for. Working on the buy side vs sell side will alter these responsibilities a little, but not a lot.

It’s a lottery: you might have to work for someone who is too demanding or would blame you not only for your but also for his or her own mistakes. On the upside, you might end up working for a banker who is able to plan ahead so that you are not overloaded with work. Or best of all, you might be assigned to an experienced investment banker whom you can learn a lot from.

The second major variable is the deals that the bank will be working on; if your bank or the senior bankers that you’re working for are preparing a multi-month long deal, then the probability of you spending your weekends at the office would be much higher.

THE PITFALLS

When you’re a first-year investment banking analyst, apart from your job description, there are a lot of unwritten rules that you have to adhere to and pitfalls that you’ll have to avoid, if you want to get to your second year as an analyst, that is.

One of the things you have to avoid is bragging about your education if you went to a top tier school, or thinking that you know it all if you were a top student intent on entering investment banking from a second tier school. While your theoretical knowledge might be top-notch, it won’t make up for your lack of experience. Toning down your ego and having a down-to-earth attitude are more likely to impress your superiors.

There is a learning curve with every job and it is normal to make mistakes in the beginning, in investment banking, it’s important to minimize those mistakes as much as possible. While chances are that you will make some errors on account of your lack of experience, there are some that you can actually avoid; for example, before presenting any work, print it out to review it for typos and formatting errors. This is especially true in your financial models.

Avoid being late for work during your first year, especially if you have to attend a meeting at a given hour. While it’s true that sometimes you might have to leave the office in the wee hours, this does not necessarily mean that you will be excused if you are late the next morning.

AT THE END OF THE YEAR

Being a first-year investment banking analyst is definitely not a walk in the park. It, however, can be a pretty important step in your future Wall Street training. In addition, despite all the mundane tasks that you will have to perform, at the end of the year, you will have learnt a lot and more importantly, you will have a pretty good idea whether you are cut out to be an investment banker.

Otter Products LLC, based in Fort Collins, Colorado makes the wildly popular Otterbox, a protective case for smartphones. The cases, which protect touch screen wireless devices are known for being the toughest on the market and are the top-selling protective case in the United States and Canada. Established in 1998 and founded by Curt Richardson, the company is privately held and is owned by him and his family. Otter Products employs more than 800 people in the United States, Ireland and Hong Kong.

Richardson originally came up with the idea for the product while researching a waterproof case. His wife later named it Otterbox.

INVESTMENT BANKING AND CORPORATE VALUATION

Industry sources have indicated the company is preparing itself for a potential sale by hiring the services of investment banking giant Goldman Sachs. It has been rumored that Goldman values the company at $2.5 billion. Thus far, there are no indications of potential suitors, though several private equity firms are reported to be interested.

Is Otterbox worth $2.5 billion? The company has been a juggernaut, posting three year revenue growth of 455 percent and earning itself a place on Inc. magazine’s annual ranking of the world’s fastest-growing companies. Moody’s Investors Service reported the company had $925 million in sales in 2013.

PRIVATE EQUITY IN CONSUMER ELECTRONICS

Though no sale appears imminent it will be interesting to watch as other valuations have skyrocketed in the consumer electronics sector resulting is huge private for private equity firms. One example is the Carlyle Group’s $500 million investment in Beats Electronics, known for its Beats by Dre Headphones, which they sold 10 months later to Apple for almost double their original investment.

GoPro, which raised $427 million in an IPO earlier this year also is also valued at over $3 billion.
Otter Products themselves acquired LifeProof, a San Diego based rival smartphone case maker in 2013 for an undisclosed amount.

AT THE END OF THE DAY
While the consumer electronics industry has been booming of late, it will be ultimately up to potential private equity suitors to determine that valuation of Otter Products. Goldman seems to believe that this company will be the next one make headlines with another hefty price tag.

In our Investment Banking Training Course, our students learn how to value corporations using 3 strategies: 1) the income approach; 2) the market approach and 3) the asset approach. Otterbox is rumored to be woth $2.5 billion and has hired Goldman Sachs to explore a sale.

FIDELITY INVESTMENTS LEADS GROUP WITH $17 BILLION VALUATION OF UBER

Uber Technology Inc., the internet/app based ride sharing service has recently been valued at an astounding $17 billion in its latest round of financing led by Fidelity Investments, according to multiple sources. Wellington Management , an Investment Management Firm, is also rumored to be part of the financing group.

Uber is said to be seeking funding of less than $1 billion to expand from the current base of 115 cities served thus far. Other firms are reportedly looking to join Fidelity and Wellington in this latest round of funding, so terms of the deal are subject to change. Uber’s CEO Travis Kalanick has been quoted as saying the valuation associated with the funding could be “record breaking”.

The San Francisco based company has previously raised a total of $49.5 million in 3 previous rounds of fundraising including investment from Benchmark Capital, Goldman Sacs, Menlo Ventures and Bezos Expeditions. Uber generates revenue by taking 20 percent commissions from its drivers and are located in numerous US cities, with plans to expand to international markets.

BOOMING START-UP CORPORATE VALUATIONS

The corporate valuation is the most recent in a line of head turning numbers that rank Uber as the world’s highest valued startup and would make the company more valuable than established public car rental companies like Hertz Global Holdings Inc. ($13.6 billion) and Avis Budget Group ($6.1 billion) and larger than any taxi company in the United States. Uber’s valuation has quadrupled since last year when Google Ventures and TPG Capital invested on a valuation of $3.5 billion.

If the deal goes through, it would also make the company more valuable than other recent tech start-up valuations like What’s App ($16 billion), Airbnb ($10 billion), Dropbox ($10 billion), and Groupon ($4.13 billion).

Kalanick and Garrett Camp have stated that they founded Uber in 2009 after they could not find a taxi on a trip to Paris, France. With a $17 billion corporate valuation, they shouldn’t have a problem now.

IS THERE A TECH BUBBLE FORMING?

With the soaring valuations in the start-up technology space, there are people who say this can’t go on forever. There are others that say that these valuations are justified. Traditional valuation techniques like the Discounted Cash Flow method would not merit these figures, but certainly there are other methods that can. So are we in a tech bubble? Only time will tell, but until then, please send me a black car. Those conventional taxis are so 2007!

In our Investment Banking Training Course, students learn how to calculate brand value. Brand value is calculated on a firm’s financial performance and standing among customers and is essential in determining a corporation’s overall valuation. Google’s brand is calculated at an industry best $159 billion.

THE KING IS DEAD, LONG LIVE THE KING

Apple’s reign as the world’s most valuable brand is over after 3 years and Google is the new king. According to the 2014 BrandZ Top 100 Most Valuable Global Brand Ranking, Google’s brand has increased 40% since last year and currently touts a brand value of $159 billion compared to an estimated market cap of $540 billion. The ranking, conducted annually by Millward Brown Optimor, has been in place since 2006 and is the only annual ranking to measure brand value.

Apple slipped 20% to No. 2 with a brand value of $148 billion after having ruled the rankings for the past 3 years. The top 10 were dominated by US firms followed by IBM ($107.54 billion), Microsoft (90.19 billion) and McDonalds ($86 billion) rounding out the top 5.

Overall, in the nine years since the survey began, the combined value has nearly doubled, ballooning up to of $2.9 trillion this year, an increase of 12% over 2013. This shows how brand value can directly affect a company’s bottom line and overall value.

The survey also reveals the value of technology companies in today’s business world, with an increase of 16% this year and 143% since 2006. Tech companies also make up about a fifth of the survey and represent approximately a third of the overall value. Of the top 10 biggest gainers since the study began, five are tech companies.

APPLE VS GOOGLE

So how did Google knock Apple from the top spot? In one word: Innovation. Both are tech giants with loyal customer bases and compelling products. However, Apple is viewed as mostly resting on past accomplishments, choosing to update their suite of products which include the hugely popular iPhone and iPod product lines. Google, on the other hand, is now perceived as being transformational, launching the Google Glass and GoogleX projects. These products are expected to be game changers. Also, as simple as it sounds, Google does small things like updating their homepage daily to provide a slightly different look. This helps keep it fresh and relevant as a brand which is not by accident.

THE VALUE OF GOODWILL

Brand value is an intangible asset (included in Goodwill) and can be an extremely valuable. It can also be very difficult to accurately determine. The issue of goodwill, and therefore Brand Value, usually arises in M&A transactions. Typically, goodwill is the amount an acquiring company would pay for the target company over the target’s book value. It’s comprised of the value of a company’s brand name, loyal customer base, customer relations, and any patents or proprietary technology.

Being able to value a brand is essential to providing an overall snapshot of a company’s value and is reflected in a company’s balance sheet under assets. Google’s brand value of $159 billion means that the company has done a significant job positioning itself in the minds of their customer base.

With all of the skyrocketing tech valuations in recent months, it’s no surprise that Pinterest, an online social scrapbooking site is looking to cash in on some of that momentum.

First reported by ReadWrite, the startup received an additional $200 million in fundraising from its existing roster of investors: SV Angel, Bessemer Venture Partners, Fidelity, Andreessen Horowitz, FirstMark Capital and Valiant Capital Partners.

The series F raise was based on an eye popping valuation of $5 billion, just seven months after a similar raise valued the firm at $3.8 billion. It seems that online bookmarking is becoming more valuable in a hurry.

According to a survey of Q1 2014 deals by Fenwick & West LLP, a Silicon Valley law firm, venture capital investment in startups have reached the highest levels since 2001. Companies are also seeing more leverage in deals. The numbers of venture-backed firms seeking initial public offerings is the highest since 2001. That, coupled with some notable M&A transactions has created an environment which favors the right companies.

Some recent start-up valuations worth noting:

1. What’s App –$16 billion (acquired by Facebook)
2. Airbnb – $10 billion
3. Dropbox – $10 billion
4. Palantir – $9 billion
5. Groupon – $4.13 billion

Investors seem to have elevated Pinterest to superstar status as evidenced by their investment of $425 Million in the last 7 months and $764 Million overall, with the company now poised to line its coffers with the influx of cash.

Pinterest has no plans to just sit on the money however. The company has just begun paid advertising on the site and the ability to search keywords to find related pins. This will allow for the company to sell featured pins to would-be advertisers.

“This new investment gives us additional resources to realize our vision” the company’s co-founder Ben Silbermann said in a statement. His investment group certainly thinks so.

For more information on how to value corporations, please contact our office closest to you or email us at info@financeinstute.com.