Most corporate finance graduate hirers will consider candidates from all academic backgrounds, but what they will expect is a basic understanding of finance and the corporate finance industry.
In my opinion, these are the top ten questions you'll need to prepare for before attending an interview for a corporate finance graduate role.
1. What is corporate finance?
Corporate finance is the advisory service which assists companies in raising capital and acquiring and disposing of businesses. It includes M&A, equity capital markets, debt capital markets and corporate broking.
2. What do you do in corporate finance?
· Pitching - presenting to potential clients
· Advisory -providing financial and strategic advice
· Project management -managing the deal team of lawyers, accountants and PR
3. What do you think you will be doing as an analyst?
To answer this question you will have to do some research - speak to friends and family and start asking questions at graduate recruitment presentations. Think about what is involved in pitching, advisory and project management and what a junior's role might be. As an analyst you will help the senior bankers put together presentations for existing and potential clients. This research might suggest which companies a potential client should acquire in a particular sector, for example. Initially you will be responsible for the company and sector research, but you will quickly be required to carry out financial analysis and ultimately complete whole company valuations.
4. How do you value a company?
The key to both pitching and advisory is valuation. To formulate the best advice for their clients, bankers have to assess the value of the company given the different strategic alternatives.
Be prepared in your interview to explain how the following valuation techniques work:
· Discounted cash flow (DCF)
- Comparable companies analysis
- Comparable transaction analysis
5. What are the main differences between debt and equity funding?
Investment banks help companies raise debt and equity financing. It is therefore important that you understand the differences between these two types of funding. The main differences are:
· Equity confers ownership, debt does not
· Debt is always repaid, equity is generally never repaid
· Debt is often secured on the companies assets, equity is unsecured
· If a company becomes insolvent, debt ranks higher than equity
6. Choose an industry, what are the drivers and current trends in this industry?
You should spend some time thinking about how corporate finance theory applies to different companies and industries. Make sure that you have a couple of examples of industries that you can talk about - my tip is to choose a consumer type industry which you have had exposure to, e.g. retail or media. Think about how a business in your chosen sector makes money and what it has to pay out in the way of costs. Then think about combining two businesses in this sector and how a combination might enable them to make even more money and which costs could be reduced.
7. Tell me about a recent deal you've read about...
You should know about the big M&A deals that are hitting the headlines, but study at least one deal in depth. Find out the timeline of the deal, when did rumors first hit the headlines, when was the deal announced and what is the expected closing date. If you have selected a deal involving a public company make sure you check out how the share price has moved and what premium the acquiring company paid. Most importantly look into the strategic rationale for the transaction, this includes reasons stated in official press releases and speculation in the media.
8. Why do you want to work in corporate finance?
You need to show that you are making a logical and rational decision. Most corporate financiers are motivated by 'doing the deal' and not by the money, so definitely bear this in mind. The better answers which I hear include an interest in the strategy of companies and the public markets along with a desire to have a job which requires you to keep learning throughout your career.
9. Why did you apply to this organization?
In order to answer this question, you have to understand the organization's strategic positioning and their culture. Think about your skills and personality and the reasons why you think you would succeed there in particular.
10. Have you any questions for me?
Each interviewer will usually give you an opportunity to ask them questions. Have a few genuine questions prepared that will help you in your career choice and to understand the organization you are interviewing with.
Katherine Morris is a pseudonym. The author is a former analyst at a corporate finance boutique.
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