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The Technical Interview Guide to Investment Banking





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This book is dedicated to every investor in the pursuit of enhancing wealth—those who have gained, and those who have lost—this continuous struggle has confounded the minds of many. This book should be one small tool to help further this endeavor; and if successful, the seed planted will contribute to a future of more informed investors and smarter markets.


Investment banks perform two major functions. First, they act as intermediaries between investors, or suppliers of capital, and entities that request capital such as corporations. Second, investment banks advise corporations on mergers, acquisitions, restructurings, and other major corporate actions.

Jobs within the investment banking industry vary widely; some roles can be very lucrative and as a result be highly sought after and competitive.

This book seeks to give any student or professional interested in the investment banking industry the technical tools to ace an investment banking interview. Having worked in the investment banking industry, I will give my personal perspective on what the investment banking interview process is like. I will provide advice and strategy on how to best navigate such an interview process. The book will contain a series of standard investment banking and interview preparation questions that increase in difficulty. We will also go through a series of case studies important for later-stage investment banking and private equity interviews. This book is the ideal go-to guide for anyone who is looking to break into the industry.


This book is divided into five parts:

  1. Introduction to Investment Banking
  2. Core Financial Statements
  3. Valuation
  4. Mergers and Acquisitions
  5. Leveraged Buyouts

Each part will aim to give a brief overview of the core concepts: enough to better your knowledge for investment banking interviews or just a refresher. After each overview, chapters will contain interview questions and answers in increasing difficulty. These questions and answers do not capture every single possible topic, but will cover the most common. The most important thing to remember is you will never know exactly what will be asked in an interview, or how a particular question or scenario will be posed; but if you have the proper conceptual understanding of the core topics, you will be able to handle a multitude of questions asked on each topic.

If you need a stronger technical understanding or an actual modeling overview of each topic, I would recommend reading my other books, which dive deeper into each topic and provide steps for building a model from scratch:

  1. Financial Modeling—Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity
  2. Valuation—Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity
  3. Mergers and Acquisitions—Mergers, Acquisitions, Divestitures, and Restructurings: A Practical Guide to Investment Banking and Private Equity
  4. Leveraged Buyouts—Leveraged Buyouts: A Practical Guide to Investment Banking and Private Equity


An investment bank is large, complex, and has many facets. In order to best understand the investment banking interview process, it is important to first give an overview of the major investment banking departments operating within an investment bank and the major roles within each department. This will help a job seeker identify and better understand the roles sought after in an investment bank and the most popular areas of interest for job applicants. Note this is just a high-level overview; you will always find more departments as you dig deeper, and each bank may slightly vary.

It is first important to highlight the difference between an investment bank and a commercial bank. An investment bank underwrites securities and performs advisory services while a commercial bank accepts and manages deposits for businesses and individuals.

In 1933 the United States issued the Glass-Steagall Act that prohibited banks from performing both “investment banking” and “commercial banking.” This act was set up in response to the Stock Market Crash of 1929 in order to prevent banks from betting on the market at the expense of depositors. This act was repealed, however, in 1999.


The following chart highlights the major banking divisions I will explore. Again this is not meant to be a complete overview, but just the key areas. These descriptions are meant to be a very brief overview just to give you enough of an idea to differentiate between divisions for interview purposes. Going into complete detail of these roles and what they entail is grounds for another book. Please refer to the chart on the next page for reference.

Senior Management

At the top of the pyramid we have senior management. Senior management includes the CEO, CFO, and others who run the entire firm.

Investment Banking

Investment Banking is a group within the investment bank itself. The investment banking group is typically broken up into Coverage, Mergers and Acquisitions, and Capital Markets.


This core investment banking department is divided into industry groups: Energy, Technology, Media, and Healthcare are good examples. The role of these groups is to go to clients within the particular industry and sell investment banking products—products aimed to drive growth in the client's business. These products are most likely Mergers and Acquisitions (M&A) and Underwriting. So if you were a managing director within one of these groups, you would be responsible for “covering” several companies within the industry group. The role would be to sell some M&A or Underwriting business to said client. Most often presentations (pitchbooks) are created as a tool to help “pitch” or sell business. An analyst would be responsible for researching the data for slides that would populate the presentations. These slides may require some analyses such as financial modeling, valuation, in addition to market research. The pitchbook would at its core provide an overview of the market environment, maybe a valuation of the client, and would hope to sell an M&A or Underwriting product. An analyst would also be responsible for drafting memoranda, setting up conference calls, and other process-oriented tasks. If the client expresses further interest in one of the products mentioned, then the coverage team would coordinate with the respective product team. For example, if the client expressed interest in raising equity (a subset of underwriting), then the coverage team would coordinate with the equity capital markets team to further the potential transaction.


Mergers and Acquisitions

Mergers and Acquisitions is probably the most sought after group (from a junior perspective) within the Investment Banking department primarily because it's the most model intensive. The goal of the Mergers and Acquisitions group is to aid in advising clients on the potential merger or acquisition of another asset or corporate entity. Mergers and acquisitions is a general definition that often also applies to divestitures and other types of restructurings, although some banks separate restructurings as another group. If a client is interested in acquiring or divesting all of or some part of their business, the M&A team is assigned to work on the transactions. The analyst will be responsible for modeling the financial impacts of the transaction in addition to drafting memoranda, setting up conference calls, and other process-oriented tasks. But it is the M&A modeling exposure that is typically most desirable for a junior analyst. This technical knowhow opens doors to other career paths such as private equity and hedge funds. My book, Mergers, Acquisitions, Divestitures, and Other Restructurings, walks step-by-step through the technical analyses.

Note: Some industries have unique enough account nuances that when more complex M&A modeling is needed, that industry coverage group performs their own “in-house” M&A as opposed to pairing with the more generalist M&A group. I'm mentioning this because often during the recruiting process the M&A group is in the most demand. It's wise to express interest in a less popular group (maybe Energy, for example) to alleviate competition. However, people often think that only in the M&A group will one get serious consideration for the larger private equity firms or hedge funds as the more sophisticated modeling often happens in the M&A group. So a strategic angle is to express interest in a less popular group that also happens to do its own M&A. This not only gives you that highly sought-after M&A exposure, but will give you exposure to the coverage process, which is important. It also gives you uniquely nuanced accounting skills of a specific industry, which may come in handy later in one's career. This is a good networking and positioning strategy I recommend utilizing.

Capital Markets

Capital Markets is typically subdivided into Equity, Debt, and Convertible. Each of these groups aids in the process of raising capital or trading securities for a client, be it equity, debt, convertible securities, or other types of securities respectively. So if the preceding client, for example, had expressed interest in raising equity, the coverage team would pair up with the equity capital markets team. The equity capital markets team would advise the client on the types of equity securities that could be raised based on various market conditions. They would advise on how much equity could be raised given the nature of the markets and a recommended type of security to get most value for their equity. Obviously it's the expertise of the managing directors in this equity capital markets group that would be able to provide this guidance. This takes years of experience and a strong understanding of the markets. Investment banks depend on these managing directors to give good guidance based on market conditions and further be able to follow up with their recommendation when it comes time to actually issue said securities. The results of their guidance would most likely also go into a section of the pitchbook presentation. This section would contain an overview of the equity markets, maybe the last few equity transactions and pricing information, and of course the managing directors' recommendation. The same idea would apply to debts, convertible securities, or other securities, if the client had been interested in those respective securities. In these groups the analyst would be responsible for populating the presentation slides (among other duties), which entails data mining, market research, and some modeling and analysis. But again the modeling would not be as intensive as in the M&A group. Actually it's sometimes known that the capital markets groups are the least intensive. This can be a benefit for those who want to get into the investment banking industry but are not interested in working 100 hours or more. On the other hand, the less intensive groups don't always get the attention of the premium private equity and hedge funds.

Sales and Trading

The Sales and Trading department is outside of the Investment Banking department. Salespeople and traders are responsible for the selling and trading of investment securities. So, for example, if the preceding client was in fact interested in raising equity as per the advice of the equity capital markets managing director, the sales and trading team would be responsible for the execution of said security. The sales process begins with calling potentially interested investors and other institutions about securities such as hedge funds and mutual funds. A list of interested buyers would be maintained in a process called “bookrunning.” A firm would want their books to be oversold, meaning they have more potential buyers than needed, which better guarantees a complete execution of the security when it becomes time. When the time comes to sell the equity, trading begins. Nowadays this is done via computers as opposed to the yelling and screaming you may see in the news. An analyst in the sales and trading group would likely maintain records of trades and the portfolio positions. They could also be responsible for calling potential investors and over time executing the trades. Hours are generally limited to market open and close in addition to some early morning meetings and possibly some after-market analysis, but certainly not the 100 hours or more demanded in the investment banking groups.

Equity Research

The Equity Research department is responsible for providing written reports demonstrating the expected valuation of a stock based on the opinion of the Wall Street “analyst.” These reports are sold to clients and funds among others who are interested in the analyst's stock expectations. Here's another confusing note of convention: An equity research analyst is often referred to as the managing director responsible for the entire report and its opinions. This differs from the idea of an analyst being the junior person on a team. This is confusing, but the norm. The Equity Research department is also divided into sectors, just as the coverage group is (i.e., Energy, Technology, Healthcare). As a junior analyst, one would be responsible for constructing and updating models resulting in stock valuations. Working in the Equity Research department is strong as it entails modeling and valuation. However, it is important to note that often the type of modeling performed is not as robust as the investment banking type of modeling. On the other hand, another positive in the Equity Research department is that one would get specific knowledge of an industry, which can come in handy later in one's career. The hours in the Equity Research department are significantly less than in investment banking. Weekends are generally free, and a junior analyst is often out by 7 at the latest (except for the quarterly and annual earning seasons when all models need to be updated based on company performance results).

Asset Management

Asset management helps manage the client's assets and investments in certain securities. Clients typically include high-net-worth individuals in addition to other institutions. Asset managers diversify a client's portfolio by investing across different asset classes, including equity, fixed income, and derivatives.


It is important to understand the general hierarchy within an investment banking group. The roles and duties in investment banks can vary from firm to firm, but the general hierarchy follows.


The analyst is the most junior level in the investment banking industry. Note the difference between “analyst” in terms of hierarchy and an equity research analyst as defined within the equity research overview discussed earlier. Most often, an investment bank would hire an analyst for two years. Often an analyst is allowed to stay for a third year before exploring other options. If an analyst does stay for a third year, it is recommended to do so in a different group to expand network and gain more skills. After two or three years, an analyst may be able to get promoted to the associate level, or be required to go to business school and get an MBA before getting a promotion. Sometimes, however, an analyst moves on to venture capital or private equity or leaves the industry altogether.

The key roles of an analyst entail financial modeling, updating presentations, drafting memoranda, facilitating research, performing due diligence, and setting up meetings.


An associate is one step above the analyst. Associates are responsible for the technicals and memoranda in a transaction. They are responsible for the quality of output of presentations, the data and flow of key memoranda, and the execution of deal process. Associates manage the analysts and aid in quality control of their work. An associate role will typically last three to four years before getting promoted to vice president. There is a major distinction here between the role of an associate and the role of a vice president, which often becomes a big hurdle for budding vice presidents. Analysts and associates have largely technical roles, responsible for the underlying data, materials, and process of transactions. Once transitioned to VP, one is more responsible for structuring and selling the deal—a more client-focused role. Often very technical candidates are great analysts and associates but are not personable or articulate enough to be good vice presidents. This causes a roadblock for many junior bankers.

Vice President

Typically, the vice president, although still responsible for technicals and execution, starts to gain exposure to the management process, including more direct interaction with the client. The duration of service varies vastly from firm to firm. I've seen vice presidents stay in their role for many years or get promoted after three to five years. It completely depends on the firm, their staffing needs, and the state of the markets.


The director is also another vague role. Some firms refer to this role as executive director or president, and the specifics vary. Directors typically shadow managing directors and are being groomed to be the next key contact to a client. The move from director to managing director is typically not as structured a time as from analyst to associate. It depends on the state of the particular investment banking group.

Managing Director

The managing director is the key client relationship holder. The managing director is responsible for advising the client on particular M&A or underwriting products. The success of the managing director's role is often determined by how many products can be sold to the clients covered by the managing director.

This brief overview of the major divisions and roles within an investment bank is solely to provide a very high-level overview. More specifics on the investment banking recruiting process and interview preparation follow.

About the Author

Paul Pignataro is an entrepreneur specializing in finance education. He has built and successfully run several startups in the education and technology industries. He also has over 14 years of experience in investment banking and private equity in business mergers and acquisitions (M&A), restructurings, asset divestitures, asset acquisitions, and debt and equity transactions in the oil, gas, power and utilities, Internet and technology, real estate, defense, travel, banking, and service industries.

Mr. Pignataro most recently founded New York School of Finance, which evolved from AnEx Training, a multimillion-dollar finance education business, providing finance education to banks, firms, and universities throughout the world.

The New York School of Finance is a semester-long program, based in New York and geared toward helping business students from top-tier and lower-tier business schools to prepare for jobs at the top firms on Wall Street.

At AnEx Training, Mr. Pignataro continues to participate on the training team, actively providing training at bulge bracket banks and for M&A teams at corporations, and has personally trained personnel at funds catering to high-net-worth individuals worth billions of dollars. AnEx continues to train at over 50 locations worldwide, and Mr. Pignataro travels extensively on a monthly basis to do trainings at sovereign funds and investment banks overseas.

Prior to his entrepreneurial endeavors, Mr. Pignataro worked at TH Lee Putnam Ventures, a $1 billion private equity firm affiliated with buyout giant Thomas H. Lee Partners. Before that, he was at Morgan Stanley, where he worked on various transactions in the technology, energy, transportation, and business services industries. Some of the transactions included the $33.3 billion merger of BP Amoco and ARCO, the $7.6 billion sale of American Water Works to RWE (a German water company), the sale of two subsidiaries of Citizens Communications (a $3.0 billion communications company), and the sale of a $100 million propane distribution subsidiary of a $3 billion electric utility.

Mr. Pignataro is the author of Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity (John Wiley & Sons, 2013). He graduated from New York University with a bachelor's degree in mathematics and computer science.

Part One
Introduction to Investment Banking

As someone who was not a business student, breaking into the investment banking industry was a challenging and competitive task. Lucky enough to get an offer in the investment banking industry at Morgan Stanley, I was at one time part of their recruiting team. Seeing the recruiting process from the recruiter's side was helpful and interesting, and I had always thought if I understood what the process was truly like before going through the interview process, I would have been much more competitive. This is the very perspective that I will provide in this part.