Wall Street
Irina Zilbergleyt
My Background
Graduated with a Finance Major
December 2002
 Merrill Lynch Investment Banking
Analyst (Chicago)
 Allied Capital Private Equity Associate
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Oct 2004 - Present (Chicago and New
York)
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Why Work in the World of
Wall Street?
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Challenge / Responsibility
 Be in a position to provide advice and guidance to people
whom, if you worked in a corporate setting, you would
probably have no exposure to
Compensation: 2006 Investment Banking Average First Year
Compensation
 $60K salary + $70K bonus = $130K
Opportunities after Investment Banking
 Private Equity / Venture Capital
 Hedge Funds
 Corporate Finance
 Business School
Networking
Direct Promotion to Associate
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Components of Wall Street
Sell-side Firms
Buy-side Firms
Agents or Middle Man
Principals
Sell investment banking
services:
 Acquisition Advisory
 Capital Markets (IPOs)
 Trading Services
 Stock Research
Morgan Stanley, Goldman
Sachs, Merrill Lynch
Example : Merrill Lynch advised
P&G on their acquisition of
Gillette in 2005.
Those who buy the services
that the sell-side is offering:
money managers including
 Mutual Funds
 Private Equity Firms
 Hedge Funds
Fidelity, Putnam, KKR, Carlyle
Group, Blackstone, Citadel
Example : Fidelity asking Merrill
Lynch to sell their Microsoft
Stock.
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Sell-Side / Buy-Side
Sell-Side
INVESTMENT BANKING
CAPITAL MARKETS
SALES & TRADING
RESEARCH
strategic advisory
underwrite and place
securities
CORPS:
Abbott, GE
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Sell-Side
INVESTMENT BANKING
CAPITAL MARKETS
SALES & TRADING
RESEARCH
strategic advisory
underwrite and place
securities
sell equity and debt
securities, provide
research
MUTUAL FUNDS
(Buy-Side)
CORPS:
Abbott, GE
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Sell-Side
sell equity and
debt securities,
provide research,
financial planning
INDIVIDUAL
INVESTORS
INVESTMENT BANKING
CAPITAL MARKETS
SALES & TRADING
RESEARCH
strategic advisory
underwrite and place
securities
sell equity and debt
securities, provide
research
MUTUAL FUNDS
(Buy-Side)
CORPS:
Abbott, GE
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Sell-Side
sell equity and
debt securities,
provide research,
financial planning
INDIVIDUAL
INVESTORS
INVESTMENT BANKING
CAPITAL MARKETS
SALES & TRADING
RESEARCH
strategic advisory
underwrite and place
securities
sell equity and debt
securities, provide
research
MUTUAL FUNDS
(Buy-Side)
CORPS:
Abbott, GE
invest indirectly by buying mutual funds,
insurance policies, etc.
institutions
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Money Flow
Institutional
Investors:
Individual
Investors:
•Insurance Companies
•Pension Funds
High Net Worth
Individuals
•College Endowments
Investment
Types:
Cash
Equivalents
Buy-side
Firms:
Debt
Securities
Stocks
Mutual Funds
Real
Estate
Private
Assets
Hedge Funds
Other:
Metal, Oil
Private Equity
Publicly Traded Investments
Privately Traded Investments
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Private Equity Fund
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Private Equity Fund: is an investment company that
provides equity capital in exchange for an ownership
position in a private company (not traded on a public
stock market post transaction).
 Venture Capital: invest in start-ups and early stage
deals (Technology)
 Leverage Buyout Funds: invest in buyouts, usually of
mature companies (Allied Capital)
Leverage Buyout (LBO): is the process of acquiring a
company using a significant amount of debt, which helps
increase the acquirer’s equity return.
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Leverage Buyout: Example
House
Leverage Buyout (LBO)
Pre Deal Research:
Hire a Broker or look at
listings, attend open houses.
Hire investment bankers
who help find potential
opportunities or do your
own search. Visit
companies, meet
management.
Deal Related Work/
Investigation (Due
Diligence):
Hire inspector, attorney, title
company
Perform Financial, Legal,
Accounting, and Insurance
Due Diligence (Usually hire
outside parties)
20%
25-40%
Mortgage Payment
Interest Payment
Varies
3-7 years
Payment:
1) Down payment
2) Borrow From Bank
Hold Period:
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Leverage Buyout: Ultimate
Goal
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Buy low, sell high!
An equity investor expects that the Company will grow
in value.
How does Private Equity Firm create value?
 Cost cutting (outsource to Asia)
 Selecting operating executives and boards of
directors
 Industry consolidation or acquisition strategies
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Power of Leverage
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Why borrow capital (debt) to fund buyout transaction?
Cash Purchase
LBO
Purchase Price Today:
$100 million
$100 million
Equity $s Invested:
$100 million
$30 million (30%)
Selling Price (1 year
$125 million
$125 million
$25 million
$25 million
$25 (profit) / $100
(invested amount) = 25%
$25 (profit) / $30
(invested amount) = 83%
Transaction Structure:
later):
Profit:
Simple Return Calc:
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Private Equity Firm Structure
 General
General Partners
partners
(GPs) The private equity
firm employees that
manage the firm’s
investing activities
• Receive a 2%
management fee and
20% of profit

Limited partners
(LPs) The pension funds,
college endowments, etc.
that provide capital to the
private equity firms but do
not actively manage the
investments
• Receive their initial
investment and 80% of
profit
Managing
Directors (MD’s)
Principals
Recent MBA’s
often with
related
experience
Vice Presidents
Undergrads with 2-3 years
experience as:
•Investment Bankers
•Management Consultants
•Big Four Accountants
Back Office
(Accounting,
Treasury, etc.)
Operating
Partners
Former CEOs,
COO’s,
CFO’s, and
management
consultants
Sr. Associates
Associates
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Deal Process: Allied
acquisition of Meineke
Development
Meineke hired investment
bankers to help them sell
the Company
Investment Bankers put
together a book describing
the business (Offering
Memorandum) and
submitted it to Allied and
other interested parties
Allied Internal Process
Financial Analysis of
Historical information
Determine the appropriate
Capital Structure (How
much debt should the
company hold)
Hire Third Party providers
to perform additional
investigations:
Allied performed financial
analysis to determine the
value of the Company and
submitted it to Meineke
through Investment
Bankers
•Accounting
Allied met Meineke
management
•Background Checks of
Management
Investment Bankers
compared all the offers and
decided that Allied’s offer
was the best
Present the deal to Allied’s
internal Investment
Committee for approval
Deal Execution
Work with Lawyers to
prepare acquisition
documents, debt
documents, management
employment agreements
Finally work with Allied’s
treasury department to
make sure that the money
wires go to the right
recipients
•Tax
•Insurance
Celebrate
•Legal
•Industry (Customer Calls)
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Insurance Diligence
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Allied hired Marsh (risk management consulting firm) to
perform Insurance Due Diligence:
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Review existing policies and provide recommendation to
Allied concerning uninsured and underinsured risks
Project estimate of annual cost of Meineke insurance
program going forward
Insurance policies reviewed: Product Liability, Pollution
Liability, Auto liability, Property, Directors and Officers
Liability, Workers’ Compensation, & Franchisor Liability
Marsh’s issued a 30 page report summarizing their findings.
They recommended additional insurance that would
increase the current annual premium by 85%.
Marsh is an insurance broker and gets commission for any
additional insurance that the Company buys from them.
Allied’s and Meineke’s role is to figure out what additional
Insurance is truly necessary.
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Risk Management
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M & A Insurance solves deal specific liability
concerns
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Tax liability
• To protect against changes of tax treatment of the
transaction
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Environmental Liability
• To protect against pollution liabilities arising post
transaction close
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Litigation
• To insure against a lawsuit or threat of litigation
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The Private Equity Summary
Insurance Companies
$
Private Equity Firms:
25% Returns
College Endowments
$
Pension Funds
$
Wealthy Individuals
$
Work with:
• Investment Bankers
• Lawyers
• Accountants
• Insurance
Consultants
LBO
Structure:
Equity
30%
Debt
70%
Debt Providers
Portfolio
Companies
Exit 3-7
Years
Value Creation:
Strategic Direction
Cut Expenses
Acquisition Strategy
Managing Oversight
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My Job: the Good and the
Bad
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Good:
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Interesting and challenging work
• Enjoy learning about different businesses and
every deal has different issues
• Interaction with upper management both at Allied
and at portfolio companies
• Good compensation
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Bad
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Work long hours and difficulty making plans
Spend many hours doing work that might not
go anywhere
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Overview of Investment
Banking Jobs
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Investment banks provide financial advice for corporations, trade and sell
stocks and other securities, and develop research and opinions on all
financial markets and economies.
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They hire college graduates each year into two- to three-year analyst
programs. Entry level positions on Wall Street that have active recruiting
programs are as follows:
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Investment Banking
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Debt and Equity Capital Markets
Equity Research
Sales and Trading
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Investment Banking Analyst
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Typically organized into Industry (Consumer Products, Healthcare, Energy
and Power, etc.). However, role of the analyst doesn’t change much across
groups.
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Marketing
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Preparing presentations (“Pitch Books”)
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Industry research
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Financial modeling (Projecting the Company’s Financials in Excel)
Live Deals
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Valuation work (Determining the value of a Company)
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Writing offering documents (SEC Documents)
Expect to work 90+ hour weeks
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This means 13 hours every day of the week…
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Debt and Equity Capital
Markets Analyst
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Overall work is a little less technical than in investment banking and the hours
are generally better. However, expect to start work early in the morning.
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Trading floor environment - need to be able to focus despite innumerable
distractions
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Gather market intelligence; talk to traders
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Keep market transaction database
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Work with Investment Bankers to prepare presentations and pitches
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Equity Research Analyst
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Work will typically include a lot of writing and less technical than
investment banking. The hours are better than banking, but very busy
around earnings releases.
The role of the equity research analyst is to assist the senior analyst to
conduct research on a particular industry segment, such as the
“Healthcare Industry.” Research analysts usually work with only one or
two supervisors.
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Conducting industry and company research (talking with companies,
suppliers, customers, and other industry experts)
Writing research reports
Developing models to project the future financial performance of specific
companies
Listen to Company earnings calls
Keep Sales and Trading informed on industry developments
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Sales and Trading Analyst
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Typically work around market hours (no weekends) and expect to be on
your computer and phone every minute the stock market is open.
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As a sales analyst you will be supporting the work of senior sales people as they
provide investment recommendations for their clients. The main responsibilities of
this job are:
 Work with research to collect information and tips on investment opportunities
for your group’s clients
 Record and process “buy” and “sell” orders from clients
 Talk with the Trading group to execute sales on behalf of clients
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The trading group is in charge of executing all trades on behalf of the bank’s clients.
If a client wants to sell a particular stock at a certain price, the trader must find
someone interested in buying the stock at that price.
 Booking and processing all transactions that you or your senior trading
associates execute in a day
 Receiving orders from sales people or directly from clients who need to execute
trades
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How Do You Get There?
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High GPA
Relevant / Challenging Classes
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Good Internships
Extracurricular Activities
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Preferred majors: Finance and Accounting
Leadership Roles
Meeting Recruiters Early
Read Wall Street Journal
Network with Alumni / Faculty
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Have a Great Break!
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