A Typical Interview Process for an Investment Banking Analyst

Investment banks hire their Analysts about 10 months before they start. The exact process varies from bank to bank but generally an applicant should expect the process to begin in the middle of August and end in the middle of September for the top firms. These are the big multinational bulge bracket investment banks like Credit Suisse, Goldman Sachs (although they are a bit later), UBS, Barclays Capital, Morgan Stanley, and so on.

The theory I've heard is that the top firms pay top dollar to get what they think is the best talent coming out of this years business school graduate class at the undergrad (analyst) and grad (associate) level. After this hiring cycle is done the next tranche of banks on the league table grab their candidates for a little less money and it trickles down through the fall and winter as mid-market and boutique firms make their play for graduates. Come spring all the firms open their doors again if they want to fill a spot or two and offer unemployed grads a direct hire position. There are of course on the spot hires for teams that are in heavy need of more hands throughout the year but most graduates are recruited in one of these cycles.

Round One
The first round is the screening round. Resumes flood the firm through online applications, campus recruiting, and in firm recommendations. In my fall push I was 1 for 2 on an in firm push through approach, and 1 for 15 on the only online application approach - even then the 1 that bit was something I don't think I would have taken if it was offered. So if your serious in your landing attempts you need to reach somebody in the firm who can place your resume on the right stack. If you're successful you'll be given a call to line up a behavioral interview; I was given about 12 hour notice, so its good to be on your toes in your interview prep as soon as you are applying.

Round Two
Unbeknownst to me at the time I actually did my behavioral interview before I was screened. My contact in the firm had gathered enough on our 'informational interview' to form an opinion on my fit in the firm that he must have given me a pass on this round. The general questions you can expect here are the classic ones like: "Walk me through your resume", "Why investment banking?", "Why [firm name]", "Why this team?", "Do you think you can take the hours?", "What three of your strengths and weaknesses", "What are some questions you have for me?". The list goes on; generally if you take some time to think about your motivations and skills you will be equipped with genuine answers to give to the interviewer. If you are just memorizing what you think they want to hear because you think they wouldn't like your answer then perhaps you are applying to the wrong line of work?

Round Three
When I was given my 12 hour heads up for my behavioral interview, what I was actually being notified for was my third round technical interview. This became pretty clear after the second question, and I had to lean hard on my undergraduate knowledge and CFA I prep to answer valuation questions on the fly. Keeping in mind that I was applying to an M&A role in a office that deals primarily with large oil and gas firms here are some technical questions you can expect in the third round.
1. Walk me through your resume
2. How do you value a company?
3. How do you value a pure play oil and gas firm?
4. How do you value a firm before it IPO's?
5. Should you expect your DCF value to be higher or lower than your comparable's value?
6. What multiples should you use to value Oil and Gas companies? Be as specific as possible. (He wanted to hear Enterprise Value over Reserves, and I got likely got the next question as a follow up to see if I could incorporate the 'right answer')
7. You have been researching a firm and have a solid grasp of BPD [barrel per day] numbers, and their current and historical reserves. They are a pure play upstream O&G firm. How do you use this information to help you value the company?
8. A firm in the same geographical region and with normal firm activities (no blow ups ect) has a stock that is under-performing peers. What are the possible explanations for this / what would you check for?
9. Talk to me about LBO's. Should the precedent value set by other deals be higher or lower than your DCF valuation?
10. Any questions for me?

Round Four
And now the final round. They usually do this one on-site and so expect to be flown to the location at a moments notice. I learned of my Friday morning interview on a Wednesday afternoon, and had Thursday travel booked by Thursday morning; everything is last minute. You get to see a bit of how the firm values your candidacy at this point, everything is paid for and you are put up in very nice hotels. The day of the interview begins with a gathering of the prospective candidates. I expect each office does this their own way, but for my final round I ended up talking to the other three candidates for about 20 minutes while the team assembled for the rolling interview rounds.

There was four stations, or offices, that had two different people that would test you on different things, except for one office that housed the managing director. All of the interviews would start with "walk me through your resume" and the interviewers would focus in on different things as you made your pitch. I started with the MD and it was a behavioral / interest interview. It was my responsibility to ask most of the questions, and go into a bit of explanation of why I thought I was a good fit and could handle the work. Each interview would last about 40 minutes and then you would immediately transition to the next interview.

My second interview was with two members of the team - the interviewers ranged from the Analyst to VP / Director level. This one went technical quickly and I quickly sensed it was going to take an accounting bent. Like some young financiers I look at accounting like pilots look at radio protocol. Necessary to do the job, but always an unpleasant experience. So after covering as much ground as I could on the more interesting projects I was bringing to the table, it was time to tackle their questions. They went something like this:
1. Walk me though your resume
2. How do you value a company
3. Walk me through a DCF valuation from Revenue.
4. I just bought a piece of equipment for $100, $50 was cash, $50 was debt. Walk me though every accounting transaction that occurs during the year. And fill out the financial statements starting at net income.

This last question in particular is a tricky one and I heard it replicated in a interview prep course I ended up sitting in on after landing so I assume it's industry standard. I asked if I could write things on their white board and I was told no. I got them as far as the depreciation tax shield and change in retained earnings but it was a bit slow and painfully confusing to do all in my head. I solved it on paper on the plane ride home and it is actually a tricky question that looks deceptively simple to do in your head.

My third interview was another fit interview after being a bit shaken from my accounting interview I hit this one as hard as I could. In the moment it felt like it went well, and it was passion filled. It was one of those moments that you realize your dream might be slipping from your finger tips and the adrenalin kicks up yet another gear. It was in that interview that I realized how crushed I would be if I didn't land at this particular firm, and how much I really did want the job. From what I can remember it was a re-hash of the behavioral questions that should have been my round one.

My fourth and final interview was a valuation interview, something I've taken to be a personal strength, but after 2+ hours of grilling I was losing my crispness. Questions I recall being asked were:
1. Quickly walk me through your resume
2. What stock would you buy today?
3. How would you value it?
4. How do you measure investment risk?
5. Why Investment Banking?
6. You experiences lean towards investment management, why not pursue that?
7. Why Canada after studying in the USA?

And that was it. I raced out of the office to catch my flight home and my emotions swung a bit as I re-ran questions in my mind. In particular the accounting questions ate at me, and I felt I had definitely given them enough to say no.

Mercifully the offer call came in the next day on a Saturday afternoon and I worked with HR Sunday evening to iron out all the details - yet another indication that anyone in an investment firm never sleeps.