I have a great guest post for everyone today. Patrick Curtis, founder of WallStreetOasis.com, was kind enough to send me a great write-up on interviewing for an investment banking position. This is one of the main jobs many MSF graduates seek and I thought it would be of interest to everyone coming to this site. Enjoy the below article and please check out www.wallstreetoasis.com!

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Ace These 3 Parts of Investment Banking Interviews and Land an Offer

Investment banking interviews are notoriously intimidating and difficult to prepare for. Not only do you have to ace the technical portion of the interview, but you also have to impress the interviewer with your behavioral answers. Even if you ace both of these sections and have the “right” answers, if you don’t have the proper body language or the way you deliver the answers is not convincing, you can still be out of luck.

The odds of getting a response from an online application is between 1-6% depending on your background, and then you still have less than a 10% chance of landing the job even if you are granted a first round interview.

So if you are one of the lucky few that finds yourself face to face with an investment banker, we want to make sure that you are prepared. Below are the three toughest parts of the interview, some advice and an example to illustrate how to succeed.

  1. Technical IB Interview Questions

This is what most applicants fear the most. How do I successfully walk through a DCF? How do you value a company? What does beta mean? how about WACC? Investment banking interview questions are difficult to prepare for, but the technical portion should be tackled by understand the concepts behind the questions and not by rote memorization. It’s impossible to cover every single variation, so make sure you can navigate complex technical concepts before you get into an interview room.

Sample Question: “What would be the effect of using levered free cash flow rather than unlevered free cash flow in your DCF model?”

Sample Answer: “If you were to use the levered free cash flow in your DCF, you would end up with the Equity Value of the company rather than the Enterprise Value since the cash flows you are finding the present value for are after the debt investors had been repaid, therefore indicating how much cash would be available to equity investors, not to all investors.

Notice that this question could have countless variations. They could ask you what is the difference between Equity value and Enterprise Value? They could ask you detailed specifics about a DCF, etc. The point is if you don’t understand a DCF, what it represents and how that related to enterprise value and equity value, any variation on this question will leave you lost. Again, you need to understand the concepts, don’t just memorize.

  1. Behavioral IB Interview Questions

This part of the interview is often underestimated in importance by many applicants. They think to themselves, “if I get all the technical right, I can wing it through the fit questions.” That is WRONG.

I would argue that fit questions can be even more difficult to answer vs technical IB interview questions. Oftentimes they will try to trap you into answering a question that makes you look petty or foolish. The protection against these questions and the secret to acing this portion of the interview is to have at least 5-7 different stories prepared that you pull from at any time.

Specific examples from your previous internships, school or extracurricular activities will keep you from rambling and keep you on point, demonstrating you are organized and are up to the challenge of working 90+ hours per week as an analyst.

Sample Question: “What do you know about our firm?” [Here’s a question that allows you to demonstrate that you have done your homework and know that this is the firm where you want to work. Talk a bit about the firm’s history, whether it is public or private, its areas of specialization (M&A, restructuring, etc.), branches, or international offices. If possible, mention some deals they have been working on. Most of this information can be easily found on the firm’s website.]

Sample Answer: “I have actually done a lot of research on Lazard. It was founded in 1848 and was a private company until 2005. While you are a smaller firm, you still maintain a strong global presence. You have two main divisions, Asset Management and Financial Advisory, and you are one of the most respected players in the M&A world. According to my alumni contacts, you maintain a boutique feel, with small, lean deal teams, which provides great experience for analysts, but you still compete for the largest M&A clients.

  • Intangibles

This is often the last piece of the puzzle. Having great intangibles is what takes a candidate from just “good” to “great” and can be the difference between getting an offer or not. These skills typically only develop after countless hours of mock interviews, studying the technical concepts and perfecting your story.

The intangibles are what determine if you are actually liked by the person across from you. Even if you answer every technical question right and have the perfect story formulated, if you can’t deliver the answers with conviction and demonstrate confidence, you won’t land the job. There is a fine line between confidence and arrogance. It’s important to make sure you do the following:

  • Smile and give a firm handshake at the beginning and end of the interview
  • Have good posture throughout
  • Give steady eye contact when speaking or being spoken to
  • Frequently express your desire to work in investment banking and display that you understand what the job requires

These are the three most critical aspects of the investment banking interview you should master. Stay tuned, maybe I will give a short lesson on the even more daunting world of private equity interviews in the near future!

-Patrick Curtis

Chief Monkey & Founder, WallStreetOasis.com