Investment banking

Investment banking revolves around deals that could amount to millions or billions of ringgit, so if you're comfortable with figures and want to work in a fast paced environment with a steep learning curve, investment banking provides the challenge you seek in a career.Lim Tiang Siew, Director and Co-Head of Corporate Finance, Commerce International Merchant Bankers (CIMB), Asia's largest investment bank tells us more.

Investment banks are financial institutions that help medium to large public and private corporations make financial and investment choices. The activities in investment banks include new issues (equity and debt), capital re-structuring, investment management and mergers and acquisitions.

An investment bank would usually have the following divisions or areas of work:

• Corporate finance
• Treasury dealing
• Securities trading

a) Corporate finance

The corporate finance division typically looks into raising funds or capital, takeovers, mergers and acquisitions, initial public offerings, and capital restructuring. Investment banks normally engage in two ways of raising funds; one is through the capital markets and the other is through private placements. In the capital markets, investment bankers raise money either by selling their clients' equities in the stock market (equity capital markets) or by issuing bonds to the public market (debt capital markets). Private placement is a direct offering of securities to a selected number of investors. Some examples of investors include insurance companies, pension funds, mezzanine funds, equity funds and trusts, and high net worth individuals. Investment banks advise companies on the size of the funds to be raised, the type of the instrument whether equity, debt or a combination of both, and pricing of the instruments. The investment bankers' role is to structure deals that benefit the issuers (their clients) and the investing public.

In cases of takeovers, mergers and acquisitions, the corporate finance division helps in evaluating the target company before advising on a suitable price for the merger or acquisition, and helps their client come up with ways to arrange finance for the purchase consideration.

There are basically three stages in every deal - origination, execution and distribution. Origination refers to putting together a proposal and selling the concept to the client company. According to Lim Tiang Siew, Director and Co-Head of Corporate Finance, 'The idea of coming up with a proposal for clients is something new in Malaysia. In the past, clients would approach the merchant banks with their ideas and not the other way around.'

The execution part involves structuring and negotiating the deal which eventually ends with a contract and other related documentation. The signing of these documents is the official confirmation of the transaction. At this stage, a variety of financial, legal and accounting skills are needed to ensure that all regulations are complied with. The corporate finance division will assist the client in announcing the deal to the public. It is only at this stage that the rest of the world will find out about the deal you've been working on for the last few months.

The final part is the distribution which involves looking for external parties to buy shares or bonds. The sales of shares and bonds are tightly regulated by the Securities Commission in Malaysia.

b) Corporate finance in commercial banks

Commercial banks also have corporate finance divisions but these divisions are quite different from investment banks. According to Lim, 'In Malaysia, the Securities Commission allows the investment banks to deal in both equity and debt type of products whereas commercial banks can only deal in the debt type of products.' In countries where such regulations do not apply, commercial banks and even accounting firms can offer equity products. Besides, Lim says that 'the nature of business for investment banks is wholesale whereas for commercial banks, it includes retail. Although commercial banks also provide corporate finance services to companies, the retail side like providing loans and receiving deposits forms an important part of their business,' he adds.

Do you have what it takes?

In the corporate finance division of CIMB, Lim says that the majority of its professional staff has accounting or finance backgrounds. 'Fresh graduates from these backgrounds have an advantage because we deal with a lot of financial information. However, we also want graduates of other disciplines so that we can have different ways of looking at and approaching different issues. Graduates from engineering and law are also accepted,' he says. Since 2003, CIMB has introduced the one-year Management Trainee Programme for fresh graduates from various backgrounds.

Lim says that all fresh graduates and those with no prior experience in investment banking will start at the executive level. Work is project based and new hires will have early responsibilities in research and analysis. 'I started at that level too although I was working in audit for 10 years prior to working in a merchant bank. From there, graduates can expect to move up the ranks to assistant manager, manager, senior manager, associate director, and finally director. It takes about one and a half years to two years to move from an executive position to an assistant manager position,' Lim adds. This is considerably fast and Lim says it's because not everyone can bear the long working hours and work demands.

'Generally, it is a financially rewarding job but you must have the ability to work hard and long hours. The nature of the job is such that your work cannot be delayed because you're helping your clients to make a live transaction - to sell or buy, or raise money. Moreover, you're given a timeframe with specific deadlines to complete all the paperwork concerning the transaction which you have to meet. These timeframes are governed by law or Stock Exchange requirements and they can't change so the only thing that you can change is the working hours,' he explains.

'To do well in this area of work, you must have the desire to learn. You must also enjoy what you're doing. I enjoyed the work in investment banking because it gives me a lot of job satisfaction when I'm able to help my clients make a good transaction. I enjoy strategic thinking and dealing with corporate issues. I particularly like giving notice about takeovers to unsuspecting companies because companies that are usually being taken over have little or no idea of the process that's taking place behind the scenes. Besides, I also think that clients are more appreciative of our work compared to an auditor's as we're helping them raise money or achieve a particular objective!' concludes Lim.

At a glance

You need

• An inquisitive mind
• Ability to work long hours
• To be careful and meticulous in your work - errors are not tolerated
• To be good with numbers - you'll be dealing with lots of financial information

Investment/merchant banks in Malaysia

• Affin Merchant Bank Bhd.
• Alliance Merchant Bank Bhd.
• AmMerchant Bank Bhd.
• Aseambankers (M) Bhd.
• Commerce International Merchant Bank Bhd.
• Malaysian International Merchant Bankers Berhad
• Southern Investment Bank Bhd.
• Public Merchant Bankers Bhd.
• RHB Sakura Merchant Bankers Bhd.
• Utama Merchant Bank Bhd

© GTI Specialist Publishers. Reproduced with permission.