Investment Banking 101: Why the Fundamentals Still Matter

By Joshua Rosenbaum
Published June 29, 2020 | 2 min read

What does it take to make it in investment banking? In a constantly evolving world of finance, Joshua Rosenbaum, Head of the Industrials & Diversified Services Group at RBC, cracked the code in Investment Banking: Valuation, LBOs, M&A, and IPOs. Now in its third edition, the book has earned the reputation as the definitive resource for those trying to understand the technical craft at the heart of the investment banking world. In the first of a four-part series, Rosenbaum reflects on the genesis of this groundbreaking book and how he updated the third edition for today’s environment.

Q:  How has deal making changed over the last 10 years?

A: Technology has made bankers’ jobs much more efficient. For example, 10 years ago, bankers at all levels spent inordinate amounts of time processing materials, known as “turning the book”. Today, remote access and instant communications have simplified the process, giving bankers more time to focus on clients, team building, and strategy.

These advancements have also improved bankers’ work/life balance, as well as the effectiveness of remote working, which is obviously highly relevant for WFH.

Q: Why is investment banking so difficult to teach?

A: It’s a highly experiential and specialized profession that you learn through years and years of transactions. It’s also uncertified, so it’s difficult for non-practitioners to master the craft and teach it effectively. And, most investment bankers are too busy to teach full-time. It’s the classic “chicken or egg” scenario: It’s hard to learn the skillset without having the job first, and it’s hard to get the job without understanding the skillset.

Q: What separates your book from the many others on investment banking out there?

A: Prior to the first edition, most other books on investment banking promoted the “lifestyle,” lauding high-profile deals and larger-than-life Wall Street figures. We, however, decided to focus on the investment banking technical skillset. Our essential guide was groundbreaking at the time, and quickly became the go-to book for students and career-changers looking to break into the investment banking industry. Due to the strong reception, we published a second edition in 2013 that went much further on M&A, especially buyside and merger analysis.

Q:  How did you adapt the third edition for today's market environment?

A: Seven years passed since the prior edition – and that is a lifetime in finance. So much has changed with respect to the structure and nature of deals. We also have two new chapters on IPOs and equity offerings, including content on SPACs and direct listings. IPOs promise to be particularly topical later this year and into 2021 and beyond given the enormous backlog that has built up during the pandemic, including some high-profile names from Silicon Valley.

Also, LBOs have evolved in multiple ways, including the number and types of participants, structures and terms, sources of financing, and expected equity returns. In addition, M&A continues to progress in terms of valuations, process, and legal/contractual terms.

In terms of timing, it’s ironic that we released this edition during the current economic crisis. Our first edition was also released during a global financial crisis in Spring 2009, which actually turned out to mark the start of the next decade’s historic bull run. I think we all hope that history repeats itself.

Q: Do you think that COVID-19 will change investment banking fundamentals? 

Although the pandemic has created a lot of disruption and uncertainty around M&A and future market conditions, I don’t believe that it will change the fundamentals that we cover in the third edition.

Over the coming years, I think unprecedented low interest rates and capital chasing growth and returns will still dominate our landscape. These conditions clearly provide a strong backdrop for deal-making. And investment bankers will need the essential toolkit to keep up with deal flow.

Joshua Rosenbaum

Joshua Rosenbaum
Head of Industrials & Diversified Services Group

IPOInvestment BankingM&AValuation