Section One: Investment Banking
- Chapter 1 – Overview of Investment Banking
- Organizational Structure of an Investment Bank
- Investment Banking Division
- Client Coverage Bankers
- Capital Markets Group
- Equity Capital Markets
- Debt Capital Markets
- Mamp;A Product Group
- Trading Division
- Fixed Income, Currencies and Commodities (FICC)
- Equities
- Non-Client Related Trading and Investing
- Principal Investing
- Proprietary Trading
- Asset Management Division
- Co-Investments in Asset Management Division Funds
Referenced Case Studies – Investment Banking in 2008 (A): Rise and Fall of the Bear; Investment Banking in 2008 (B): A Brave New World
- Chapter 2 – Regulation of the Securities Industry
- Introduction
- Section One: U.S. Regulations
- Early Investment Banking
- The Growth of Investment Banking
- Limited Regulation
- The Securities Act of 1933
- The Registration Statement
- The Investment Prospectus
- New Liabilities
- Gun-Jumping Rules
- The Glass-Steagall Act (formally, the Banking Act of 1933)
- Separation of Private Banks into Deposit and Investment Banks
- Separation of Commercial and Investment Banks
- Securities Act of 1934
- Public Utility Holding Company Act
- Chandler Act
- Maloney Act
- Investment Company Act of 1940
- Section Two: Recent Development in Securities Regulations
- Gramm-Leach-Bliley Act
- Sarbanes-Oxley Act
- Bear Stearns Collapse
- Section Three: Securities Regulations in Other Countries
- Japan
- 1947 – 1992
- 1992 – 1998
- 1998 – Present
- United Kingdom
- Pre-1986
- 1986 – 1997
- 1997 – Present
- China
- Pre-1992
- 1992 – 1998
- 1998 – 2005
- 2005 – Present
- Chapter 3 – Financings
- Capital Markets Financings
- Financing Considerations
- Financing Alternatives
- Debt Financing
- Bonds
- Loans
- Private Placements
- Asset Backed Securities
- Commercial Paper
- Equity Financing
- Initial Public Offerings (IPOs)
- Follow-On Offerings
- Convertible Securities
- Rationale for Issuing Convertible Bonds
- Convertible Bond Example
- Convertible Market
- Fees to Bankers
- Distribution Alternatives
- Shelf Registration Statements
- ""Green Shoe"" Over-Allotment Option
Referenced Case Studies – Freeport McMorRan: Financing an Acquisition
- Chapter 4 – Mergers amp; Acquisitions
- Strategic Rationale
- Synergies
- Credit Ratings and Acquisition Currency
- Regulatory Considerations
- Social and Constituent Considerations
- Role of Investment Bankers
- Other Mamp;A Participants
- Fairness Opinion
- Acquisitions
- Merger
- Tender Offer
- Proxy Contest
- Due Diligence and Documentation
- Breakup Fee
- Alternative Sale Process
- Preemptive
- Targeted Solicitation
- Controlled Auction
- Public Auction
- Cross-Border Transactions
- Tax-Free Reorganizations
- Corporate Restructurings
- IPO
- Carve-Out
- Spin-Off
- Spit-Off
- Tracking Stock
- Valuation
- Comparable Company Analysis
- Comparable Transaction Analysis
- Discounted Cash Flow Analysis
- Leverage Buyout Analysis
- Breakup Analysis
- Valuation Summary
- Takeover Defenses
- Shareholder Rights Plan
- Other Defenses
- Risk Arbitrage
Referenced Case Study – The Best Deal Gillette Could Get? Procter amp; Gamble’s Acquisition of Gillette
- Chapter 5 – Trading
- Client-Related Trading
- Pricing Securities Offerings
- Research
- Sales
- Equity Trading
- Prime Brokerage
- Securities Lending
- Margin Financing
- Fixed Income, Currencies and Commodities (FICC) Trading
- Interest Rate Products
- Credit Products
- Structured Credit
- Credit Default Swaps
- Bank Loans
- Commodities
- Currencies
- Proprietary Trading
- Risk Monitoring and Control
- Value-at-Risk (VaR)
Referenced Case Studies – A Tale of Two Hedge Funds: Magnetar, Peloton, CDOs, and the 2008 Financial Crisis; Kmart, Sears, and ESL: How a Hedge Fund Became One of the World’s Largest Retailers
- Chapter 6 – Asset Management, Wealth Management and Research
- Asset Management
- Wealth Management
- Hedge Fund Investments
- Private Equity Investments
- Research
- Paying for Research
- Conflicts of Interest
- Regulation FD
- Chapter 7 – Credit Rating Agencies, Exchanges and Clearing and Settlement
- Credit Rating Agencies
- Asset-Backed Securities and Criticism Against Credit Rating Agencies
- Monoline Insurers’ Relationship with Credit Agencies
- Credit Rating Advisory Services Provided by Investment Banks
- Exchanges
- Specialists
- Futures Exchanges
- Over-the-Counter Market
- Clearing and Settlement
- Securities Settlement
- Derivatives Settlement
- Investment Banking Services
- Chapter 8 – International Banking
- Euromarkets
- Japan’s Financial Market
- Mamp;A in Japan
- Equity Financing in Japan
- Trading Securities in Japan
- China’s Financial Market
- Mamp;A in China
- Equity Financing in China
- Trading Securities in China
- International Investment Banking Activity in China
- Emerging Financial Markets
- Bonds
- Syndicated Loans
- Equity
- Mamp;A
- Global IPO Market
- Brazil’s IPO Market
- Russia’s IPO Market
- India’s IPO Market
- China’s IPO Market
- American Depository Receipt (ADR)
- Standardized International Financial Reporting
- International Investors
- Chapter 9 – Convertible Securities and Wall Street Innovation
- Convertible Securities
- Hedge Funds and Delta Hedging
- Zero Coupon Bonds
- Mandatory Convertibles
- Wall Street Innovation
- Nikkei Put Warrants
- Accelerated Share Repurchase Program
- Chapter 10 – Investment Banking Career Opportunities and Trends
- Investment Banking Division
- Analysts
- Associates
- Vice Presidents
- Managing Directors
- Trading and Principal Investments Division
- Client-Related Trading
- Proprietary Trading
- Institutional Sales
- Equity Sales
- Fixed-Income Sales
- Prime Brokerage Sales
- Private Wealth Management
- Asset Management
- Research
- Principal Investments
- Other Investment Banking Functions
- Operations
- Finance
- Investment Banking Trends
- Securitization
- Credit Crisis of 2007 – 2008
- Bear Stearns
- Short-Term Financing by Investment Banks
- Structured Investment Vehicles
- Leverage at Investment Banks
- Capital Ratios
- New Power Brokers in the Capital Markets
- Credit Default Swaps
- Bridge Loans
- Investment Banking Future
Section Two: Hedge Funds and Private Equity
- Chapter 11 – Overview of Hedge Funds
- Leverage
- Growth
- Composition of Investors
- Industry Concentration
- Performance
- 2008 Slowdown
- Market Liquidity and Efficiency
- Financial Innovation
- Illiquid Investments
- Lock-Ups, Gates and Side Pockets
- Comparison with Private Equity Funds and Mutual Funds
- High Water Marks and Hurdle Rates
- Public Offerings
- Fund of Funds
Referenced Case Study – A Tale of Two Hedge Funds: Magnetar, Peloton, CDOs, and the 2008 Financial Crisis
- Chapter 12 – Hedge Fund Investment Strategies
- Equity-Based Strategies
- Equity Long/Short
- Non-Hedged Equity
- Directional Strategies
- Macro
- Emerging Markets
- Arbitrage Strategies
- Fixed Income-Based Arbitrage
- Convertible Arbitrage
- Relative Value Arbitrage
- Event Driven Strategies
- Activist
- Merger Arbitrage
- Distressed Securities
- Summary
Referenced Case Study – Kmart, Sears, and ESL: How a Hedge Fund Became One of the World’s Largest Retailers
- Chapter 13 – Shareholder Activism and Impact on Corporations
- Shareholder-Centric vs. Director-Centric Governance
- Activist Hedge Fund Performance
- Activist Hedge Fund Accumulation Strategies
- Changing Rules that Favor Activists
- Daniel Loeb and 13D Letters
- Lehman Brothers’ Erin Callan vs. David Einhorn of Greenlight Capital
- Carl Icahn vs. Yahoo
- CSX vs. TCI
- Bill Ackman vs. McDonald’s, Wendy’s, Ceridian, Target and MBIA
- Summary
Referenced Case Studies – McDonald’s, Wendy’s, and Hedge Funds: Hamburger Hedging?; Porsche, Volkswagen and CSX: Cars, Trains and Derivatives
- Chapter 14 – Risk, Regulation and Organizational Structure
- Risk
- Incremental Risk
- Leverage
- Regulation
- Short Selling
- Transparency
- Risk Tolerance
- Systemic Risk
- Bank Exposure to Hedge Funds
- Mitigating Systemic Risk
- Investor Risks
- Regulation
- Alternative Regulatory Approaches
- Organizational Structure
- Domicile
- Legal Entity
- Open-Ended Partnership
Referenced Case Study – Porsche, Volkswagen and CSX: Cars, Trains and Derivatives
- Chapter 15 – Hedge Fund Issues and Performance
- 2008 Summary
- Fund of Funds
- Absolute Return
- Benefits Revisited
- Transparency
- Fees
- Taxes
- High Water Mark
- Searching for Returns
- Future Developments
- Merging of Functions
- Hedge Fund Performance
- Chapter 16 – Overview of Private Equity
- Characteristics of a Private Equity Transaction
- Target Companies for Private Equity Transactions
- Private Equity Transaction Participants
- Structure of a Private Equity Fund
- Capitalization of a Private Equity Transaction
- Assets Under Management
- Private Equity Goes Public
- History
- Equity Bridge Loans
- Covenant-Lite Loans and PIK Toggles
- Club Transactions and Stub Equity
- Teaming Up with Management
- Private Equity Investment in Public Equities (PIPEs)
- Leveraged Recapitalizations
- Secondary Market for Private Equity
- Fund of Funds
- Impact of Financial Services Meltdown on Private Equity
- Chapter 17 – LBO Financial Model
- Determining Cash Flow Available for Debt Service
- Determining Financial Sponsor IRR
- Determining Purchase Price and Sale Price
- LBO Analysis Example
- Forecast Revenue, Margins, Damp;A, CapEx, Working Capital, Interest Rate and Tax Rate
- Calculate Acquisition Multiples
- Determine Target’s Capitalization after Acquisition
- Determine Cash Flow Available for Debt Service
- Calculate Credit Ratios
- Calculate Equity Value, IRR, and Multiple of Investment on Projected Exit Date
- LBO Analysis Post Credit Crisis
Referenced Case Study – The Toys ""R"" Us LBO
- Chapter 18 – Private Equity Impact on Corporations
- Private Equity-Owned Companies: Management and Productivity
- Private Equity-Owned Company Failures
- Hawaiian Telecom Communications (HTC)
- Washington Mutual, Inc (WaMu)
- Scorecard During 2008
- Private Equity Purchase Commitment Failures
- BCE, Inc
- Huntsman Corporation
- Private Equity Portfolio Companies Purchased During 2006-2007
- TXU Energy (TXU)
- Equity Office Properties (EOP)
- Hospital Corporation of America (HCA)
- Harrah’s Entertainment (Harrah’s)
- Freescale Semiconductor (Freescale)
- Univision
- Private Equity Value Proposition for Corporations
- Corporate Rationale for Completing Private Equity Transactions
- Alternative to an IPO
- Corporate Orphans
- Ignored Public Companies
- Operating or Financial Weakness
- Mandated Divestitures
- Private Equity as an Alternative Model of Corporate Governance
- Private Equity Influence on Companies
- Pressure on Corporate Performance
- Changing Capital Structure
- Reduction in Public Market Capitalization
- Mergers and Acquisitions
Referenced Case Study –Cerberus and the U.S. Auto Industry
- Chapter 19 – Organization, Compensation, Regulation and Limited Partners
- Organizational Structure
- Closed End Funds
- Exits
- Compensation
- Preferred Returns
- Timing Issues
- Clawbacks
- Taxes
- Regulations
- Using Intermediaries
- Perception and Reality
- Limited Partners
- Defaults
- Disclosure
- Fees
- Secondary Market
- FASB 157
- Chapter 20 – Issues and Opportunities
- PIPEs
- Equity Buyouts
- Loans
- Mamp;A Advisory
- Capital Markets Activity
- Hedge Fund and Real Estate Investments
- 2008 Losses
- Boom and Bust Cycles
- Annex Funds
- Limited Partner Pull-Backs
- Risk Factors
- Asian Private Equity Activities
- Profile of The Carlyle Group
- Strategic Alliances
- Private Equity IPOs
- Focus on Portfolio Management
- Comparison of Private Equity Firms
- Future Issues Affecting Private Equity
Section Three: Case Studies
- Investment Banking in 2008 (A): Rise and Fall of the Bear
- Bear Stearns
- Long Term Capital Management
- The Credit Crisis
- Bear Stearns Asset Management
- The Calm Before the Storm
- Run on the Bank
- Bear’s Last Weekend
- Investment Banking in 2008 (B): A Brave New World
- The Aftermath of Bear Stearns
- Gramm-Leach-Bliley and the Fall of Glass-Steagall
- Lehman Brothers
- Merrill Lynch
- Goldman Sachs and Morgan Stanley
- Freeport-McMoRan: Financing an Acquisition
- Metals Heating Up
- Enter Freeport-McMoRan
- Role of the Investment Banks
- Inside the Wall
- Outside the Wall
- Placing the Equity and Convertible Offerings
- Mandatory Convertible Preferred Shares
- FCX Post-Allocation
- The Best Deal Gillette Could Get? Procter amp; Gamble’s Acquisition of Gillette
- A Dream Deal
- Deal Structure: An ""All-Stock"", 60/40, No-Collar Acquisition
- Valuation of the Deal
- Key Stakeholders: Beantown, Wall Street, DC, and Main Street
- The Razor Boss of Beantown: James Kilts, Gillette CEO
- The Rainmakers: Investment Bankers and Power Brokers
- The Regulators: International, National, and Local
- The White Squire from Omaha: Warren Buffett, Gillette Investor
- Conclusion
- A Tale of Two Hedge Funds: Magnetar, Peloton, CDOs, and the 2008 Financial Crisis
- What a Year
- What a Nightmare
- Magnetar’s Killer Bet
- The 2007 – 2008 Financial Crisis
- The CDO Market
- Rating Agencies
- Correlation
- CDO Market Evolution
- Bank Debt and the Cov-Lite Craze
- Kmart, Sears, and ESL: How a Hedge Fund Became One of the World’s Largest Retailers
- The Unusual Weekend
- Flash Forward: November 2004
- Case Focus
- The Rise and Fall of Kmart
- Bankruptcy and Inefficient Financial Markets
- Financial Buyers vs. Strategic Buyers
- Private Equity
- Hedge Funds
- ESL: The Hedge Fund That Could Not Be Categorized
- 2002 – 2003 Decision: Should ESL Seek to Gain Control of Kmart during Bankruptcy?
- Lampert’s Kmart Play
- November 2004 Decision: Should Kmart (under ESL’s Control) Acquire Sears?
- McDonald’s, Wendy’s, and Hedge Funds: Hamburger Hedging? Hedge Fund Activism and Impact on Corporate Governance
- Growing Hedge Fund Activism
- A Tale of Two Activists: Carl Icahn and William Ackman
- Pershing Square’s Initial Involvement: Wendy’s and McDonald’s
- Wendy’s
- McDonald’s
- McDonald’s Management and Franchisees Respond
- Rating Agency Concern
- Unlocking McDonald’s Real Estate Value
- Aftermath of McDonald’s Rejection
- The Truce
- Retrospective
- Porsche, Volkswagen and CSX: Cars, Trains and Derivatives
- Using Derivatives to Obtain Control Positions
- Volkswagen Equity Derivatives
- CSX Equity Derivatives
- CSX Collides with TCI and 3G
- Background
- TCI and 3G Take a Position
- Porsche and Volkswagen: Brothers Reunited
- Cash-Settled Options
- Stealth by Swaps
- Dilemma
- The Toys ""R"" Us LBO
- Case Focus
- Emergence of Club Deal in a Maturing Industry
- Dividends and Fees Paid to Private Equity Firms
- U.S. Retail Toy Industry in 2005
- European Retail Toy Industry
- Infant, Toddler, and Preschool Market
- Overview of Toys ""R"" Us
- Toys ""R"" Us – United States
- Toys ""R"" Us – International
- Babies ""R"" US
- Toysrus.com
- Challenging Times for Toys ""R"" Us
- Toys ""R"" Us Strategic Review and Sale
- The Toys ""R"" Us Club
- KKR
- Bain Capital
- Vornado Realty Trust
- The Assignment
- Cerberus and the U.S. Auto Industry
- Introduction
- ""What’s Good for GM?""
- GM a Power
- GM Hard Times
- Effect on Suppliers
- CEO Wagoner’s Tough Task Remaking Company
- Cerberus Capital Management to the Rescue…Maybe
- Cerberus – New Beast of the Investment Community
- The Deal and Its Details
- Roadblocks and Hurdles
- GM’s Supplier Relationships
- Cerberus Builds and Even Bigger Auto Stage
- The Dream Becomes a Nightmare
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