How to prepare for an interview at an investment bank

A failsafe guide to getting through to the next round

The financial services sector has had a difficult eighteen months and competition for internships and graduate positions remains intense. Interviews have become more difficult as banks seek to weed out marginal candidates who, a few years ago, would probably have received an offer. They are the most important part of the application process, yet many candidates do not take interviews seriously enough. Those who have done some preparation give themselves an advantage. Whilst it's obviously impossible to predict exactly what you'll be asked in an interview, you should familiarise yourself with the most common questions. These include (for investment banking interviews) motivational questions, "fit"/competency questions and technical/knowledge questions.

Motivational questions

Why do you want to work in investment banking (or in this particular department)?

This extremely obvious question is your chance to sell yourself, to outline clearly the reasons why you want the job and to suggest why you are suitable for it. Every individual will have different reasons for wanting to work in banking. A strong answer might mention the large degree of responsibility banking offers, the rapid progression, the challenge of working under pressure on important transactions and the chance to be creative and analytical. Whilst you shouldn't write out exactly what you are going to say, knowing clearly in your mind why you want the job, and having practiced answering the question a few times, will help to prepare you for the real thing without sounding scripted.

"Fit"/competency questions

Why do you want to work at this firm?

Give me an example of when you worked in a team/under pressure/balanced several important tasks.

More senior bankers ask these questions to see if you've read about the firm and know what makes them stand out. They're also looking to test your competency for the role, to see what you've done beyond your degree which has prepared you for the world of work and the pressures of investment banking. More junior interviewers are interested in this as well but will also want to know whether you are someone with whom they'll be comfortable working long hours and who will make their life easier. Fundamentally, both will be thinking: "Is this person someone I can see working in my team?"

Fit questions can be phrased in many ways but will always want you to draw on your experiences (sports teams, societies or work experience) in order to demonstrate that you've acquired the relevant skills for working in an investment banking team and that you're a well-rounded person with broad interests. The trick, as always, is to demonstrate your enthusiasm for the role and your skills, without sounding cloying. To answer these questions well you should have prepared several examples for each key skill. Try to draw from different experiences as much as you can and always try to bring the answer back to how that experience taught you something which makes you suited for investment banking.

These questions also enable you to demonstrate your knowledge of the bank. Make sure you've done your research. You should be aware of its position in the league tables, its results in the last quarter, its share price, and any recent deals or news stories in which it has featured. Visit the bank's website and note how it describes its own working culture. What differentiates it from its competitors? This is especially important when interviewing at boutique advisory firms, which tend to have strong ideas about what makes them different from larger banks.

Technical/market awareness questions

Questions that test your knowledge of corporate finance and the markets are becoming increasingly common. You don't need to start buying corporate finance textbooks, well directed internet searches will give you most of the information you need to give informed answers.

How would you value a company?

You should have a basic understanding of the various ways to value a company: discounted cash flow, comparable companies and precedent transactions. You do not need to understand everything about corporate valuation, however some time spent researching valuation methods so you are comfortable discussing them at a basic level would be of serious benefit. If, whilst discussing this, an interviewer asks a question which goes beyond your knowledge do not guess the answer, admit that you don't know and then hazard a sensible guess based on what you do know.

What drives Mergers and Acquisitions?

A broad question which often catches people out. Bruce Wasserstein's gave the classic answer in his book Big Deal:

  • Regulatory and political change

  • Technological change
  • Financial change

  • Leadership (i.e. CEOs)
  • Size

You should be able to explain how all these factors might drive M&A activity.

What do you see being the main themes in the market over the next six to twelve months?

This question is testing how much you understand the marketplace and whether you follow the financial news. For example, many analysts expect to see an increase in M&A activity over the next year due to a return in business confidence, a desire to consolidate, continued emerging market growth and better access to financing. You might choose to focus on a particular region or sector but the key is to use what you've read and your general knowledge to demonstrate an understanding of the markets.

Talk me through a deal you are following in the press.

This question tests both whether you are following the markets and also how well you can apply your knowledge to analyse those transactions. Why is the deal happening? What are the main issues in completing the transaction? What affect will the deal have on the industry? This is a chance to demonstrate not only that you are keeping up with what's going on in the financial press but also that you understand the anatomy of a deal and why it is important. A good deal to be following at the moment is the Kraft-Cadbury transaction and an example of a trend to watch is the continued consolidation activity in the pharmaceutical sector.