Solving The Chicken AndThe Egg Problem

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Insights FYou can’t get a job until you’ve
got experience. You can’t get
experience until you’ve got ajob. As in a good number of career
paths, the chicken and the egg scenario is prevalent in the financial services
industry, particularly in investmentbanking.
The reasons why are two-fold.
Firstly, your job involves dealing withcomplex transactions and sensitive
client relationships with very highstakes—situations in which no one
will trust you unless you have alreadyproven yourself in some relatable way.
A poor choice made in recruiting canbe costly for an investment bank interms of the opportunity cost of not
hiring the candidate behind you who
may have perhaps been a little more
enduring, tactful, or quicker.
Secondly, the best preparation
for investment banking is performing

actual investment banking work. Universities, even those with business andfinance programs, do relatively littleto prepare you compared to the tried-“What we’ve done
as finance practitioners is harness theultimate blend oftheory and practice.
- Pearl”

and-true corporate training programs
available at major banks and the priceless experience of learning by doing.
So how do you beat the odds?

2 Harvard College Investment Magazine

Knowledge and presentation. By
knowing as much as you possibly
can in the most cohesive mannerthat you can. By knowing the details
but predominantly by being able tokeep track of where they fit in the
bigger picture and having examples
to back this up. By learning how tospeak “I-banker.”
Written by two current WallStreet bankers, Investment Banking: Valuation, Leveraged Buyouts, andMergers & Acquisitions breaks newground in explaining how the pros
perform valuation, M&A, and capital markets analysis. It is alreadybeing used as training material atnumerous investment banks andbusiness school programs aroundthe world. Additionally, the book iscurrently the top selling valuationand corporate finance text in theworld.
We at HCIM interviewed
the authors, Joshua Rosenbaum and
Joshua Pearl to learn more about
their motivations in writing thebook and whether this book is indeed appropriate for our audience.
Joshua Rosenbaum is a Managing
Director at UBS Investment Bankin the Global Industrial Group,
where he advises on, structures, andWinter 2011

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originates M&A, corporate finance,and capital markets transactions. He
received his AB from Harvard andhis MBA with Baker Scholar honors from Harvard Business School.
Joshua Pearl is a Director at UBS
Investment Bank in Leveraged Finance, where he structures and executes leveraged loan and high yieldbond financings, as well as leveraged
buyouts. He received his BS in Business from Indiana University’s Kelley
School of Business.
After the interview, we are overwhelmingly positive that this is absolutely critical for anyone who wants
to get an edge in the Wall Street job
search, be that in investment banking, private equity, hedge funds, investment management, research, corporate finance, or even the Treasuryor the office of the CFO.
How does your book fill a niche?
What makes it different from other books like it?
Pearl: Other books available in themarket are predominately written byfinance professors. These books are
far less applicable to the real world offinance as practiced on Wall Street.
What we’ve done as finance practitioners is harness the ultimate blend oftheory and practice – quite literally, as
the finance techniques revealed in ourbook reflect contributions from bothacademic and Wall Street leaders.
Winter 2011

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The number and diversity of people
that edited this book is astounding,reflecting an elite group of bankers,
private equity investors, hedge fundprofessionals, corporate lawyers, andfinancial analysts. In short, this is thebook we wish had existed when wewere trying to break into Wall Street.
Rosenbaum: Investment banking
is highly specialized. Even the best
business schools don’t quite teach theexact skill set you need. The curricula
they teach may be accurate and provide a foundation, but there is still a“Investment Banking provides ahighly practical and relevant guide to
the valuation analysis at the core of investment banking, private equity, andcorporate finance. Mastery of theseessential skills is fundamental for any
role in transaction-related finance. Thisbook will become a fixture on everyfinance professional’s bookshelf.”
Thomas H. Lee
President, Lee Equity Partners, LLC
Founder, Thomas H. Lee CapitalManagement, LLC“This book will surely become an
indispensable guide to the art ofbuyout and M&A valuation, forthe experienced investment practitioner as well as for the non-professional seeking to learn the mysteries ofvaluation.”David M. Rubenstein
Co-Founder and Managing
Director, The Carlyle Group

Purchase yourown copy today!
www.amazon.com/
dp/0470442204
Please direct advice and feedback to
josh@investmentbankingbook.com

http://investmentbankingbook.com/
Harvard College Investment Magazine 3

“Rosenbaum and Pearl succeed in providing a systematic approach to addressing a critical issue in
any M&A, IPO, or investment situation—namely, how much is a business or transaction worth. They
also put forth the framework for helping approach more nuanced questions such as how much to pay
for the business and how to get the deal done. Due to the lack of a comprehensive written referencematerial on valuation, the fundamentals and subtlety of the trade are often passed on orally frombanker-to-banker on a case-by-case basis. In codifying the art and science of investment banking, theauthors convert this oral history into an accessible framework by bridging the theoretical to the practical with user-friendly, step-by-step approaches to performing primary valuation methodologies.”--Joseph R. Perella
Chairman and CEO, Perella Weinberg Partners“As a practitioner of hundreds of M&A and LBO transactions during the last 20 years, I recommend thisbook to advisors, financiers, practitioners, and anyone seriously interested in investment transactions.
Rosenbaum and Pearl have created a comprehensive and thoughtfully written guide covering thecore skills of the successful investment professional with particular emphasis on valuation analysis.”--Josh Harris
Managing Partner, Apollo Management, LP
disconnect between theory and practice, including specific techniques,frameworks, and real-world application under intense time pressures.
Our book allows you to self-teacheverything you need to know to getyour foot in the door with both feetready to go. For example, at a recent
corporate finance workshop I gave at
Wharton, it was very gratifying to seethat nearly all the students in the audience had the book. That in of itself
speaks volumes about its importanceas a Wall Street training tool.
So Harvard does not prepare youfor finance. Do you regret the experience?
Rosenbaum: Oh, absolutely not.
As a graduate from Mather House, I
wouldn’t trade it for the world. Harvard offers one of the best liberal arts
educations that you can get…period.
That will stay with you for life, nomatter which career path you choose.
It also has a world-leading economics
department and offers a wonderfultheoretical foundation. In fact, oneof the inspirations for writing thisbook was to better prepare Harvard
and other liberal arts students aspiring for a career in finance. I have beenworking with the Harvard Office ofCareer Services on that front over thepast couple of years and will be giving an Investment Banking 101 presentation on campus at Harvard on
January 25, 2011. The Harvard Coopalso stocks our book, including several signed copies. Every year, I invest agreat deal of time in recruiting fromHarvard and other target schools.
How would a student go about
reading this book? How longwould it take?
Pearl: It depends on how deep you
want to get into the material. The valuation chapters begin with a summaryof the basic concepts if you want thebook to simply make you fresh forthe interview. But if you really wantto get into the details and nitty-gritty,
it can take you up to six weeks. Somewhere between two and six weeks isideal to develop a solid foundation.
The book is only 300 pages and isfilled with tons of graphics.
I heard it took you 5 years to write
this book. Is this true?
Rosenbaum: At least. Writing thisbook was a herculean effort. We areboth full-time investment bankers,
and after working full days and half

4 Harvard College Investment Magazineof our nights, we used any free time
we had to write this book and coordinate with our network of industry
veterans and academic contributors,
even some lawyers, to edit it down toperfection. Late nights, holidays, anda lot of sacrifices was our formula.
How have the messages you intended changed over the timeframe of your writing?
Pearl: A lot happened between thetime when we decided to write thebook and when we finished the finalmanuscript. We began writing at thebeginning of a bull market with market color and insights reflecting thatreality. Then the markets came downfrom unprecedented peaks and we
adjusted accordingly. For example, we
adapted our two chapters on leveraged finance and leveraged buyouts. I
believe that our timing in writing thebook was actually very beneficial inthat we were able to incorporate theevents of 2008 and therefore capture
the “new normal” that ensued andcontinues today. In general, our bookemphasizes that while the fundamentals of valuation are timeless in thesense that mathematics and certain
other scientific principles are endurWinter 2011

“Investment banking requires a skill set that combines both art and science. While numerous textbooks provide students with the core principles of financial economics, the rich institutional considerations that are essential on Wall Street are not well documented. This book represents an important step in filling this gap.”--Josh Lerner
Jacob H. Schiff Professor of Investment Banking, Harvard Business School
Coauthor, Venture Capital and Private Equity: A Casebook
ing, their practical application is very
timely as it needs to reflect prevailing market conditions, which canbe highly volatile. The way we think
about the book is that it provides you
with the financial anchor that will allow you to weather any storm thatthe markets bring your way.
Does the book apply to areas offinance other than investmentbanking? What about the buyside?
Rosenbaum: The basic skill set
across the financial industry is pretty
universal. This book has applications
across all sectors of the financial industry because valuation is a fundamental skill that all financial professionals need to understand and use.
In fact, we have a significant readership among private equity and hedge
fund professionals, and we know thisfrom the amazing feedback we received and their encouraging remarks
during the editing process.
Any comments about investmentbanking as a career in general?
Pearl: Investment banking is the ultimate apprenticeship program. YouWinter 2011

enter a neophyte and after two years
are expected to be an expert. After
two years you can continue working
as an investment banker or pursue
other career options. Numerous analysts choose to pursue careers in pri-“Everything youneed to know toget your foot in thedoor with both feetready to go.
-Rosenbaum”

vate equity or alternative asset management. Some choose to start theirown business or pursue graduate
school. Whatever the path, the twoyear analyst program on Wall Street isone of the best stepping stones.
Rosenbaum: I’ve been doing recruiting for a number of years andI firmly believe that an investmentbanking analyst program is the ideal
training ground for a career in finance. What you learn is priceless forthe buy-side, the office of the CFO,
business development, start-ups, oranything else you decide to do lateron. And our book is focused on preparing you for that career in finance.
At the same time, students need tounderstand that it is a challenging
and demanding job – in most cases,
it is actually pretty self-selecting andstudents should do their homework
beforehand.
Will there be another edition
coming out?
Pearl: We certainly hope so. It’s typical in professional finance publishingthat after a few years of strong sales,a revised edition gets underway. I
would expect a revised edition in the
future with updated data and potentially some expanded topics, but thefundamental valuation methodologies and lessons will apply.
HCIM would like to especially thankJoshua Rosenbaum and Joshua Pearl forthis exclusive interview.

Harvard College Investment Magazine 5