What do they do exactly?


“All those people who got placed on Day 0 of campus placement are being laid off,” bristled my husband, while we were driving back home after work. He was flustered, primarily, because the topper in his IIM Kolkatta batch was laid off in London. He continued, and I let him. “Investment bankers at CitiBank are going to face hell in the next few days. I already know of 10 i-bankers who have been sacked, and 5 others who have had their offers revoked. About 7000-8000 layoffs in CitiBank markets is what I hear,” he finished.

NOw, we all know that earnings of an investment banker are closely tied to how the economy is doing. Bonuses make up a large portion of the earnings, and they tend to shrink together with the Dow Jones and Nasdaq as recession takes charge. Ever since CitiBank declared Tough Times, it’s been a downhill for many hardworking i-bankers.

On a big-picture level, these (who were laid off) were my husband’s colleagues who helped large companies raise capital and provide them with strategic advice. What that basically means is that they assessed a company’s financial capabilities and decided what would be best for that company.

According to the i-banker husband:

A company that decides to go public—Google, for instance—needs investment bankers to arrange an IPO (initial public offering). A company in need of cash may turn to an investment bank in order to raise funds through the issuance of either equity (stocks) or debt (bonds). Investment bankers also act as advisors when companies are being bought (the buy side) or sold (the sell side) and when companies merge. Additionally, there is something called a leveraged buyout (LBO), in which a public company is bought by a small group of private investors. These investors — known as “the buyout group”—finance the acquisition by levering a ton of debt on the target company and then using that company’s profits to pay off the loans. Once the debt has been paid off, the company’s cash flows can be used to line the pockets of the investors.

Whoosh. All of these financial terms gave me a brain rash 11 months back, but now, I can proudly say that I can nod my head in accordance.

Some might wonder if the layoffs could become a boon for senior bankers. With generous savings in hand, they’d finally be able to take some time to explore other potential career paths beyond finance and broaden their horizons. Perhaps there would be a surge of untalented yet highly persistent Banker-esque indie rock bands, an entire collection of Vampire Weekends, if you will. One could imagine this group of well-educated business minds might try their hand at executing any one of those many entrepreneurial ideas (high-end liquor company) they are known to spout out while hammered.

Eh?

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