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Why Goldman Sachs investment banking

How to Answer Why Goldman Sachs for Investment Banking Candidates

Struggling to come up with an answer to “Why Goldman Sachs” that will impress the interviewer?

 

You’re not alone. We’ve all been there. From the outside looking in, it’s very hard to pinpoint a specific reason that you can use to justify why you want to work at Goldman Sachs over the other bulge bracket banks. At the end of day, banking is banking.

 

We’re going to help you solve that.

 

Having gone through Goldman’s Investment Banking Analyst program, we came up with the following characteristics that you can potentially incorporate into your “Why Goldman Sachs” story.

1.     Industry Leader
2.     Anti-Raid & Activism Defense Franchise
3.     Innovator of M&A Solutions
4.     Coverage & Execution
5.     Comprehensive Training
6.     Junior Banker Initiatives
7.     IBD Investment Funds

 

1. Industry Leader

Across the globe, it’s generally recognized that Goldman Sachs is the industry leader in investment banking.

 

The firm consistently ranks at the top of various league tables and is the trusted advisor for the world’s biggest corporations. From an Analyst’s perspective, this is particularly important because it directly affects the quantity and quality of the deals that you’ll work on.

 

There is a very strong deal flow at Goldman and you’ll have an opportunity to work on industry-shaping, transformative deals during your time there.

 

Goldman’s leadership in M&A is even more impressive if you consider the fact that Goldman doesn’t have a large balance sheet.

 

In the investment banking industry, the universal banks (BAML, Citi, JPM) that offer both retail banking and investment banking services have an advantage when it comes to landing deal mandates. These banks have a large balance sheet because they have a retail arm where consumers deposit money with them (so they have more cash that they can lend). These large balance sheets allows the banks to offer more appealing debt financing packages and serve as an important gateway to debt financing.

 

Corporations have to maintain a good relationship with these banks because they might need capital down the line. This valuable financing relationship is often taken into account when it comes to choosing a bank to engage for M&A advisory.

 

Goldman doesn’t have the same balance sheet advantage as the universal banks. And yet, Goldman is the go-to bank when it comes to M&A. That shows how much clients value Goldman as their trusted advisor.

 

2. Anti-Raid & Activism Defense Franchise

A little background here.

 

When people talk about M&A, they’re usually referring to the buying & selling of companies. But not all M&A are peaceful transactions. Sometimes, a company could be the victim of a hostile takeover or be the target of activist investors.

 

Unlike other investment banks, GS strategically positions itself as the “friend of corporations” and defends businesses against hostile actors. Corporate defense has historically been an integral part of the Goldman Sachs M&A franchise.

 

It actively seeks mandates that defends the company and turns down offense-related M&A advisory.

 

Over the years, GS has built an incredible track record defending corporations against hostile takeovers and activist investors. There is a sub-group within the M&A group that focuses solely on raid defense and shareholder activism. This group would get involved whenever someone like Carl Icahn launches a campaign.

 

Some landmark transactions include the defense of Allergan against Valeant and DuPont against Starboard.

 

Some landmark transactions include the defense of Allergan against Valeant and DuPont against Starboard.

 

At GS, it’s extremely difficult for a MD to obtain approval to advise a client on the offense side of a hostile transaction. An MD will have to make the case to senior management and pass a rigorous business selection test in order to get clearance to accept an engagement.

 

There are instances where the proposed transactions passed the business selection test and GS went on offense, but those are very rare.

 

As a result, Goldman has secured a dominant market share in defense-related M&A transactions. With the rise of shareholder activism, there’s a lot of defense-related M&A work and most of them are done by GS.

 

So as an Analyst at Goldman, you’ll pick up a lot of knowledge about corporate defense mechanisms and gain a lot more exposure to defense-related M&A mandates.

 

3. Innovator of M&A Solutions

Did you know that Goldman has a history of making seemingly impossible M&A transactions possible?

 

Just so everyone’s on the same page, here’s how the M&A business works. Banks get paid if the deal gets done. Deal doesn’t happen, banks don’t get paid.

 

Anyone can come up with M&A ideas for one company to buy another company. Google should buy Facebook. See? We just did it. Literally anyone can come up with M&A ideas. There’s nothing special here and that’s not the investment banks’ value-add.

 

The hard part is getting the deal across the finish line and making it happen.

 

And there are a lot of factors at play that affect whether a deal gets done: what is an acceptable price to the seller, whether the buyer can afford to pay that price, how much returns does it generate for the buyer, what happens to leverage ratios, how does it affect creditors, what happens to management teams, how will the transaction be financed, etc.

 

All stars need to align, which makes it very difficult for these deals to happen.

 

Goldman is very innovative and has an arsenal of creative transaction structures to make these deals a reality.

 

Case in point. Goldman’s M&A group led the wave of structuring “merger inversions”. This transaction structure helps buyers capture significant value from tax savings. With this tax benefit, buyers were willing to pay a much higher price, which made the deals more appealing to the sellers. Without this tax benefit, the buyers wouldn’t have been able to afford to pay the high price that sellers demanded and the transactions wouldn’t have happened. Goldman popularized this inversion structure and by the time the other banks caught on to it, Goldman had already captured ~90% of the merger inversion market share by deal value.

 

4. Coverage & Execution

Similar to other banks, Goldman has industry coverage groups (i.e. TMT, CRHG, Industrials, etc) as well as an M&A group.

 

At other banks, when a deal goes live, the M&A group will get involved and responsibilities get split between the industry group Analyst and the product group Analyst. The M&A group will often take over ownership of the model and the industry group Analyst’s experience gets diluted.

 

At Goldman, the industry group Analysts (most Analysts are in industry groups btw) own the execution of the whole process from start to finish.

 

That means you’re not only learning what the coverage guys know about the industry, but you’re also running the model – not the M&A group. GS is probably the only BB we know whose M&A group doesn’t do modeling. So as an industry group Analyst, you get to see up close how a deal is structured, why it makes strategic sense and how the M&A process works.

 

So you can argue that you’ll have more exposure to financial analysis at GS, which allows you develop a stronger technical skillset.

 

And unlike the elite boutiques, you’ll also be able to work on products outside of M&A, like equity & debt issuances, corporate derivatives, etc.

 

This gives you a very well-rounded investment banking experience. You learn about an industry, develop strong M&A technical skills, and at the same time be able to work on equity & debt financing deals.

 

You won’t get that at most of the other banks.

 

5. Comprehensive Training

One of the things that make the Analyst experience at GS rewarding is the comprehensive training that you’ll receive.

 

Upon joining the firm as a full-time Analyst, you’ll undergo 2-2.5 months of training at 30 Hudson in New Jersey, which is just a 5-minute boat ride from Manhattan on Goldman’s very own ferries.

 

During this new banker training, they’ll teach you most of the things that you need to know to do your job. They’ll go over corporate finance concepts, modeling, how to use GS resources, etc. Most of the bulge bracket banks have this, so this by itself isn’t something that distinguishes GS.

 

Post the new joiner training program, you’ll have access to GS University, which is Goldman’s internal online e-learning platform. GS has a ton of courses on here. You can learn a specific IBD topic in detail or you can access the courses designed for other divisions (i.e. trading, markets, asset management, etc.) You can also spend your time to develop your soft-skills such as presentation or leadership.

 

The division also organizes special events where a seasoned banker teaches a specific topic. Those in the NY office can attend in-person and those outside of NYC can dial into a conference line. In the past, they’ve held sessions to go over M&A taxes, inversions, etc. They send around detailed presentations covering the topics so even if you can’t attend, you’ll gain a pretty good idea of the key takeaways.

 

Then there’s Talks at GS. Goldman regularly invites leading thinkers from a broad range of backgrounds to share their views and expertise. Past speakers included Howard Marks (Oaktree), Hank Paulson (Former Secretary of Treasury), and David Benioff (GoT). This is a resource few other banks can afford and access is completely free and encouraged at Goldman.

 

6. Junior Banker Initiatives

Over the last few years, Goldman has enacted a number of changes to its Analyst program designed to retain talent and improve the junior banker experience.

 

Some examples of these initiatives are as follows.

 

Accelerated Promotion: Goldman announced a new promotion policy towards the end of 2015 that basically promotes Analysts directly to Associates after 2 years (previously 3 years). What they didn’t mention to the media is that not all of these Associate promotions are created equal. Most Analysts will be promoted to Associate 1. But for the star Analysts, GS will promote them to Associate 2. In other words, they’ll be 1 year ahead of their peers on the Associate track.

 

Vacation: Junior bankers are obligated to take at least 2 weeks of vacation days in a year. You’re given more than 14 days of vacation in a year, so you can take 3-4 weeks off in a year if you want. And you’re encouraged to work from home during holiday season.

 

Protected Weekend: Senior bankers are prohibited from asking junior bankers to work from Friday 9pm to Sunday 9am. Every time a VP or MD wants you to work during this time frame, he needs to obtain approval from the head of the group.

 

Now when you talk about this in your interview, you CAN’T say that you want to work at GS because you’ll work less than you will at other banks. It’s probably true, but you can’t say it.

 

Instead, you should frame it along the lines of how you really admire the firm’s commitment to retain Analysts and you’re really excited about the prospect of pursuing a long-term career at GS rather than doing a 2-year & out program at other banks.

 

7. IBD Investment Funds

Most bulge bracket and elite boutique’s investment banking arm provide advisory services & financing solutions.

 

Goldman’s IBD is unique in that it not only provides these conventional investment banking services, but also makes selective principal investments in companies.

 

Goldman’s IBD has its own investment funds, which are separate from GS Capital Partners / PIA (Goldman’s internal corporate private equity group). The IBD investment funds belong specifically to Investment Banking Division and the investment work is executed by bankers.

 

That’s right. Investment Banking Analysts at Goldman Sachs can not only work as a advisors to corporations, but a few lucky ones may also get to put on their investor hats and invest in a company, private equity style.

 

Truth be told, there are only two investment funds as of this moment at GS IBD, investing in 2 niche sectors.

 

Internet Fund and Clean Tech Fund.

 

The investment execution work for these two funds are done by the TMT group and the Clean Technology & Renewables group. No other IBD groups have principal investment funds at this moment.

 

So only use this answer if you’re set on TMT / Clean Tech.

 

You’ll work on the model, perform industry & business research, conduct commercial diligence and put together the investment committee memo similar to how they do it in PE. This is an extremely valuable experience difficult to find anywhere else.

 

These two IBD investment funds invest in late-stage, high-growth private companies that will IPO in the foreseeable future. They do this because 1) they can see a clear path to exit for the investments they make and 2) once GS becomes an investor, it’s much better positioned to take the lead on the IPO process, which earns the millions in fees.

 

Genius.

 

One Point on “Culture”

The above reasons are examples that can help you stand out because they’re the details that differentiate Goldman’s investment banking franchise.

 

Now let’s talk about our least favorite answer.

 

Culture.

 

It’s honestly shocking how many candidates go with “culture” as their reason for “why Goldman Sachs”. From the interviewers’ perspective, it reflects lack of research and commitment from the candidate.

 

First, we all know culture is complete BS. Within a bulge bracket bank, there’s not really a single culture across the entire firm. Instead, each division, each group and each office has its own culture. For example, Goldman Industrials and Real Estate have completely different cultures (polar opposites). Likewise, Financing groups are a completely different experience versus Classic groups. And that’s just IBD.

 

Second, as outsiders, candidates really don’t have the credibility to judge a bank’s culture. A lot of candidates like to say that they really like a bank’s culture because they had some really great interaction with some bankers they networked with. For the BB banks who employ tens to hundreds of thousands of people, you can’t really judge the bank’s culture based on interactions with a few bankers who you might not even work with. They end up saying general things that can be said about half of the banks in the world.

 

That’s why culture is often a vague answer. Don’t expect to earn any extra points because this just makes you look just like all the other candidates.

 

If you really want to talk about culture, say something that shows you’ve done real work learning about the firm.

 

For instance, did you know GS has a history of promoting people in their 20s to Partner MDs? GS is very merit-based and if you’re good, GS will accelerate your promotion.

 

Conclusion

Quite frankly, whether you’re interviewing with GS or any other bank, you should really try to develop a good answer to “why our firm”.

 

This question is one of the most important questions to get right in an interview and far more important than any technical questions.

 

You can say general things about the firm and get by, but the interviewers will be much more impressed if you do enough research and convey the specific reasons that make you want to work at Goldman more than anywhere else.

 

And to do that, you need to pinpoint the specifics that makes Goldman’s IBD franchise and Analyst experience unique. We hope we’ve given you some solid leads to do further research.

 

If you have any questions or want any clarifications, leave a comment below and we’ll get back to you.

jenius
Comments:
  • Sinless Blade
    November 5, 2017 at 6:34 am

    Fairly fantastic!

  • Practical
    January 13, 2018 at 10:35 am

    WHEN has this article been written?!

  • francis
    January 19, 2018 at 2:49 pm

    Guys, simply fantastic. Is there an opportunity that we will receive another article about other BB banks soon?

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