Equity Capital Markets (ECM): The Ultimate Guide

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Disclaimer: This guide provides a comprehensive overview of Equity Capital Markets (ECM). The information is based on general industry practices and may vary by region, bank, and market conditions.

Introduction to Equity Capital Markets (ECM)



When people think of Equity Capital Markets (ECM), the first thing that usually comes to mind is initial public offerings (IPOs) and companies raising billions in high-profile stock market debuts. However, ECM encompasses much more than headline-grabbing IPOs.

ECM groups within investment banks serve as a bridge between traditional investment banking and sales & trading. The primary role of ECM teams is to advise companies seeking to raise equity capital. This process involves selling a portion of the company's ownership in exchange for cash, differing from raising debt, where the company retains ownership but incurs interest payments on the funds raised.

In this guide, we'll delve into the structure, typical workflow, on-the-job tasks, recruiting process, interview preparation, and more for ECM roles.

Equity Capital Markets Interviews and Recruiting

ECM teams recruit candidates through various channels, including internships that lead to full-time positions, placement processes, and lateral hiring. Sometimes, bankers from industry coverage groups transition to ECM seeking a better work-life balance.

The recruiting process and interview questions for ECM roles are similar to those for other investment banking positions. You can expect to be quizzed on topics such as:

  • Accounting Fundamentals
  • Equity Value and Enterprise Value Calculations
  • Valuation Techniques
  • Discounted Cash Flow (DCF) Analysis
  • Transaction Modeling

While M&A and leveraged buyout questions may be less common, you should still be prepared for them. The key difference in ECM interviews is the emphasis on your interest in the markets. Be ready to discuss recent equity issues, market trends, index performances, and recent IPOs and follow-on offerings.

To prepare for these discussions, check resources like Renaissance Capital's "Commentary & News" section for the latest IPO filings and NY Times DealBook for insights into follow-on offerings and convertible bonds.

If interviewing for roles related to convertible bonds, familiarize yourself with the basics of calls, puts, and convertible bond valuation. John C. Hull's Options, Futures, and Other Derivatives is a valuable reference for these topics. Our IB Interview Guide and Advanced Financial Modeling course also cover convertible bond accounting and valuation.

When answering the “Walk me through your resume” question, emphasize your passion for both markets and deals, positioning ECM as the perfect blend of your past experiences, current interests, and future career aspirations.

For more details on the recruitment process, visit the investment banking recruitment section of our site.

Conclusion

Equity Capital Markets is an exciting and dynamic field within investment banking. Whether you're interested in IPOs, follow-on offerings, or convertible bonds, ECM provides a unique opportunity to work at the intersection of markets and corporate finance. By preparing thoroughly and demonstrating your enthusiasm for both markets and deals, you can excel in ECM interviews and secure a rewarding career in this sector.

Equity Capital Markets (ECM): The Comprehensive Guide


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