Investment Banking Cheat Sheet

The core ideas of Investment Banking distilled into a single, scannable reference — perfect for review or quick lookup.

PiqCue — piqcue.com/investment-banking/cheatsheet

Quick Reference

Initial Public Offering (IPO)

The process by which a private company offers shares to the public for the first time, transitioning from private to public ownership. Investment banks underwrite and manage the entire offering process, including pricing, regulatory filings, and distribution.

Mergers and Acquisitions (M&A)

The consolidation of companies through various types of financial transactions including mergers, acquisitions, tender offers, and asset purchases. Investment banks advise on valuation, deal structure, negotiation strategy, and regulatory approvals.

Discounted Cash Flow (DCF) Analysis

A valuation method that estimates the present value of an investment based on its projected future cash flows, discounted back at an appropriate rate (typically the weighted average cost of capital) to reflect the time value of money and risk.

Leveraged Buyout (LBO)

An acquisition of a company using a significant amount of borrowed money (debt) to meet the cost of acquisition, with the assets of the acquired company often used as collateral. Private equity firms frequently use LBOs to acquire companies.

Underwriting

The process by which an investment bank assumes the risk of buying a new issuance of securities from the issuing company and reselling them to investors. In a firm commitment underwriting, the bank guarantees the issuer a fixed price regardless of market demand.

Due Diligence

A comprehensive investigation and analysis conducted before a transaction to verify facts, assess risks, and evaluate the financial, legal, operational, and commercial aspects of a target company or investment opportunity.

Comparable Company Analysis (Comps)

A relative valuation method that determines a company's value by comparing its financial metrics and trading multiples (such as EV/EBITDA, P/E ratio) to those of similar publicly traded companies in the same industry.

Pitch Book

A detailed presentation prepared by investment bankers to win mandates from potential clients. It typically includes market analysis, valuation perspectives, transaction structure ideas, the bank's relevant credentials, and strategic recommendations.

Capital Structure

The mix of debt and equity financing that a company uses to fund its operations and growth. Investment bankers advise companies on optimizing their capital structure to minimize the weighted average cost of capital while maintaining financial flexibility.

Syndication

The process of forming a group of investment banks (a syndicate) to jointly underwrite and distribute a large securities offering. The lead underwriter (bookrunner) manages the process, while co-managers help with distribution.

Key Terms at a Glance

Accretion:An increase in a company's earnings per share resulting from an acquisition or merger.

Book Running:The role of the lead underwriter in a securities offering, responsible for managing the order book, pricing, and allocation.

Bridge Loan:Short-term financing provided to bridge the gap until permanent financing or the next round of capital is secured.

Bulge Bracket:The group of the largest and most profitable global investment banks that handle the biggest deals.

Capital Markets:Financial markets where long-term debt or equity-backed securities are bought and sold, facilitating capital allocation.

Convertible Bond:A bond that can be converted into a predetermined number of the issuing company's equity shares.

Covenant:A clause in a debt agreement requiring the borrower to meet certain financial conditions or restricting certain activities.

Dilution:A reduction in existing shareholders' ownership percentage caused by the issuance of new shares.

Divestiture:The partial or full disposal of a business unit, subsidiary, or asset through sale, exchange, or closure.

Equity Research:Analysis and reports produced by sell-side analysts covering publicly traded companies, providing recommendations and price targets.

Fairness Opinion:An independent assessment of whether the financial terms of a proposed transaction are fair to shareholders.

Green Shoe Option:An over-allotment option allowing underwriters to sell up to 15% more shares than originally planned in an IPO.

High-Yield Bond:A bond rated below investment grade (BB+ or lower) that offers higher interest rates to compensate for greater default risk.

Hostile Takeover:An acquisition attempt that goes directly to a company's shareholders against the wishes of its board of directors.

Mandate:A formal agreement to engage an investment bank for a specific transaction or advisory assignment.

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