1. Healthcare Investment Banking
|Definition: Healthcare Investment Banking refers to an industry group within the Investment Banking Division of an Investment Bank. The group solely focuses on healthcare companies and has sufficient capabilities to advise clients on strategic transactions such as Mergers & Acquisitions, and divestitures, and capital services including debt, equity, etc. Its main clients span across multiple types of healthcare companies including biotechnology and pharmaceuticals, medical equipment and devices, and healthcare facilities and providers.|
1.1 Clients of Healthcare Investment Banking
Healthcare Investment Banking’s clients are categorized into 3 main groups including Healthcare facilities and providers, Medical equipment and devices companies, and Bio-Pharma companies.
1.1.1 Healthcare Facilities and Providers
Several big names in this category are McKesson, UnitedHealth, Tenet Healthcare, and Quest Diagnostics.
These companies provide facilities including hospitals, surgical centers, care clinics, rehab facilities or nursing homes. Compared with other healthcare sectors, healthcare facilities and providers have more stable revenue because demands for hospitals, drugs, and medical supplies remain significantly unaffected regardless of economic conditions. A majority of these companies often employ high leveraged buyouts for their operations to increase returns, making them valued clients of DCM group in Investment Banking firms.
1.1.2 Medical Equipment and Devices Companies
Medical equipment and devices companies operate on a bigger scale than Healthcare facilities and providers. Dickinson & Company, Siemens Healthineers, Baxter International, and Boston Scientific are representative names in this category.
Medical equipment and devices companies differ considerably from Healthcare facilities and providers in making revenues. These companies provide medical equipment and devices for hospitals, clinics, and other healthcare facilities. The key levers in this segment are pricing power, government approvals and regulations, and the product pipeline. Leveraged buyouts are commonly employed in this segment with the aim of raising capitals to fund their research & developments, etc. Beside leveraged buyouts, these companies also make several acquisitions and carry out mergers with others, though less frequently.
1.1.3 Biotechnology and Pharmaceuticals
Several representative names in this segment are Johnson & Johnson, Abbott Laboratories, Roche, and Novartis. Biotech and pharmaceutical companies’ business is inventing new drugs and new biotechnology applications for the healthcare industry. To make money, branded bio-pharma companies sell their self-innovated drugs until their patent expires. They spend a lot of resources and time developing new products. Not all of the drugs will be successful, but if one to two fly, these companies can make billions of dollars.
A lot of healthcare startups are operating in the segment, that’s why mergers & acquisitions are more popular than the two above categories. Investment Banks tend to be involved in merger & acquisition transactions and leveraged finance advisory. Beyond that, based on financial modelling and projections, Investment Bankers also help clients figure out which products the bio-pharma company should bring out and what price it should set.
1.2 Big-leagued Healthcare Investment Banking Firms
Like any other industries, Bulge Bracket Banks also have a prominent presence in healthcare. Because of the long history and high-quality service, these Bulge Brackets possess highest-net-worth deals in M&A and capital advisory.
Big-league names in the top 10 are:
- JP Morgan
- Goldman Sachs
- Credit Suisse
- Morgan Stanley
Beside top-tier Bulge Brackets, Elite Boutique Banks and Middle Market Banks hold a certain number of deals in the industry. Sometimes, fees from smaller banks’ deals are sometimes as high as those of Bulge Brackets.
Several Middle Markets and Boutique Banks with a growing presence in the healthcare industry are:
- Houlihan Lokey
- Piper Jaffray
- Centerview Partners
2. Healthcare Investment Banking: Career, Salary, Working Hour, Responsibility
2.1 Career Progression and Salary
Similar to other groups in an Investment Bank, a healthcare investment banker starts off his/her career as an Analyst, then moves up to Associate, Vice President, Senior Vice President/Director, and Managing Director.
The table below shows the salary with respective positions, the numbers listed on the table are averaged numbers surveyed from multiple respondents, for reference purpose only:
|Promotion Timeline||Base Salary (USD)||Total Compensation (USD)|
|Analyst||2 -3 years||80K – 90K||150K – 200K|
|Associate||2 – 3 years||150K – 180K||250K – 400K|
|Vice President||5 years with a strong performance||200K – 300K||500K – 700K|
|Director/Principal/Senior Vice President||5 – 10 years||250K – 350K||500K – 1,000K|
|Managing Director||450K – 600K||1,000K+|
2.2 Working Hours
The working hours are quite intense in Investment Banking. For junior levels, the hours hover around 70 – 80 hours per week, and can be up to 90 hours during the busy season due to multiple deals and transactions at the same time.
2.3 What do Investment Bankers do in Healthcare Investment Banking?
Though you solely focus on advising healthcare deals, you gain exposure to various types of transactions including Mergers & Acquisitions and Capital Market Advisory.
Specifically, the investment bankers’ responsibilities include:
- Keep your fingers on the pulse of industry M&A, ECM, DCM trends to set valuation expectations for client companies and help them plan their timing and go-public strategies
- Craft a set of key points that form a compelling investment thesis by deploying in-depth knowledge, then make and assemble Memorandum to convey these points
- Identify and contact prospective buyers, manage information flow and hold strategic discussions with interested parties
- Serve as a primary liaison between the buyer and seller
- Help negotiate the final terms of the deal
- Identify potential issues in the diligence process and follow up accordingly
- Analyze the capital structure to determine the correct transaction financing, help the client find financing
- Set preliminary valuation based on evaluating the potential target and its industry
- Assess the strategic fit of a potential target with the client, identify and quantify synergy opportunities if possible
3. Pros and Cons of Joining Healthcare Investment Banking
- Various skill sets: Since you work across various types of transactions including Mergers & Acquisitions, Debt and Equity Capital Market, you have opportunities to improve necessary transferable skills that can be applicable to many industries.
- Greater exit opportunities: Your exit opportunities can be Private Equity firms, Hedge Funds, Venture Capitals, and Corporate Developments. You can also move to different groups at your bank.
- Potential growth: The healthcare industry is likely to grow fast. Regardless of economic conditions, people always need healthcare, and healthcare companies always need money to enlarge and diversify their pipelines.
- Industry-specialized: Working in the healthcare group means your specialization is limited within healthcare deals and transactions. Compared with other groups, healthcare is sometimes considered as lower-paced and more boring.
- Exit opportunities: For some certain exit opportunities, a strong medical background is required. Healthcare investment bankers indeed don’t have an upper hand.
4. Exit Opportunities for Healthcare Investment Banking
Knowing that a majority of healthcare companies are pre-seeding startups or early-stage companies, Private Equity rarely invests in or acquires these companies. However, PE investing is quite active in medical devices, equipment and facilities because of these firms’ predictable cash flow. At the healthcare group, you get exposure to a variety of transaction types such as M&A and CM. If you have related-investment deal experience throughout the time you work here, you can be a strong candidate for Private Equity.
Biopharma companies are often preferred by Hedge Funds. If your experience is relevant to Biotech and Biopharma, you will be a good candidate in the space.
As said above, a lot of healthcare startups are operating in the sector, so you can be a strong candidate for Venture Capitals. Yet, the position requires a strong background of healthcare science.
Corporate Development and Corporate Finance:
Large healthcare companies need to make acquisitions to enlarge and diversify their product pipelines. If you present an active involvement in deals at healthcare investment banking, you can apply for these roles.
5. How to Get into Healthcare Investment Bank?
Getting into Healthcare Investment Banking is similar to getting into any groups in an Investment Bank. The application process is the same. The difference is you will choose your preferences by ticking boxes in the application form. In general, if you receive offers after Superday, you can be placed in any industry groups or product groups based on your own experience and your skills. However, if you are interested in the healthcare industry, you should let recruiters know. The HR department and group leaders are quite flexible, they will consider your preference.
5.1 Common pathways to get into Investment Banking
Classification: Investment Banking Division (IBD) as Tier 1, Sales & Trading (S&T), Equity Research (ER) as Tier 2
The step-by-step guide created with 6 steps (embed a link to 6 steps) gives you the best shot possible at landing one of the most lucrative careers in finance. However, in this article, the pathway to get into Investment Banking is summarized with 4 main steps as follows:
- Resume / Cover letter
- Internship / Relevant Banking Experience
If you want to learn about your specific chance of breaking into investment banks, you can check our Wall Street Career Planning Tool. The tool examines the chances of getting into Wall Street for different backgrounds. It provides the big picture of Wall Street’s job market and acts as a career guideline for you to land your dream job.
For freshman and sophomore:
- Tier 1 summer analyst internships at Bulge Bracket banks are getting more and more competitive. If you have little to zero relatable professional work experience, applying for an Bulge Bracket internship in your freshman and sophomore year is infeasible. However, freshman and sophomore year are golden times to secure a summer analyst in junior year. You should start early and apply for an internship / part-time position at wealth management firms (most realistic if you don’t have a strong network), or ideally boutique investment banks & small private equity funds – this takes a lot of smart networking and some relevant finance course / experience though.
For junior and senior:
- If you are unable to secure a Tier 1 IBD, S&T internship at Bulge Bracket banks, you should focus more on Tier 2 positions at Middle Market & Boutique banks or Sales & Trading and Equity Research. These are considered less competitive, yet still require a lot of smart networking and selling your relevant banking experience on your resume (link to our product). If you are struggling to land an investment banking internship, then internships in Private Equity, Hedge Funds, Venture Capitals, Corporate Development, Management Consulting, Big 4, and Valuations can be viable options. These industries provide a significant overlap or deals directly with investment banking. After equipping yourself with relatable experience, you can apply for full-time analyst roles whose recruitments happen annually.
Top 20 MBA programs:
- Associate roles at Bulge Bracket Banks are highly sought-after targets by MBA students. Top 20 MBA students have a decent chance of getting into both Tier 1 & 2 careers given the school’s prestige and strong alumni network. They are often approached by Bulge Brackets’ recruiters right at the campus. The key to win a full-time associate role upon graduation is to grab a summer associate internship right after the first year of MBA. You will need to bankify your resume and know how to sell your background (link to our product), especially if you did not work in Finance before your MBA.
Outside-top-20 MBA programs:
- Though students outside-top-20 MBA have less competitive advantages than highly achieving top 20 MBA students, they have certain chances of landing jobs at Bulge Brackets. Provided that you have strong finance-related work experience, and do a crazy amount of networking through LinkedIn or professional connection, you can stand a good chance of breaking into Bulge Brackets. In addition, you should consider Middle Market banks and Boutique banks since your chances there are higher.
- Professionals with several years of relevant work experience in Big 4, Consulting, Valuation firms, etc can apply for associate roles and some customized professional programs. Over the past few years, Bulge Bracket banks have offered many slots to experienced professionals. A lot of recruiting programs and events are designed with the aim of diversifying the workforce. The programs vary from firm to firm. For example: Goldman Sachs has Neurodiversity Hiring Initiative, Career Pivots series for professionals who want to learn about the firm and get into the banking career. For this category, your chance will be more decent if you apply for associate roles at Middle Market banks and Boutique banks. The key to win a job at large banks is always sticking with having relatable practical work experience and an extensive network (embed a link to network products) with pro-investment bankers.
For a detailed assessment of your chance of getting into these Tier 1 & 2 division/ careers, leverage our Wall Street Career Tool.
Make your resume stand out and finance-oriented
The investment banks generally look for two key differentiators on your resume.
- History of excellence (i.e. GPA / test scores, awards & honors, brand name, competition wins, leadership) – Quick fact: Goldman Sachs recommends applicants to submit their SAT scores to increase the chance to pass the application round.
- Interest for finance, specifically investment banking (i.e. school major, clubs, related coursework).
- Relevant Experience (i.e. past finance-related internships, past relatable work experience). – Investment banking internships (i.e. IBD internship) work best.
Mistakes: Candidates often just list their activities rather than putting their accomplishments.
Beyond basic mistakes listed out above, what are some of the other common mistakes candidates make? If your resume is not “bankified”, it will be difficult to get past even the 1st screening round. BankingPrep Resume Toolkit (embed a link to resume product) is here to make your resume stand out among the piles of thousands of prominent candidates, and make it finance-oriented even for non-target backgrounds. Your profile will be proofed properly to make sure it has absolutely NO mistakes.
Once you have finance-related experience, the most effective way to get an Investment Banking interview is to network with your school’s alumni. If there’s no alumni at your targeted banks, you better find current professionals in investment banks by connecting with them on cold calls, LinkedIn, or emails. (Need a template for this type of networking)
You should start networking as soon as possible. The ideal time to start networking is 6-12 months before the application begins.
For MBA graduates:
You have to start networking as soon as you get accepted to MBA programs. Similar to the undergraduate group, you should reach out to your school’s alumni first, then current professionals who can give you the most insightful information source.
Mistakes: A lot of students reach out to investment bankers when they do not have any finance-related experience. It won’t look great. You still can connect with them, but it will be better if you can explain detailed plans for your upcoming internships and jobs, and you are looking for their advice.
The internship is considered a prerequisite to land a place in bulge bracket investment banks. Although relevant finance internships in other financial corporations and firms are appreciated, investment banking internships always work best.
- To improve your profile to break into large banks, you need to have at least 1-2 finance-related internships. If you do not have an internship from a bank or a financial services firm, activities such as student-run investment funds in college can be used to support your profile. This is an example of a student’s resume without an internship (link to resume product)
For MBA graduates:
- Internship is particularly important. That’s why you definitely have to have one finance-related experience pre MBA or during MBA. If your pre-MBA full-time jobs are irrelevant to banking and finance, it will be very difficult to get into. Let’s equip yourself with at least one summer associate internship at investment banks/private equity firms/ hedge funds. Here, Investment Banking internships (summer associate programs) always work best.
The interview process will include multiple rounds. Normally, there will be three rounds. The first round of application is to screen candidates’ resumes. The second round of application is to assess candidates’ practical abilities via short interviews. Specifically, if a resume is qualified, the candidate will be sent a link to complete a video-recording process – HireVue as some firms are deploying (i.e. two behavior/technical questions to test the analytical abilities, presentation abilities, etc) or phone screen, which is still popularly used by investment banking firms.
The final round of application is Superday, when chosen candidates are gathered in the office or nearby hotel to meet interviewers in person. Superday (U.S)/ Assessment Centers (EMAM) are designed to assess both your technical capabilities and physical/mental stamina. Here, in order to receive offers, most highly-achieving candidates will have to get through an intense interview day (simulating the real working pressure) with a myriad of questions largely hinged on their respective division/industry preferences in their application.
What do Recruiters Evaluate?
Investment banks will evaluate your skills, your technical knowledge, and how you are interested in the position you apply for. Many questions are designed to test these competences. Simply put, interview questions will be around 3 main parts:
- Behavior questions (often asked in HireVue/Phone Interview)
- Fit questions (Superday/Assessment Centers)
- Technical questions (Superday/Assessment Centers)
In which, behavior questions largely resemble fit questions asked during Superday. Some say that HireVue/Phone screen just asks you behavior questions. However, as mentioned above, you can be asked both technical questions and behavior questions right after you proceed to the second round. The full list of interview question samples and what you need to prepare, let’s check on investment banking interview questions (embed a link to interview question articles). Presented below is the short version of what you should do to have an upper hand in the interview.
How to Prepare and Ace an Interview
You can visit our interview questions articles for analyst and associate roles for more details.
#1. For fit/behavior questions, this is the part where you tell your stories with interviewers. Thanks to these questions, recruiters will learn how your previous academic and work experience fits into the division/industry you apply for.
The questions in the first place always surround:
- Introduce a little bit about yourself / Walk me through your resume
- Your strengths and weaknesses
- Your achievements and failures
- Future plan and why Investment Banking?
What you should prepare here are crafting your own stories (reflecting your achievements, past experience, transferable skills and leadership), and backing up small personal stories to answer questions related to strengths and weaknesses.
If you have some disadvantages in your profile such as low GPA, non-target background, fewer outstanding accomplishments, fewer finance internships, and etc., you have to prepare stronger responses to make up for these “real weaknesses”.
#2. For technical questions, the interview always sticks with accounting, finance, valuations, and practical deals.
- Accounting: Financial statements (types of financial statements, links between different types of financial statements), revenues, operating costs, EBITDA, debt & equity, etc.
- Finance: Equity Investments (stocks), Fixed Income Investments (government bonds, corporate bonds, commodities, currencies) , Derivative Investments (options, futures, forwards, swap), etc.
- Valuation: Valuation metrics and multiples, (Discounted Cash Flow, LBO modeling, etc.), knowledge about mergers and acquisitions, etc.
Beyond technical comprehension, investment banking’s recruiters also want to test your knowledge about the market, practical deals and companies. Your work is to keep abreast of news about markets, imminent IPO, bond issuances, and mergers & acquisitions on a daily basis. The questions largely depend on your experience shown on your resume. That means if you present your active involvement in transactions/deals, you might get many questions about it. Discussing the deals is considered the most challenging part in an interview.