Together with M&A, jobs in equity capital markets (ECM) and debt capital markets (DCM)are grouped together under the banner of the investment banking division (IBD). If you're a junior preparing to attend a capital markets interviewyou can expect some standard questions common across IBD. You'll also need to be ready to answer questions which are equity or debt specific.
In ECM interviews, you need to tell a good story
ECM bankers help companies raise money via the stock markets.If you're interviewing for an ECM role, you'll need to ready to talk about a particular company that recently went to the market and about what made that company's stock appealing. So says Stephane Rambosson, the former head of French industrials ECM at Citigroup, and current managing partner of search firm DHR International.
"If you're going to work in ECM you need to be passionate about the story," says Rambosson. "You need to show a company's shareholders and management that their baby is something you care about as well. You should show that you have the passion to shift their stock in an IPO, or a rights issue, or a block sale."
How do banks elicit this in ECM interviews? Rambosson says interviewers will ask what you know about recent big initial public offerings (IPOs). They will want to see that you can talk through what made that company appealing, how you would have marketed it to investors, and what you would have done differently to the banks that were involved.
In other words, don't step into an ECM interview without knowing everything there is to know about two recent large IPOs, at least.
In DCM interviews, you need to have an opinion on the markets
DCM issuance is far higher than ECM. Every year, the amount of debt issued globally is typically four or five times higher than the amount of equity issued. In practical terms, this means that the role of ECM and DCM bankers is quite different.
"In DCM, there's a lot more repeat business," says Rambosson. "It's much more about staying in touch with company treasurers on a daily basis and keeping them informed about what's going on in the market and how challenging (or not) it will be for them to issue debt now or later, at which terms, and in which structure."
Maryam Khosrowshahi is an MD and head of public sector debt coverage for Central Europe, the Middle East and Africa (CEEMEA) at Deutsche Bank. Shetold us she speaks to clients on a daily basis: "I talk a lot about the status of clients’ deals and what’s going on in the markets," she said, adding that people skills are very important if you want to work in DCM.
For this reason, DCM interviewers will want to see that you can talk engagingly about current market conditions. Do you have an opinion about the direction of interest rates? You'll need to before you step into any interview in DCM.
In ECM interviews, you'll need to know about valuation methods
If you're interviewing for an ECM job at a junior level, you'll need to know a lot about the three different methods of valuing a company and their advantages and disadvantages.ECM interviews are similar to M&A interviews in this way, says Mark Hatz, a former Goldman Sachs and Perella Weinberg banker.
In DCM interviews, you'll need to know about balance sheets, bond valuations and seniority
If you're interviewing for a junior DCM job, you'll need to be wholly comfortable with the concepts of duration, valuation, convexity, spreads, the interest coverage ratio and the leverage coverage ratio. Hatz says you'll need to know how to read a company's balance sheet and to have an understanding of how its current capital structure might impact its cash flow and ability to issue further debt (or equity) in future.
One former debt banker says you'll also need to be familiar with the concept of debt seniority (or 'waterfall'). - If a company goes bankrupt and is unable to repay its debts, who will get paid first?
In both ECM and DCM interviews, you'll need to ask about distribution
Finally, Rambossen points out that both ECM and DCM bankers don't operate in a vacuum. - Once they've found clients and issued debt or equity for them, they need to sell it on. For this reason, the strength of the bank's sales and distribution teams are crucial to success in capital markets. "In both ECM and DCM, you need to sell client securities. You should understand exactly how the bank you're interviewing with structures its sales and marketing capabilities and how strong it is in your field," says Rambosson. If you don’t ask about this in the interview, you may live to regret it.
FAQs
DCM offers good work conditions:
Development and advancement opportunities. A culture focused on fun, team work, and success. Competitive pay and benefits.
Why do you want to work in DCM? ›
DCM offers good work conditions:
Development and advancement opportunities. A culture focused on fun, team work, and success. Competitive pay and benefits.
What do you do in ECM and DCM? ›
Capital markets bankers help clients raise money through public markets. Capital markets bankers usually specialize in equity or debt. They're known as Equity Capital Markets (ECM) bankers and Debt Capital Markets (DCM) bankers.
What is the difference between ECM and DCM? ›
Both of these groups help their clients raise funds but in different ways. As implied by the name, in the Equity Capital Markets group, bankers focus on raising equity for clients. Debt Capital Markets group raise debt for clients.
What does an ECM Associate do? ›
GROUP DESCRIPTION: Equity Capital Markets (ECM) originates, advises, structures, and executes equity and equity-linked offerings for corporates and financial sponsors.
What is the best answer for why do you want to work here? ›
“I see this opportunity as a way to contribute to an exciting/forward-thinking/fast-moving company/industry, and I feel I can do so by/with my …” “I feel my skills are particularly well-suited to this position because …” “I believe I have the type of knowledge to succeed in this role and at the company because …”
Why do you want to work here why do you want to work here? ›
Express your eagerness to learn and grow within the company. Talk about the company's mission, culture, and values that resonate with your interests. Mention how your transferable skills and personal qualities can contribute to the team, and how the role aligns with your long-term career ambitions.
How do I prepare for an ECM interview? ›
In ECM interviews, you need to tell a good story
ECM bankers help companies raise money via the stock markets. If you're interviewing for an ECM role, you'll need to ready to talk about a particular company that recently went to the market and about what made that company's stock appealing.
How much do ECM bankers make? ›
Pay for entry level juniors tends to be standardised across IBD, but first and second year associates in ECM earn a base salary of $100-125k plus up to $325k in bonuses.
What is the career path of ECM? ›
Typically, ECM professionals tend to have many exit options. Due to their excellent understanding of equities and different industries, other career opportunities include trading, research, investment management, or corporate finance roles that require financial modeling skills.
This daily work involves updating market slides, case studies, and sales memos, analyzing the shareholders of prospective clients, as well as working with syndicate to update market comps, trade flows, and investor sentiment.
Is ECM investment banking? ›
The truth is, it is a part of investment banking, and almost all mid-sized and large banks have equity capital markets teams. The main difference is that the group focuses exclusively on equity deals instead of debt or M&A deals, and it works across different industry verticals rather than focusing on just one.
What does ECM stand for equity? ›
The equity capital market (ECM) refers to the arena where financial institutions help companies raise equity capital and where stocks are traded.
What is the bonus for ECM analyst? ›
The average Analyst, Equity Capital Markets in the US makes $135,000. The average bonus for an Analyst, Equity Capital Markets is $50,000 which represents 37% of their salary, with 100% of people reporting that they receive a bonus each year.
What skills do you need for equity capital markets? ›
ECM teams have to work closely with the internal legal team or transaction lawyers and it always helps to have a strong understanding of the local legal and regulatory environment. Relationship management with investors like banks, brokers, credit funds, hedge funds etc. is another integral part of the job.
Why do you want this role at this company? ›
When asked why you want the job, you can then talk about how you want to help them on their mission to achieve certain goals or that you are aligned with some of their core company values. If you have any industry specific knowledge that applies to this role, that can be a plus, but it's not a deal breaker.
What skills do you need for debt capital markets? ›
Important skills needed for working in DCM, and for working in investment banking in general, include:
- Knowledge of investing concepts, like stock options.
- Ability to work with a variety of financial models, such as discounted cash flow (DCF) valuation.
- Analytical skills.
