The Practical Side of Investment Banking

Table of Contents
1. Citigroups Investment Banking Michigan Team

2. Structure of an Investment Bank

3. Deal Teams and the Role of an Associate

4. Why Citigroup?
1. Citigroups Investment Banking Michigan Team
Citigroups Investment Banking Michigan Team

Managing Directors

Randy Barker John Ciolek James McCummings Timothy Devine Stephen Schiller Hugo Verdegaal
Co-Head, Global Fixed Energy Global Communications FIG Client Strategy Latin America
Income

Directors
Nathan Eldridge Jodi Schenk Victor Voorheis Peter Kapp
Mergers & Acquisitions Mergers & Acquisitions FIG FIG

Vice Presidents
Rich Harding Daniel Lee Jas Singh Keith Anderson Ramon Gonzalez Susan Manuelle Christa Volpicelli
Healthcare Global Energy London Global Global Industrial Global Industrial
Communications Communications

Associates

Ben Riback (A4)* Arun Prasad (A3) Owen Bittinger (A3) Benjamin Carpenter Paul Croci (A3) Pablo Pallas (A3)
Global Consumer Health Care Palo Alto (A3) London
Los Angeles

Martin Valdes (A3)* Sarah Ransdell Bayer Patty Yang (A2) Jason Godley Julius Peter Harsh Singh
Latin America (A2) Hong Kong Generalist Generalist Generalist
Palo Alto

1 * Team Co-Captain
2. Structure of an Investment Bank
What is an Investment Bank?
An investment bank typically consists of three distinct, but related businesses:

Traditional
Sales & Trading Research
Investment Banking

Capital raising Distribution and Analysis and

Debt execution arm of the recommendations of
investment bank stocks and bonds
Equity
Sells and trades Includes company
Strategic advisory
stocks and bonds coverage and sector
services
coverage
Mergers & Manages the firms
acquisitions risk and makes
Restructuring markets for the
securities underwritten
Takeover defense
by the investment
bank

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Who are the Leading Investment Banks in the United States?

Large / Small /
Global Regional

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Structure of an Investment Bank Conduit to the Corporate Client

Private Side Public Side

Client

Capital Markets Sales &

Trading

Chinese Wall
Corporate Investment Banking Bank Loans High
Banking Coverage Groups Inv. Grade
Yield
Debt Equity

Other Product
M&A Research
Groups

Financial Strategies
Derivatives
Liability Management
Pensions
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Products and Services
An investment bank provides numerous corporate finance functions.

Balance Sheet
Hedging Capital Raising Equity
Management

Share and Debt Investment Grade

Repurchases Debt

Debt Exchanges High Yield Debt

Consent Solicitations Syndicated Loans

Bridge Commitments
Advisory M&A

Restructuring

Financial Strategy

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Industry Coverage Groups

Consumer Financial Communications

Institutions

Energy, Power Health Care Real Estate

& Chemicals

Financial Industrials Technology

Entrepreneurs
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3. Deal Teams and the Role of an Associate
Structure of a Typical Deal Team
The Coverage Officer has primary client responsibility and the Associate ensures that all members of the
working party, both internal and external, are informed and working together.

Client

Accountants
Investment Banking
Attorneys
Coverage Officer

Capital Markets Associate

Compliance/
IBD Support Analysts Legal

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Strategic Advisory

A good investment banker is a trusted advisor to their client a CEOs first call for
strategic advice

Investment bankers are most valuable when they can provide unique insight
regarding a companys operations or strategic direction

As part of a normal client dialogue, investment bankers will show clients strategic
ideas that may or may not be obvious to their client

CEOs often use their bankers to approach potential counterparties on an informal

basis

Investment bankers typically handle negotiations and most other aspects of the
M&A process, allowing management to focus on running their business
Valuation Fairness opinion
Process management Purchase/Sale documentation
Structuring Whatever else it takes

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Strategic Advisory M&A

Purchasing other companies

Friendly Mergers
Hostile Takeovers
Leveraged Buyouts

Selling companies
Selling entire companies
Spin-off of subsidiaries

Defending Company Buyouts

Poison Pill

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Life of an M&A Transaction

The Mandate: Closing:

The Pitch Announcement
Deal is Live Its Official!

Specific pitch ideas Preparation Preparation for Between

announcement announcement &
Beauty contests Solicitation of closing
Press release
preliminary bids
Q&A script SH vote
Solicitation of HSR
binding bids Week of
Other regulatory
announcement
approvals
Negotiations Market reaction
Roadshow? Closing
Contract Signing
Lucites
Bankers work is
Dinner
largely done once the
deal is made public

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Valuation: The Foundation of Every Deal

Primary Valuation Techniques How is my client trading relative to

peers?
Discounted Cash Flow Analysis WHY is it trading this way?
Public Market Analysis (Comparable Growth? Margins?
Companies) Hot market versus fundamentals
HOW can the company improve its
Private Market Analysis (Precedent
valuation?
Transactions)
Does an acquisition make sense?
LBO Analysis
What is an appropriate price?

Is cash or stock a better choice?

Secondary Valuation Techniques

Pro Forma Consequences Analysis What is appropriate leverage?

Accretion/dilution How would the market value the

Capital Structure company in a public offering?
EPS Growth Rates How long will a company take to pay
Relative Contribution Analysis back debt holders?

Liquidation Analysis Do cash flows support an LBO?

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Valuation and the Associate
The associate is responsible to ensure numbers are accurate and assumptions are realistic.

Valuation is NOT . . . Valuation is . . .

A single, quantitatively derived answer

Lots of number crunching
A precise number
More art than science
A static number
Heavily dependent on judgment

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Raise Capital for Clients

One of the most common functions of investment bankers is to assist companies

in raising capital
Investment banks are the intermediaries between users of capital and providers
of capital
Equity
IPO
Secondary Offering
Preferred Stock
Debt
Investment Grade
High Yield Debt
Structured & New Product Financing

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Capital Raising Assignment
The associate manages the flow of information and therefore must be organized and anticipate everything.

Pitching Pre-Filing Marketing Pricing / Post-deal

Preparation Closing follow-up

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Capital Raising: Pre-Filing
Screen the Deal Internally
Put together all internal memos and coordinate meetings
Commitment Committee
Investor Issues Committee

Organizational Meeting
Establish agenda, timetable, information request list and working group list

Due Diligence Meetings

Drafting of Registration Statement

Development of business section and positioning
Participation in drafting sessions
Work with underwriters counsel on underwriting agreement

Marketing Preparation
Prepare roadshow presentation with company
Coordinate for reds to be delivered as necessary

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Capital Raising: Marketing
Prepare memos for sales forces
Institutional sales memo
Retail Sales Memo
Coordinate dry-run (company presentation to sales force)
Roadshow:
Responsible that
Denver Minneapolis Milwaukee Chicago Toronto Montreal
ALL logistics run 3 one-on-ones
1 one-on-one
2
one-on-ones 1 one-on-one 5 one-on-ones 1 group mtg
1 group mtg
smoothly Boston
Accompany

7 one-on-ones
1 group mtg
company to
New York
investor 6 one-on-ones
meetingskeep 1 group mtg

meetings on time Philadelphia

Feedback to 6 one-on-ones

Capital Markets
desk: know how San Francisco
4 one-on-ones
the book is
1 group mtg

Europe
building San Diego Kansas City
1 group call
1 one-on-one
2 one-on-ones
ANTICIPATE 1 group call

everything

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Capital Raising: Pricing/Closing

Pricing: Handled by ECM

Coordinate bring down due diligence call prior to pricing

Finalize registration statement

Meet with lawyers and printers to add in final pricing information

Closing: Help coordinate wiring of funds to company

How much? Where? When? Wire instructions via memo to syndicate

Post-deal client relationship

Create post-mortem book

Organize closing dinner

Design Lucite

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Keys to Success as an Associate

Goals Pitfalls

Develop credibility early with team, especially Presenting materials with mistakes or typos
analysts
Waiting to get involved
Leadership: Delegating authority
Failure to anticipate
Time management skills: Balance multiple
projects Not leveraging firms resources appropriately

Understand the transaction and communicate Getting lost in the detail and missing the big
both up and down picture

Develop a rapport with the analysts and Insubstantial interaction with clients
communicate the big picture
Does not properly delegate work
Manage expectations and define responsibilities
Losing confidence under pressure
Get your hands dirty
Lack of attention to detail
Dont be afraid to ask questions
Lack of follow through
Proactive client interaction
Lack of involvement in recruiting and training
Educate senior bankers and exceed activities
expectations

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4. Why Citigroup?
Citigroup is the #2 Global M&A Advisor YTD

Global U.S. Europe

Volume Volume Volume

($B) Rank ($B) Rank ($B) Rank

769.5 1 437.9 1 326.1 5

714.7 2 315.1 3 440.9 1

664.3 3 315.3 2 384.9 2

592.2 4 260.4 5 371.0 3

524.2 5 185.0 7 344.8 4

472.9 6 166.5 8 279.6 8

452.8 7 297.6 4 175.3 13

Source: Securities Data Company, Inc.

Note: Data as of September 30, 2006, based on rank date.

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We Advised on 7 of the 10 Largest Deals YTD
Deal Size Companies Deal Size Companies

$89 Billion $32 Billion

$71 Billion $30 Billion

$44 Billion $28 Billion

$41 Billion $27 Billion

$38 Billion $26 Billion

Source: Securities Data Company, Inc.

Data as of September 30, 2006, based on rank date.

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We Have Advised on Many Landmark, Cross-Border Deals

Pending Pending Announced Cross-Border (2004YTD 2006)

Volume (US$bn)

Advised on Autostrade SpAs

$629 $622 $609
Advised on Mittal Steels proposed merger of equals with Albertis
$575
offer to acquire Arcelor Infraestructuras
$522
$474

US$43,632 mm US$28,389 mm
January 2006 April 2006

Pending Completed

Advised on Bavarias sale of a

Advised on NYSEs proposed 71.8% stake owned by Santo GS C JPM MS DB ML
merger with Euronext Domingo to SABMiller
International (1) Client Advisory (2004YTD 2006)
Volume (US$bn)
US$10,203 mm US$5,227 mm $106
May 2006 July 2005

$78 $74
Completed Completed $71 $68 $66

Advised on G-TECH Holdings Advised on CNPC Internationals

sale to Lottomatica SpA acquisition of PetroKazahkstan

US$4,736 mm US$3,957 mm
January 2006 August 2005

Source: Securities Data Company, Inc. GS C JPM UBS MS CS

(1) Advising a non-U.S. or non-European client in a cross-border transaction.
M&A deals rank-eligible 2004-YTD 2006 (as of August 31st).

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 Citigroups Dominance in Capital Raising
Citigroup is a leading bookrunner in Global Capital Markets.

C12 MONDAY, OCTOBER, 1, 2006 THE WALL STREET JOURNAL. R10 TUESDAY, JANUARY, 3, 2006 THE WALL STREET JOURNAL.

SCORECARD OF WALL STREET UNDERWRITING:

FIRST NINE MONTHS YEAR-END REVIEW OF MARKETS & FINANCE
Global Stocks and Bonds Global Stocks and Bonds
In the U.S. public, Rule 144a, domestic and international equity and Euro markets, ranked by first nine months U.S. public, Rule 144a, domestic and international equity and euro-market issues, ranked by 2005 proceeds.
2006 proceeds. FIRST NINE MONTHS 2006 FIRST NINE MONTHS 2005 2005 2004
PROCEEDS MARKET NO. OF PROCEEDS MARKET PROCEEDS NO. OF MARKET PROCEEDS
(billions) SHARE ISSUES (billions) SHARE RANK MANAGER (billions) ISSUES SHARE (billions) RANK
Citigroup $490.0 9.0% 1,384 $431.5 8.8% 1 Citigroup $564.7 1,856 8.7% $539.9 1
J.P. Morgan 382.6 7.0 1,270 322.6 6.5 4 Lehman Brothers 420.8 1,249 6.5 377.2 5
Deutsche Bank AG 340.5 6.2 1,072 331.2 6.7 2 Deutsche Bank AG 418.1 1,398 6.4 343.4 7
Lehman Brothers 330.9 6.1 955 326.1 6.6 3 J.P. Morgan 414.6 1,553 6.4 395.6 3
Morgan Stanley 319.3 5.8 968 299.2 6.1 5 Morgan Stanley 383.5 1,238 5.9 416.3 2
Merill Lynch 300.9 5.5 1,097 259.9 5.3 6 Merill Lynch 343.2 1,450 5.3 385.7 4
Goldman Sachs 276.6 5.1 643 246.8 5.0 9 Credit Suisse First Boston 337.3 1,138 5.2 366.5 6
Credit Suisse 262.9 4.8 834 256.4 5.2 8 UBS 323.5 1,188 5.0 303.6 8
Barclays Capital 241.3 4.4 757 194.2 3.9 12 Goldman Sachs 310.2 819 4.8 291.1 9
UBS 232.2 4.3 870 256.5 5.2 7 Barclays Capital 269.7 853 4.1 191.8 12
TOP 10 TOTALS $3,177.1 58.2% 9,850 $2,924.3 59.3% TOP 10 TOTALS $3,785.6 12,742 58.3% $3,611.2
INDUSTRY TOTAL $5,463.5 100.0 15,264 $4,933.9 100.0 INDUSTRY TOTAL $6,511.3 20,118 100.0% $5,767.0

Who's No. 1? THIRD CHANGE IN

Who's No. 1?
Leading stock-and-bond underwriters, by volume, third-quarter 2006. Leading stock and bond underwriters, by 2005 proceeds.
QUARTER MARKET SHARE 2005 MKT CHANGE FROM
MARKET SECTOR NO 1 RANKED MANAGER MKT. SHARE FROM PREV Q MARKET SECTOR NO 1 RANKED MANAGER SHARE 2004 (pct. Pts.)
Global Debt, Equity & Equity-related Citigroup 9.3% 0.80 Global Debt, Stock & Stock-Related Citigroup 8.7% -0.70
U.S.Debt, Equity & Equity-related Citigroup 10.6 0.20 U.S.Debt, Stock & Stock-Related Citigroup 10.1 -0.90
STOCKS STOCKS
Global Common Stock J.P. Morgan 11.3 3.60 Global Common Stock Citigroup 9.5 -1.10
Global Convertibles Citigroup 19.2 3.30 Global Convertible Offerings J.P. Morgan 14.6 5.00
Global Common Stock- U.S. Issuers Goldman Sachs 16.0 -0.40 Global Common Stock- U.S. Issuers Morgan Stanley 12.1 -3.30
Global Convertibles- U.S. Issuers Citigroup 31.6 17.00 Global Conv. Offerings- U.S. Issuers Goldman Sachs 15.7 4.90
BONDS BONDS
U.S. Asset-backed Securities Citigroup 9.6 -0.60 U.S. Asset-backed Securities Citigroup 8.6 -1.10
U.S. Investment Grade Corporate Debt Citigroup 17.1 2.20 U.S. Investment Grade Corporate Debt Citigroup 16.5 -3.90
U.S. High Yield Corporate Debt Citigroup 17.8 1.30 U.S. High Yield Corporate Debt J.P. Morgan 13.0 1.60
U.S.Mortgage-backed Securities Royal Bank of Scotland 10.8 0.30 U.S.Mortgage-backed Securities Bear Sterms 10.7 -1.70
SYNDICATED LOANS SYNDICATED LOANS
U.S. Syndicated Loans J.P. Morgan 28.1 -5.40 U.S. Syndicated Loans J.P. Morgan 28.1 -4.00

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So What Does This Mean For You?

Acquisition of American
Acquisition of Household Inc. Acquisition by
Vincor International Buy-Side Advisor Constellation Brands Inc. New Credit Facility in Connection
Advisor to Constellation Acquisition Finance Advisor to Mondavi with Acquisition of Grey Goose
Joint Book-Runner
$1,310,000,000 $890,000,000 $1,355,000,0000 $4,400,000,000
June 2006 January 2005 December 2004 September 2004

European Beverages Acquisition by GTCR

Sale of Tohato, Inc. to Acquisition by GTCR
Financing of Acquisition by 7.250% Senior Notes due 2016 Buy-Side Advisor
Yamazaki Baking Co, Ltd. Buy-Side Advisor
Blackstone and Lion Capital Joint Book-Runner
Joint Book-Runner Advisor to Unison Capital
Partners
1,850,000,000 $700,000,000 18,200,000,000 $555,000,000 $240,000,000
February 2006 July 2006 July 2006 April 2004 January 2004

Acquisition of Senior Notes Convertible Senior Senior Subordinated Notes Senior Notes
FileNet Corporation Sole Bookrunning Manager Subordinated Notes Joint Bookrunning Manager Joint Bookrunning Manager
Advisor to IBM Sole Bookrunning Manager

$1,600,000,000 $400,000,000 $190,000,000 $600,000,000 $300,000,000

Pending May 2006 May 2006 January 2006 July 2004

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