The Practical Side of Investment Banking

October 10, 2006

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
Randy Barker
Co-Head, Global Fixed
Income
John Ciolek
Energy
James McCummings
Global Communications
Timothy Devine
FIG
Stephen Schiller
Client Strategy
Hugo Verdegaal
Latin America
Managing Directors
Nathan Eldridge
Mergers & Acquisitions
Jodi Schenk
Mergers & Acquisitions
Victor Voorheis
FIG
Peter Kapp
FIG
Directors
Rich Harding
Healthcare
Daniel Lee
Global
Communications
Jas Singh
Energy
Keith Anderson
London
Ramon Gonzalez
Global
Communications
Susan Manuelle
Global Industrial
Christa Volpicelli
Global Industrial
Vice Presidents
Ben Riback (A4)*
Global Consumer
Arun Prasad (A3)
Health Care
Owen Bittinger (A3)
Palo Alto
Benjamin Carpenter
(A3)
Los Angeles
Paul Croci (A3)

Pablo Pallas (A3)
London

Martin Valdes (A3)*
Latin America

Sarah Ransdell Bayer
(A2)
Palo Alto

Patty Yang (A2)
Hong Kong
Jason Godley
Generalist
Julius Peter
Generalist
Harsh Singh
Generalist
Associates
* Team Co-Captain
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2. Structure of an Investment Bank
What is an Investment Bank?
Traditional
Investment Banking
Research Sales & Trading
Capital raising
Debt
Equity
Strategic advisory
services
Mergers &
acquisitions
Restructuring
Takeover defense
Analysis and
recommendations of
stocks and bonds
Includes company
coverage and sector
coverage
Distribution and
execution arm of the
investment bank
Sells and trades
stocks and bonds
Manages the firms
risk and makes
markets for the
securities underwritten
by the investment
bank
An investment bank typically consists of three distinct, but related businesses:
2
Large /
Global
Small /
Regional









Who are the Leading Investment Banks in the United States?
3
Structure of an Investment Bank Conduit to the Corporate Client
Client
Investment Banking
Coverage Groups
Other Product
Groups
M&A
Capital Markets
Bank Loans
Inv. Grade
Debt
High
Yield
Equity

C
h
i
n
e
s
e

W
a
l
l

Financial Strategies
Derivatives
Liability Management
Pensions
Corporate
Banking
Sales &
Trading
Research
Private Side Public Side
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Products and Services
Balance Sheet
Management
Hedging
Share and Debt
Repurchases
Debt Exchanges
Consent Solicitations
Capital Raising Equity
Investment Grade
Debt
High Yield Debt
Syndicated Loans
Bridge Commitments
Advisory M&A
Restructuring
Financial Strategy
An investment bank provides numerous corporate finance functions.
5
Industry Coverage Groups
Consumer
Energy, Power
& Chemicals
Financial
Entrepreneurs
Financial
Institutions
Health Care
Industrials
Communications
Real Estate
Technology
6
3. Deal Teams and the Role of an Associate
Structure of a Typical Deal Team
Client
Investment Banking
Coverage Officer
IBD Support
Accountants
Associate
Analysts
Capital Markets
Compliance/
Legal
Attorneys
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.
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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
Process management
Structuring

Fairness opinion
Purchase/Sale documentation
Whatever else it takes

8
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
9
Life of an M&A Transaction
The Pitch
Specific pitch ideas
Beauty contests
The Mandate:
Deal is Live
Announcement
Closing:
Its Official!
Preparation
Solicitation of
preliminary bids
Solicitation of
binding bids
Negotiations
Contract Signing
Preparation for
announcement
Press release
Q&A script
Week of
announcement
Market reaction
Roadshow?
Bankers work is
largely done once the
deal is made public
Between
announcement &
closing
SH vote
HSR
Other regulatory
approvals
Closing
Lucites
Dinner
10
Valuation: The Foundation of Every Deal
Primary Valuation Techniques
Discounted Cash Flow Analysis
Public Market Analysis (Comparable
Companies)
Private Market Analysis (Precedent
Transactions)
LBO Analysis

Secondary Valuation Techniques
Pro Forma Consequences Analysis
Accretion/dilution
Capital Structure
EPS Growth Rates
Relative Contribution Analysis
Liquidation Analysis
How is my client trading relative to
peers?
WHY is it trading this way?
Growth? Margins?
Hot market versus fundamentals
HOW can the company improve its
valuation?
Does an acquisition make sense?
What is an appropriate price?
Is cash or stock a better choice?
What is appropriate leverage?
How would the market value the
company in a public offering?
How long will a company take to pay
back debt holders?
Do cash flows support an LBO?
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Valuation and the Associate
A single, quantitatively derived answer
A precise number
A static number

Lots of number crunching
More art than science
Heavily dependent on judgment
Valuation is NOT . . . Valuation is . . .
The associate is responsible to ensure numbers are accurate and assumptions are realistic.
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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


13
Capital Raising Assignment
Pitching Pre-Filing
Preparation
Marketing Post-deal
follow-up
Pricing /
Closing
The associate manages the flow of information and therefore must be organized and anticipate everything.
14
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)
Denver
3 one-on-ones
Minneapolis
1 one-on-one
Milwaukee
2 one-on-ones
Chicago
1 one-on-one
Boston
7 one-on-ones
1 group mtg
New York
6 one-on-ones
1 group mtg
Philadelphia
6 one-on-ones
2 one-on-ones
Kansas City
1 group call
Europe
San Francisco
1 one-on-one
1 group call
4 one-on-ones
1 group mtg
San Diego
Toronto
5 one-on-ones
1 group mtg
Montreal
1 group mtg
Roadshow:
Responsible that
ALL logistics run
smoothly
Accompany
company to
investor
meetingskeep
meetings on time
Feedback to
Capital Markets
desk: know how
the book is
building
ANTICIPATE
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
Develop credibility early with team, especially
analysts
Leadership: Delegating authority
Time management skills: Balance multiple
projects
Understand the transaction and communicate
both up and down
Develop a rapport with the analysts and
communicate the big picture
Manage expectations and define responsibilities
Get your hands dirty
Dont be afraid to ask questions
Proactive client interaction
Educate senior bankers and exceed
expectations
Pitfalls
Presenting materials with mistakes or typos
Waiting to get involved
Failure to anticipate
Not leveraging firms resources appropriately
Getting lost in the detail and missing the big
picture
Insubstantial interaction with clients
Does not properly delegate work
Losing confidence under pressure
Lack of attention to detail
Lack of follow through
Lack of involvement in recruiting and training
activities
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4. Why Citigroup?
Citigroup is the #2 Global M&A Advisor YTD
Source: Securities Data Company, Inc.
Note: Data as of September 30, 2006, based on rank date.
Global U.S. Europe
Volume
($B) Rank
Volume
($B) Rank
Volume
($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
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Deal Size Companies
$89 Billion

$71 Billion

$44 Billion
$41 Billion

$38 Billion

We Advised on 7 of the 10 Largest Deals YTD
Source: Securities Data Company, Inc.
Data as of September 30, 2006, based on rank date.
Deal Size Companies
$32 Billion

$30 Billion

$28 Billion

$27 Billion
$26 Billion


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We Have Advised on Many Landmark, Cross-Border Deals
$629 $622
$609
$575
$522
$474
GS C JPM MS DB ML
$106
$78
$74
$71
$68
$66
GS C JPM UBS MS CS
Source: Securities Data Company, Inc.
(1) Advising a non-U.S. or non-European client in a cross-border transaction.
M&A deals rank-eligible 2004-YTD 2006 (as of August 31
st
).
Announced Cross-Border (2004YTD 2006)
Volume (US$bn)
International
(1)
Client Advisory (2004YTD 2006)
Volume (US$bn)
Completed



Advised on CNPC Internationals
acquisition of PetroKazahkstan



US$3,957 mm
August 2005
Pending



Advised on Mittal Steels proposed
offer to acquire Arcelor



US$43,632 mm
January 2006
Pending


Advised on Autostrade SpAs
merger of equals with Albertis
Infraestructuras



US$28,389 mm
April 2006
Pending



Advised on NYSEs proposed
merger with Euronext



US$10,203 mm
May 2006
Completed


Advised on Bavarias sale of a
71.8% stake owned by Santo
Domingo to SABMiller



US$5,227 mm
July 2005
Completed



Advised on G-TECH Holdings
sale to Lottomatica SpA



US$4,736 mm
January 2006
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Citigroups Dominance in Capital Raising
THIRD CHANGE IN
QUARTER MARKET SHARE
MARKET SECTOR NO 1 RANKED MANAGER MKT. SHARE FROM PREV Q
Global Debt, Equity & Equity-related Citigroup 9.3% 0.80
U.S.Debt, Equity & Equity-related Citigroup 10.6 0.20
STOCKS
Global Common Stock J.P. Morgan 11.3 3.60
Global Convertibles Citigroup 19.2 3.30
Global Common Stock- U.S. Issuers Goldman Sachs 16.0 -0.40
Global Convertibles- U.S. Issuers Citigroup 31.6 17.00
BONDS
U.S. Asset-backed Securities Citigroup 9.6 -0.60
U.S. Investment Grade Corporate Debt Citigroup 17.1 2.20
U.S. High Yield Corporate Debt Citigroup 17.8 1.30
U.S.Mortgage-backed Securities Royal Bank of Scotland 10.8 0.30
SYNDICATED LOANS
U.S. Syndicated Loans J.P. Morgan 28.1 -5.40
THE WALL STREET JOURNAL.
YEAR-END REVIEW OF MARKETS & FINANCE
Citigroup is a leading bookrunner in Global Capital Markets.
Who's No. 1?
Leading stock and bond underwriters, by 2005 proceeds.
Global Stocks and Bonds
U.S. public, Rule 144a, domestic and international equity and euro-market issues, ranked by 2005 proceeds.
R10 TUESDAY, JANUARY, 3, 2006 THE WALL STREET JOURNAL.
SCORECARD OF WALL STREET UNDERWRITING:
FIRST NINE MONTHS
C12 MONDAY, OCTOBER, 1, 2006
Who's No. 1?
Leading stock-and-bond underwriters, by volume, third-quarter 2006.
Global Stocks and Bonds
In the U.S. public, Rule 144a, domestic and international equity and Euro markets, ranked by first nine months
2006 proceeds.
2005 MKT CHANGE FROM
MARKET SECTOR NO 1 RANKED MANAGER SHARE 2004 (pct. Pts.)
Global Debt, Stock & Stock-Related Citigroup 8.7% -0.70
U.S.Debt, Stock & Stock-Related Citigroup 10.1 -0.90
STOCKS
Global Common Stock Citigroup 9.5 -1.10
Global Convertible Offerings J.P. Morgan 14.6 5.00
Global Common Stock- U.S. Issuers Morgan Stanley 12.1 -3.30
Global Conv. Offerings- U.S. Issuers Goldman Sachs 15.7 4.90
BONDS
U.S. Asset-backed Securities Citigroup 8.6 -1.10
U.S. Investment Grade Corporate Debt Citigroup 16.5 -3.90
U.S. High Yield Corporate Debt J.P. Morgan 13.0 1.60
U.S.Mortgage-backed Securities Bear Sterms 10.7 -1.70
SYNDICATED LOANS
U.S. Syndicated Loans J.P. Morgan 28.1 -4.00
2005 2004
PROCEEDS NO. OF MARKET PROCEEDS
MANAGER (billions) ISSUES SHARE (billions) RANK
Citigroup $564.7 1,856 8.7% $539.9 1
Lehman Brothers 420.8 1,249 6.5 377.2 5
Deutsche Bank AG 418.1 1,398 6.4 343.4 7
J.P. Morgan 414.6 1,553 6.4 395.6 3
Morgan Stanley 383.5 1,238 5.9 416.3 2
Merill Lynch 343.2 1,450 5.3 385.7 4
Credit Suisse First Boston 337.3 1,138 5.2 366.5 6
UBS 323.5 1,188 5.0 303.6 8
Goldman Sachs 310.2 819 4.8 291.1 9
Barclays Capital 269.7 853 4.1 191.8 12
TOP 10 TOTALS $3,785.6 12,742 58.3% $3,611.2
INDUSTRY TOTAL $6,511.3 20,118 100.0% $5,767.0
FIRST NINE MONTHS 2006 FIRST NINE MONTHS 2005
PROCEEDS MARKET NO. OF PROCEEDS MARKET
(billions) SHARE ISSUES (billions) SHARE RANK
Citigroup $490.0 9.0% 1,384 $431.5 8.8% 1
J.P. Morgan 382.6 7.0 1,270 322.6 6.5 4
Deutsche Bank AG 340.5 6.2 1,072 331.2 6.7 2
Lehman Brothers 330.9 6.1 955 326.1 6.6 3
Morgan Stanley 319.3 5.8 968 299.2 6.1 5
Merill Lynch 300.9 5.5 1,097 259.9 5.3 6
Goldman Sachs 276.6 5.1 643 246.8 5.0 9
Credit Suisse 262.9 4.8 834 256.4 5.2 8
Barclays Capital 241.3 4.4 757 194.2 3.9 12
UBS 232.2 4.3 870 256.5 5.2 7
TOP 10 TOTALS $3,177.1 58.2% 9,850 $2,924.3 59.3%
INDUSTRY TOTAL $5,463.5 100.0 15,264 $4,933.9 100.0
22
So What Does This Mean For You?
Acquisition of American
Household Inc.
Buy-Side Advisor
Acquisition Finance
$890,000,000
January 2005
$1,310,000,000
June 2006
Acquisition of
Vincor International
Advisor to Constellation
Acquisition by
Constellation Brands Inc.
Advisor to Mondavi
$1,355,000,0000
December 2004
$4,400,000,000
September 2004
New Credit Facility in Connection
with Acquisition of Grey Goose
Joint Book-Runner
Acquisition by GTCR
Buy-Side Advisor

$240,000,000
January 2004
1,850,000,000
February 2006
Financing of Acquisition by
Blackstone and Lion Capital
Joint Book-Runner

European Beverages
7.250% Senior Notes due 2016
Joint Book-Runner
$700,000,000
July 2006
18,200,000,000
July 2006
Sale of Tohato, Inc. to
Yamazaki Baking Co, Ltd.
Advisor to Unison Capital
Partners
$555,000,000
April 2004
Acquisition by GTCR
Buy-Side Advisor
$400,000,000
May 2006
Senior Notes
Sole Bookrunning Manager
$190,000,000
May 2006
Convertible Senior
Subordinated Notes
Sole Bookrunning Manager
$600,000,000
January 2006
Senior Subordinated Notes
Joint Bookrunning Manager
$1,600,000,000
Pending
Acquisition of
FileNet Corporation
Advisor to IBM
$300,000,000
July 2004
Senior Notes
Joint Bookrunning Manager
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