Proposal
I am writing to seek funding approval to integrate an Investment Banking simulation into my [course/program].
As we strive to continuously improve our curriculum and keep up with industry trends, I believe that incorporating the simulation will provide a significant advantage to our students and increase their chances of success in their future careers.
While our current course offerings are effective, we are always looking for new and innovative ways to engage our students and equip them with the skills and knowledge necessary to thrive in the highly competitive job market. The use of simulation has been proven to enhance student engagement and improve their retention of complex concepts, as they are able to apply what they learn in a realistic and interactive setting.
In addition, by incorporating the simulation into our [course/program], we can ensure that our students are well-prepared for the challenges of the industry, including rapid technological advancements and changing market conditions. This will give them a competitive edge in the job market and make them highly sought after by top employers.
Furthermore, AASCB, EQUIS, and AMBA encourage the use of practical simulations.
In summary, this simulation will benefit our students and our institution. I am confident it will enhance our reputation for innovative teaching methods and result in improved educational outcomes.
Provider
Finsimco is a software provider specializing in simulations for investment banks. Founded by former investment bankers with origins at Morgan Stanley, Finsimco’s simulations are being used in corporate training and have been adopted by several Business Schools. For more information, visit www.finsimco.com
Benefits
1. Real world experience: It is often difficult for students to fully comprehend finance theory without relevant work experience. Even after years of industry experience, certain scenarios may remain uncommon (e.g. exogenous shocks). For several years, financial service providers have utilized Finsimco simulations to expose staff and new recruits to these types of challenging situations. The simulations enable students to experience real-life settings without taking on any risks.
2. Employability: The Simulator offers a realistic work experience. Similar simulations are used in recruitment and training events. Our students would be exposed to a similar environment, which should improve their prospects.
3. Cost reduction: The self-running nature of the simulation will reduce the teaching workload, requiring less supervision.
4. Assessment: The simulation supports effective assessment of students' knowledge and skills in financial services. It provides a practical platform for evaluating performance, decision-making abilities, and industry understanding.
5. Higher enrollment: Business Schools that have integrated the simulations into their curriculum have observed an increase in student applications. The positive word-of-mouth generated by students who have experienced the simulations contributes to the increased enrollment in these programs.
Key statistics
- Increased job placement: Finance majors who complete Finsimco simulations are 1.7 times more likely to secure jobs at Bulge Bracket Banks.
- Excellent ratings: 93% of participants rate the simulator experience as "excellent."
- Certification: Upon successful completion, participants will receive a certificate recognized by most banks.
Review
I will review the simulation annually, aligning it with our teaching-focused processes. As part of the review, I will consider enrollment numbers, student feedback, and employability-enhancing metrics.
Investment Banking simulation
Url: https://www.finsimco.com/business-schools/simulations/investment-banking
Duration: 16 to 32 hours.
Setup:
- Students are organized into teams, each consisting of 3 to 5 members.
- Each team is running its own Financial Services firm, working on key transactions.
- Students rotate through various roles offering key Investment Banking and Capital Markets services
- The difficulty level of the simulation adjusts based on performance.
Grading: Assessment is based on the performance in the simulation and the information memorandums submitted.
Concepts:
- Financial Statement Analysis
- Discounted Cash Flows
- Debt & Equity Financing
- Financial Modelling
- Company Valuation
- Derivatives
- Risk Management
Dynamics & Learning Objectives:
Round 1
Teams provide 2 financial services:
- Leveraged Finance: Teams aim to become lenders by offering debt financing solutions to the market based on the current Leveraged Finance environment.
- Buy-Side Advisory: At a second stage, teams aim to receive a buy-side mandate of a PE firm by advising on the most attractive debt solutions available (other teams) and on acquisition bid values based on their Enterprise Value calculations.
By the end of the round, participants are able to:
- Calculate the NPV and IRR of a project
- Analyze the role of debt and equity in a firm’s capital structure
- Define Discounted Cash Flows
- Discuss relative valuation techniques among comparable companies
- Create a framework for choosing the appropriate valuation techniques
- Describe the purpose and framework for analyzing financial statements – Income Statement, Balance Sheet and Cash Flow Statement
- Compare financial statements of different companies
- Understand what a capital structure is, why it is important to businesses, and if changes to the structure can enhance shareholder value considering the risks associated with those changes
Round 2
Teams provide 4 financial services:
- Leveraged Finance: To get closer to reality, Leveraged Lending now covers the key terms of a loan agreement.
- Buy-Side Advisory: Teams again compete for buy-side mandates. They calculate acquisition bid values based on their Enterprise Value calculations, taking into account the debt financing and derivative offers from other teams.
- Sell-Side Advisory: These teams receive private information and aim to sell their companies for the highest price via a Roadshow and managing a Data Room.
- Derivatives. Teams have the possibility to offer currency swaps to reduce exchange rate risk and therewith the cost of debt.
By the end of the round, participants are able to:
- Calculate the levered free cash flow and understand its sensitivity towards certain variables
- Derive the Enterprise Value by adding net debt from Equity Value
- Explain how companies can manipulate P&L items to boost earnings
- Recognize the importance of ratio analysis
- Understand why management and advisors are overly optimistic
- Explain the role of covenants in lending agreements and describe the main covenants encountered in leveraged loans
- Explain how collateral and other types of security affect risk in leveraged loans
- Discuss current trends in corporate finance transactions
- Explain why derivative instruments can reduce risk and therewith are able to lower financing costs
Round 3
Teams provide 5 financial services:
- Leveraged Finance & Derivatives: To simulate real-world scenarios, terms are now bilaterally negotiated between the financing and derivative teams, as well as the borrowers, who are represented by the Buy-Side Advisory teams.
- Buy-Side Advisory: Teams are now negotiating the terms bilaterally with the financing and derivative teams.
- Sell-Side Advisory: These teams receive private information and aim to sell their companies for the highest price via a Roadshow and managing a Data Room.
- Acquisition: Teams advise on an acquisition proposal by assessing whether the deal is dilutive or accretive.
- Divestiture: One of the companies has divested part of its business. Teams calculate the value of the remaining core business.
By the end of the round, participants are able to:
- Discuss the merits of pursuing acquisitions, mergers and divestitures
- Identify the risks inherent in each type of corporate transaction for different stakeholders
- Apply business judgment when working on financial procedures and formulas
- Explain Risk Management and corporate governance processes at financial institutions
- Describe the role of Environmental, Social and Governance (ESG) in corporate governance and decision making for investment firms as well as for corporates
- Understand the key components of widely adopted Risk Management frameworks (interest rate, market, credit and liquidity risk)
- Recognize different types of transactions and typical deal structures, including financing terms, commitments and contingencies
Round 4
Teams provide 2 financial services:
- Fairness Opinion: Teams no longer have access to advisors and act as independent financial advisors to provide Fairness Opinions. They must completely overhaul their models to use Free Cash Flow to the Firm (FCFF) instead of Free Cash Flow to Equity (FCFE), which was used earlier.
- Debt Restructuring. For the restructuring mandate, teams assume the roles of various stakeholders and negotiate key terms for a distressed company that had been divested in the previous round.
By the end of the round, participants are able to:
- Understand what WACC is, how it should be calculated, and why it matters to firms
- Explain why WACC is used to discount a company’s unlevered free cash flow
- Use the CAPM to the derive the cost of equity
- Discuss the role of auditors and the various opinions available
- Recognize the roles, responsibilities and conflicts of different Investment Banking and Capital Markets teams such as Origination, Structuring and Syndication
- Understand financial distress and the perspectives / incentives of creditors, management and equity owners
- Explain how contractual and structural subordination affect credit risk
- Discuss creditor and equity owner rights during a restructuring and bankruptcy
- Define events of default and describe possible responses to technical and payment default, including waivers, amendments, hair cuts, debt to equity swaps and liquidation
