‘Investment Banking‘ as term suggests, is concerned with the primary function of assisting the capital market in its function of capital intermediation, i.e., the movement of financial resources from those who have them (the Investors), to those who need to make use of them for generating GDP (the Issuers). Banking and financial institution on the one hand and the capital market on the other are the two broad platforms of institutional that investment for capital flows in economy. Therefore, it could be inferred that investment banks are those institutions that are counterparts of banks in the capital markets in the function of intermediation in the resource allocation. Nevertheless, it would be unfair to conclude so, as that would confine investment banking to very narrow sphere of its activities in the modem world of high finance. Over the decades, backed by evolution and also fuelled by recent technologies developments, an investment banking has transformed repeatedly to suit the needs of the finance community and thus become one of the most vibrant and exciting segment of financial services. Investment bankers have always enjoyed celebrity status, but at times, they have paid the price for the price for excessive flamboyance as well.
Investment banks help companies, governments, and their agencies to raise money by issuing and selling securities in the primary market. They assist public and private corporations in raising funds in the capital markets (both equity and debt), as well as in providing strategic advisory services for mergers acquisitions and other types of financial transactions.
What is Investment Banking?
It provides strategic, financial and valuation advisory services
- Use industry knowledge, expertise and contacts to advise senior executives and boards of directors
- Identify and assess strategic opportunities
- Interpret market information and enhance shareholder value
- Provide general valuation services (e.g., segment analysis, break-up valuations, fairness opinions)
Raise capital through the issuance of securities
- Act as intermediary between issuers and investors
- Provide access to equity and fixed income capital (e.g., investment grade, bank, high yield, preferred stock)
- Create specialized securities and derivatives (e.g., convertibles, trust preferred securities, warrants)
Advise companies in merger &acquisition and restructuring transactions
- Sell-side assignments (represent client in the sale of its company or some of its assets)
- Buy-side assignments (represent potential acquirers and negotiate transactions)
- Hostile take-over defense/advisory
Offer specialized products and services that satisfy the needs of corporate and government clients
- Private equity (e.g., Merchant Banking, Real Estate, Venture Capital, other)
- Privatization
- Monetization