Investment banking provides a range of specialized financial services to corporations, governments, and institutional clients. These services are designed to help clients manage complex financial transactions, raise capital, and grow their businesses.
Core Services of Investment Banking 🤝
Investment banks are essentially intermediaries between those who need capital and those who have it. Here are some of their most important services:
Mergers and Acquisitions (M&A) Advisory
Investment banks act as strategic advisors when a company wants to buy, sell, or merge with another company. They guide clients through the entire process, which can be complex and lengthy.
Valuation: They assess the true value of a company to determine a fair price for the deal.
Due Diligence: They conduct a thorough investigation of the target company's finances, operations, and legal standing.
Negotiation: Investment bankers represent their client's interests during negotiations to ensure favorable terms.
Structuring: They design the financial and legal framework of the transaction to maximize value for their client.
Underwriting and Capital Raising
Underwriting is the process by which an investment bank helps a company raise money by issuing new securities, such as stocks or bonds. The bank takes on the financial risk of selling these securities to investors.
Initial Public Offerings (IPOs): This is when a private company first sells its stock to the public. The investment bank manages the entire process, from pricing the shares to marketing them to investors.
Debt and Equity Offerings: Investment banks also help established companies raise capital by issuing new bonds (debt) or additional shares (equity).
Risk Assessment: The bank assumes the risk of not being able to sell all the securities at the initial price, but profits from the spread between what it pays the company and what it sells the securities for.
Sales, Trading, and Equity Research
These services focus on the secondary market—where securities are traded after they are first issued.
Sales and Trading: This division helps institutional clients (like pension funds and hedge funds) buy and sell securities. They act as a market maker, facilitating trades and ensuring liquidity.
Equity Research: Analysts in this division study companies and industries, publishing reports and making investment recommendations. This research helps investors make informed decisions and provides insights into market trends.