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Investment Banking Division (IBD)

Updated on April 30, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What is the Investment Banking Division (IBD)?

Investment Banking Division (IBD) is a particular investment bank division that provides corporate finance and advisory services. It is responsible for capital raising by the underwriter, debt, hybrid markets, mergers and acquisitions and different types of advisory mandates.

Explanation

IBD provides advisory on transactions and helps arrange to finance transactions and execute mergers and acquisitions. It consists of the following type of deals:

  • Mergers & Acquisitions (M&A) – providing advisory services on the company’s merger, sale, or purchase. The services include building a detailed valuation of the company or division, which helps decide whether the client should go ahead with the deal, which also includes the pricing at which the deal is conducive to being closed. Apart from all these, the M&A division of the investment banking arm also provides expertise in structuring the various financial transactions involved in the overall merger and acquisition deal and also effectively implements the overall strategy.
  • Leveraged Finance – lending money to companies to help financing of acquisitions.
  • Equity Capital Market – providing advice on equity and equity-derived products like shares, options, futures, etc.
  • Debt Capital Markets – providing valuable advice on raising and structuring debt to finance acquisitions.
  • Restructuring – improving the overall structures of a company to make it more profitable in the long run.
Investment Banking Division (IBD)

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Investment Banking Division Groups

  • IBD can be further subdivided into different groups. The most common ones are- Technology Media and Telecommunication (TMT), Financial Institution Groups (FIG), Energy, Mining, Healthcare, Industrials, and Real Estate.
  • It carries out all different deals for the firms within that sector. For example, the FIG team in this division will work with clients to raise debts, IPOs, acquisitions, etc., but will only work with clients within that sector.
  • On any given day, the work of the Investment Banking Division includes advising a company on the cross-border merger, structuring the initial public offering of a subsidiary, refinancing an outstanding bond, and many more.
  • Some investment banks are well known for being good in particular sectors like Goldman Sachs TMT (Technology Media and Telecommunication), Morgan Stanley M&A (Merger and Acquisition), and Bank of America LevFin.

Investment Banking Clients

Investment bankers act as advisory to a wide range of clients for capital raising and Merger and Acquisition needs. Their clientele includes:

  • Governments – This division works with the governments to raise money, trade-in securities, and buy and sell crown corporations.
  • Corporations – Investment bankers work with private and public companies known as corporations to help them offer Initial Public Offering (IPO), raise additional capital for business growth, making acquisitions, provide research and general corporate finance advice, etc.
  • Institutions – IBD works closely with institutional investors who manage other people’s money (known as institutions) to help them trade in securities and provide detailed financial research.

Investment Banking Division – Skills Required

Investment bankers who work in the IBD require a lot of financial modeling, valuation, and excel skills to prepare research reports, advise clients, and complete deals. The major skills required are mentioned as follows:

  • Business valuation
  • Financial modeling
  • Pitchbooks and Presentations
  • Transaction Documents
  • Relationship management
  • Negotiation skills
  • Sales and Business development.

Job Titles

There is a particular job hierarchy within the IBD. The most common job titles starting from junior to the senior position are as follows:

  • Analyst – An analyst focuses exclusively on companies’ financial modeling, valuation work, and pitchbook support.
  • Associate – An associate’s job is to manage the analyst, do financial modeling, and draft pitchbooks.
  • Vice President – The responsibility of the Vice President is to manage the associates, design pitch books, and go to client meetings.
  • Director – The director leads the team, meets the clients, and structures the deals.
  • Managing Director – He is focused solely on acquiring new clients and business for the division.

Conclusion

The Investment Banking Division (IBD) acts as a bridge between large enterprises and investors. They play an important role in advising businesses and governments on overcoming financial challenges and procuring finance, whether from stocks, bond issues, or derivative products.

This has been a guide to the investment banking division (IBD). Here we discuss IBD Groups, including skills required and job titles.

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