Investment Banking Division (IBD)

What is Investment Banking Division (IBD)?

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

Explanation

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

  • Mergers & Acquisitions (M&A) – providing advisory services on merger, sale or purchase of the company. The services include building a detailed valuation of the company or division which helps in taking the decision whether the client should go ahead with the deal, which also includes the pricing at which the deal is conducive to be 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 implement the overall strategy.
  • Leveraged Finance – lending money to companies to help in the 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 of 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 among which 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 kinds of deals for the firms within that sector. For example, the FIG team in this division will with clients for raising debts, IPOs, acquisitions etc, but will only work with clients within that particular sector.
  • On any given day, the work of 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 banker’s act as advisory to a wide range of clients for capital raising and Merger and Acquisition needs. Their clientele includes:

  • Governments – This division work with the governments to raise money, trade in securities and buying and selling of crown corporations.
  • Corporations – Investment bankers work with private and public companies known as corporations to help them in offering Initial Public Offering (IPO), raising additional capital for business growth, making acquisitions, providing 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 for preparation of research reports, advising clients and completion of 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 financial modeling, valuation work of companies, and pitchbook support.
  • Associate – An associate’s job is to manage the analyst, doing financial modeling and also drafting pitchbooks.
  • Vice President – The responsibility of Vice President is to manage the associates, designing pitch books as well as going for client meetings.
  • Director – The director leads the team, meets the clients and structures the deals.
  • Managing Director – He is focussed solely on acquiring new clients and business for the division.

Conclusion

The Investment Banking Division (IBD) acts as a bridge between the large enterprises and the investors where they play an important role in advising businesses and governments on how to overcome financial challenges and procure finance, whether it is from stocks, bond issues or derivative products.

This has been a guide to what is Investment Banking Division (IBD)? Here we discuss IBD Groups, including skills required and job titles.

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