Investment Banking Tutorials
- Investment Banking Free Course
- Investment Banking Basics
- What is Investment Banking? (Overview of what do they actually do!)
- Investment Banking Functions
- Investment Banking vs Commercial Banking
- Equity Research in an Investment Bank
- What is Asset Management Company AMC
- Sales and Trading in Investment Banking
- Private Placement, IPO and FPO in Investment Banking
- Investment Banking – Underwriters and Market Makers
- Investment Banking – Mergers and Acquisitions
- Investment Banking – Restructuring and Reorganisation
- Investment Banking Roles and Responsibilities
- Market Makers
- Propreitary Trading
- Deal Origination (Sourcing)
- Initial Public Offering (IPO)
- Top 4 Must Know Investment Banking Charts (Free Download Template included)
- Pitch Book | Guide to Investment Banking Pitch Book (Examples)
- What is LBO?
- Leverage buyout Lbo Analysis
- LBO Financing
- Trading Floor
- Market Order vs Limit Order
- Bid vs Ask
- Industry vs Sector
- Merchant Bank
- Best Investment Banking Books
- Nasdaq vs Dow Jones
- Nasdaq vs Nyse
- Differences Between NSE and BSE
- Investment Banking Careers
- Investment Banking Interview Questions (with Answers)
- How to get into Investment Banking?
- Investment Banking Analyst
- Investment Banking Job Description
- Investment Banking Division (IBD)
- Investment Banking Associate Salary
- Analyst vs Associate
- Investment Banking Job For Graduates (Engineers) | Top 8 Tips
- How to get an Investment Banking Internship?
- Top 10 Finance Certifications Programs
- Investment Banking Lifestyle
- Investment Banking Exit Opportunities
- Investment Banking Case Studies
- Top 10 Best Finance courses (with Online Certification)
- Investor Relation Job Description
- Financial Analyst Job Description
- Investment Banking vs Equity Research
- Investment Banking vs Asset Management
- Commercial Banking vs Merchant Banking
- Investment Banking vs Corporate Banking
- Portfolio Management vs Investment Banking
- Investment Banking vs Hedge Fund Manager
- Investment Banking vs Investment Management
- Investment Banking vs Private Equity
- Careers in Trading
- Investment Banking Firms
- Top Bulge Bracket Investment Banks
- Top Middle Market Investment Banks
- Top Boutique Investment Banks
- Investment Banking in Dubai
- Investment Banking In Nigeria
- Investment Banking in Abu Dhabi
- Investment Banking in Hong Kong
- Investment Banking in Russia
- Investment Banking in Brazil
- Investment Banking in China
- Investment Banking in Australia
- Investment Banking in Saudi Arabia
- Investment Banking in Singapore
- Investment Banking in London (UK)
- Investment Banking in India
- Investment Banking in Ireland
- Investment Banking in South Africa
- Investment Banking in Canada
- Investment Banking in Germany
- Investment Banking in France
- Investment Banking in Malaysia
- Investment Banking in Philippines
- Investment Banking in Boston
- Investment Banking in San Francisco
- Investment Banking in Chicago
- Investment Banking in Atlanta
- Investment Banking in Toronto
- Top Banks
- Top Banks in Australia
- Top Banks In Austria
- Top Banks In Bahrain
- Top Banks In Belgium
- Top Banks In Bermuda
- Top Banks In British Virgin Islands
- Top Banks In Brunei
- Top Banks In Canada
- Top Banks In Cayman Islands
- Top Banks In Denmark
- Top Banks In Finland
- Top Banks In France
- Top Banks In Germany
- Top Banks In Greenland
- Top Banks In Guernsey
- Top Banks In Ireland
- Top Banks In Isle of Man
- Top Banks In Japan
- Top Banks In Kuwait
- Top Banks In Liechtenstein
- Top Banks In Luxembourg
- Top Banks In Macau
- Top Banks In Norway
- Top Banks In Oman
- Top Banks in Pakistan
- Top Banks in Philippines
- Top Banks In Puerto Rico
- Top Banks In Qatar
- Top Banks In Saudi Arabia
- Banks in South Africa
- Top Banks In Singapore
- Top Banks In South Korea
- Top Banks In Sweden
- Top Banks In Switzerland
- Top Banks in UAE
- Top Banks in United Kingdom
- Top Banks in USA
- Banks in Nigeria
- Top 10 Banks in Netherlands
- Mergers and Acquisitions
- What is Mergers and Acquisitions?
- Mergers vs Acquisitions
- Synergy in M&A
- Successful Mergers and Acquisitions
- Financing Acquisitions
- Acquisition Premium (Takeover)
- Statutory Merger
- Joint Venture
- White Knight
- Hostile Takeover
- Golden Parachute
- Poison Pills
- Killer Bees Defense Strategy
- Show Stopper in M&A
- What is Amalgamation?
- Spin off vs Split Off
- Forward Integration
- Backward Integration
- Horizontal vs Vertical Integration
- What is Divesting / Divestiture?
- Bootstrap Effect
- PAC MAN Defense
- Flip-In Poison Pill
- Flip-Over Poison Pill
- Tender Offer
- Friendly Takeover
- Amalgamation vs Merger
- Lobster Trap Defense
- Asset Purchase vs Stock Purchase
- Greenshoe Option
- Dawn Raid Takeovers
- Crown Jewels Defense
- Best Mergers and Acquisitions Books
- What is Asset Restructuring?
Functions of Investment Banking
An investment bank is like a middleman between investor and issuer and helps their client to raise money through debt and equity offering. Some of the investment banks are JP Morgan Chase, Goldman Sachs, Credit Suisse, Morgan Stanley etc.
It provides all type of financial services. Below listed are the top 7 investment banking functions –
There are multiple Investment banking functions and they are as follows:-
#1 – IPOs
This investment banking function i.e. IPO is an initial public offering wherein a company hires an investment bank to issue IPO.
Below are the steps followed by a company for its IPO:-
- Before issuance of IPO company hire an investment bank. This bank is chosen based on different criteria like market reputation, industrial experience, quality of research and distribution channels etc.
- Selected bank do underwriting process where it acts as a broker between investors and issuing company.
- Investment bank works out on financial detail of IPO in the underwriting agreement.
- Post that company files registration statement along with underwriting agreement with SEC.
- Post-approval of IPO by SEC underwriter and issuing company decide offer price and a number of shares to be sold.
- After issuance, the bank carries out after markets stabilization in which that bank analyze aftermarket stabilization and create a market for the stock.
- The final stage is a transition to market competition, After 25 days period, the bank provides an estimate regarding valuation and earning of issuing company.
Investment bank helps a company to set everything and list IPO in a stock exchange. IPO is one of the major investment banking functions. This bank in return charges commission from a company.
#2 – Merger and Acquisitions
Merger and Acquisitions is the area of corporate finances, management, and strategy dealing with purchasing or joining with other companies. An investment bank in return charges fees for M&A. For M&A company hires a bank for merger and acquisitions. Following steps are taken for M&A by investment banks.
- There is two type of role in M&A of investment bank they are seller representation or buyer representation.
- One important role in M&A is a valuation of a company. The bank calculates the actual value of a company.
- Investment bank builds their strategy for M&A of two companies.
- The investment bank also does financial provisioning for a company as for M&A company will need lots of funds. It helps a company in raising fund for M&A.
- The main role of a bank is to issue new securities to market.
This investment banking function helps a small firm to project themselves, design merger once a suitable target is found. It helps in the success of the merger and this all is done with the help of investment bank.
#3 – Risk Management
Risk Management from the name itself it is clear that its management of risk involves, it is a continuous process as capital is involved it set a limit to avoid loss in trade. Investment banks help a company in the following ways:-
- Investment bank helps a company to manage financial risk in term of currency, loans, liquidity etc.
- This bank helps a company to recognize loss area.
- This bank analyzes the market and credit risk. To control credit risk investment spreads out counterparties and bank choose standard exchange for trading.
- There are different risks like business risk, investment risk, legal & compliance risk and operational risk which are internally controlled by an investment bank.
Risk management is done at every level by investment banks as it highlights what are risks involve and how it can be handled.
#4 – Research
This equity research investment banking function is one of the most important investment banking function is research. This research helps provide a rating to company help investor to take a decision of investment. Research reports tell whether to buy, sell or to hold the base on a rating of a company. Through this one can know worthiness of the company. Research is done by analyzing and comparing various report and performance report of the company. Investment bank primary work is research and these researches are of multiple types like equity research, fixed income research, macroeconomic research, qualitative research etc. Investment bank shares these reports with clients which helps an investor to generate profit through trading and sales.
#5 – Structuring of Derivatives
For this Investment banking function i.e. structuring of derivatives, investment bank needs a strong technical team working of such a complex structure of derivatives. Derivatives product offer a high rate of return and good margin hence a lot of risks is involved with it. Investment bank prepares these derivatives with a strategy based on a single as well as multiple securities.
This bank adds features to it like in bonds it provides future and option derivative etc. Investment bank designs securities with different derivatives options. The main reason to design such product is to attract investors and to increase profit margin.
There is another derivative also available in the market, it helps to generate a good return to investors.
#6 – Merchant Banking
This investment banking function is one of the private activities of investment bank where the bank also does consultancy for their clients. They provide consultancy in a matter of financial, marketing, legal and managerial. It acts as a financial engineer for business.
Merchant banking has below functions:-
- Raising finance for a client
- Broker in Stock exchange
- Project management
- Money market operations
- Leasing service
- Portfolio management
- Handling government consent for industrial projects
- Managing public issue of a company
- Special assistance to small companies and entrepreneurs
There are multiple other services provided by investment banks to their clients. This bank charges consultancy fees from investors.
# 7 – Investment management
This investment banking function is a core job of an investment bank to guide the investor to purchase, manage his portfolio and to trade various securities. Investment bank prepares reports based on company performance and through this it investment bank makes a decision on financial securities. Investment advice is provided based on the client’s objective, client’s risk appetite, investment amount and time period. Based on customer segment investment management is divided like Private clients, Private wealth management, wealth management. Here, investment bank manages a portfolio of customers and also provides tips to investors whether to sell stocks or to buy stocks or to hold stocks.
This has been a guide to Investment Banking Functions. Here we discuss the top 7 functions of Investment Banking including IPOs, M&A, Research, Risk Management, Structuring Derivatives, Investment Banking and more. You may also take a look at below articles related to investment banking-