Investment bank

From Traderpedia

An institution which assists public and private corporations in raising funds in the capital markets (both equity and debt), as well as advisory services for mergers, acquisitions and other types of financial transactions.


[edit] Activities of Investment Banks

The primary purpose of an investment bank for its customers is to raise capital and strategic advise on corporate financial.

The activities investment banks pursue to provide the above services include:

  • Underwriting and distributing new security issues
  • Offering brokerage services
  • Providing financial security research to investors and corporate customers
  • Market-Making in particular securities

Investment banks have also moved into foreign currency exchange, private banking, and bridge financing.

[edit] Raising funds

There are two directions for fund raising: the capital markets and through private placements.

Investment bankers can raise funds in capital markets in two ways. The first one is by selling a company's equities in the stock market via an initial public offering (IPO) or secondary offering. The other is by selling debt issues.

Private placements are the purchase or sale of corporate securities by private companies or individual. Types of private placement transactions include venture capital investments, strategic investments by companies, private equity investments, private debt placements, acquisitions, divestitures, and merchant banking.

[edit] Value of Investment Banks

Being specialists, investment bankers offer three advantages to companies who use them:

  • They have networks contacts in terms of both issuers and purchasers.
  • They can create a competitive pricing environment for the company's securities or other assets.
  • They possess current market knowledge about the financial markets themselves, transaction structuring, legal processes and comparable market events.

[edit] Major Investment Banks

Some of the major investment banks include: