An Investment Bank is a bank or say any other Financial Institution which helps corporate organizations in raising capital by acting as client’s agent regarding various services and as an underwriter when securities are issued. An investment bank assists companies with Project Finance, Mergers and Acquisitions, Leveraged Finance, Equity Capital Markets, Debt Capital Markets, Providing meaningful advisory, finding synergistic opportunities and Restructuring of business organization whether Private or Public or Government. The investment banks charges commission for providing financial and other services. The most popular investment banking products and services offered by banks and financial institutions are listed below.
Mergers and Acquisitions
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Investment banks provide advices to the companies when they plan to merge with the competitor or take over any small company. Mergers and Acquisitions require strategic level decision making. To provide advice regarding mergers and acquisitions bankers must have specialized skills and knowledge in order to provide precise financial advices. The future benefits and cash flows available to companies after merger or acquisitions should also be analyzed. There are lots of bankers who are highly capable can earn huge amount of money than ever expected by their specialized knowledge.
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Underwriting agreements provides safety to the corporations at the time of issuance of securities or debentures. This is the traditional role of investment bankers. The bankers providing such facilities have specialized skills in debt and equity finance. These bankers need to associate with their clients and can be able to know the capital needs of clients. This is also a commission based work. Underwriters can earn maximum commission on their respective gross Liabilities up to 5% on issue of securities and 2.5% on issue of debentures. There is high volume of risks involved as banks have to subscribe for securities outstanding after public issue. Thus one needs to be very much sure about the advisories provided.
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A lot of specialization is needed as venture capital involves investment in new venture or business which consists of risk to be accepted. With the help of favorable government support new startups are taking place in fast growing industries. The investment banker in this field must be able to take proper judgment about future benefit from the particular venture. As the investment is going to be in the new companies there are maximum chances of failures which a banker should be able to forecast well in advance in order to avoid future losses.
Equity and Debt Capital market
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This field of investment banking is fast growing and highly paid by the corporates and huge companies. Investment bankers in this field should possess skills of debt and equity finances, cost of issue, future benefits, company’s financial position with respect to payment of interest on debts etc.
All these fields requires peculiar and highly specialized knowledge of subject matter and requires strenuous workings in order to achieve desired results but the pay scale and compensations outreaches the difficulties on investment banker’s viewpoint and from the company’s viewpoint it gives huge assistance for financial decision making.