Investment banks are financial services companies that act as intermediaries in large and complex financial transactions. They help corporations and governments raise money by managing complex financial transactions such as IPOs and mergers. Investment banks are best known for their work as intermediaries between a corporation and the financial markets. They help corporations issue shares of stock in an IPO or an additional stock offering, and arrange debt financing for corporations by finding large-scale investors for corporate bonds. Investment banks also provide strategic advice on a variety of financial matters to large institutional investors. Investment banking has a reputation for being a highly-paid but also highly-stressful profession.
Investment bank operations can be roughly divided into three main functions:
- Financial Advisors: As a financial advisor to large institutional investors, an investment bank may provide strategic advice on a variety of financial matters. They accomplish this mission by combining a thorough understanding of their clients objectives, industry, and global markets with...
- Underwriting: The investment bank is responsible for examining a company’s financial statements for accuracy and publishing a prospectus that describes the offering in detail to investors before the securities are available for purchase.
- Trading: Most large investment banks maintain strong trading capabilities, which is a significant though volatile profit center – profits are made both from...
Investment bankers play a role in a number of financial activities undertaken by companies and governments. They arrange financing, help their clients raise capital to finance various activities and expand their businesses, and facilitate flows of funds and allocations of capital. Investment banks can provide a range of services, including capital raising, book building, prospectus drafting, IPOs, “roadshow” investment meetings, issuing and selling securities, private placement of capital, mergers, acquisitions and divestitures, corporate restructuring, debt and equity advisory services, bond issuance and pricing on bond markets, and hedge fund, mutual fund, and pension fund advisory services.
