Investment banking is a distinct segment of the finance industry that is responsible for the generating of capital for corporate enterprises, corporations, governments and business organizations. Experts who conduct activities for the establishments that fall under this banking division oversee the underwriting of new securities in the form of equity or debt for all kinds of businesses. In addition to this, these bankers also provide advisory services to companies that enter into merger and acquisition agreements or corporate reorganization. For the benefit of private and institutional investors, they carry out broker trade and guide them on the issues relating to the placement of company stocks.
Bob Stefanowski, a popular investment expert in America, says investment banks are organizations within the banking industry that employ specialists to help companies plan and handle large investment projects. Their services go a long way in assisting their clients in the corporate sector and government save time and money by pinpointing potential risks before they implement such ventures. In addition to this, the professionals also act as intermediaries between a corporate enterprise and potential investors when the former issues stocks, shares or bonds in the market. They also help in pricing these financial instruments in order to maximize the profits of their corporate clients. The mains functions that investment bankers carry out for their clients include:
- Initial Public Offering(IPO): Investment bankers provide underwriting services to corporations in the public and private sector when these organization issue new securities in the primary market. In the banking industry, experts refer to this as initial public offerings. In addition to this, they also act as intermediaries when it comes to trading in stocks for their clients and foreign exchange.
- Investment Management: Specialists in the field of investment banking offer advisory services to investors on the purchase, trade and handling of various securities. Such activities also extend to the buying, managing and selling of various assets like real estate and mutual funds.
- Mergers and acquisitions: Merger and acquisition is important area where corporate enterprises hire the services of investment bankers guide them on whether to purchase rival companies. These experts give valuable advice on determining the value of these businesses. In addition to this, they help to finalize the purchase consideration to satisfy the interests of all the parties to the agreement.
- Risk Management: In this activity, investment bankers analyze the market trends and assess the credit risk their clients take by trading in securities on the stock exchange. In addition to this, they also determine the amount of money these traders need to invest in the financial markets to minimize their potential risks.
- Structuring of Derivatives: This is a recent activity that investment bankers carry out for their clients, which involves dealing in derivative products in the financial markets. A derivative is contract that at least two parties agree to undertake and they determine the consideration based on the performance of an underlying asset in the financial market.
Bob Stefanowski explains that in addition to the above activities investment bankers play a critical role in assisting corporate enterprises make informed decisions when it comes to rising capital.