What is Investment Banking?
Investment Banking is a small sector of the finance industry that plays a very curtail role in governments and corporations. The Investment Banking is the bridge that connects the investors with the corporate. The growth of corporate result in the financial benefit of the investors.
Services of an Investment Bank
There are various services offered by the investment banks. Many have this misconception that investment banking is all about investing in stocks and so on. But that is just a small part of investment banking. The investment banks provide services like Underwriting, Mergers & Acquisitions, Sales and Trading, Equity Research and Asset Management.
Underwriting is the procedure that involves the selling of stocks and bonds to the investors in order to raise the capital. It is a known fact that every business needs money to operate and take things to the next level. So underwriting is basically the process of marketing the company to the investors. There are three types of underwriting. They are
Firm Commitment is when the underwriter decides to buy the entire share and gain complete control.
As the name states, the underwriter agrees to sell as many shares as possible with a price for it and is allowed to return the unsold shares.
All or none
If there is a situation where the whole issue cannot be sold, and then the deal is called off, and the company gets nothing is called all or none.
Mergers & Actuations advisory services
The M&A advisory service is the process of assisting the corporations to evaluate and complete the business actuation process. It is one of the important functions as the banking sector capitalizes on the network that it has in the corporate world. Bankers advise both sides in M&A Transactions.
Sales and Trading
Sales and trading is the most curtail function of investment banking. The process involves trading and selling of company shares that have registered public offerings. These investment banks also sell shares of government holdings. This plays a very important role in the economy of the company and the whole country.
Equity Research involves the analysis of the company’s financial status, performance ratio, the company’s financial forecast and exploring the ways to increase the share value.
Asset Management refers to the approach of the value of the tangible and intangible assets of an individual or a firm. The process involves deciding whether to invest the money in a particular entity or not.