A lot of people might be familiar with the term financial advisors but investment banker is something that sounds unheard of. Investment banking is about providing services to customers or business sectors to raise their capital by investing and arranging acquisitions. For a better overview of investment banking, we have written this detailed article on what is the role of investment bankers.

What is Investment Banking?

Investment banking represents the financial activities that involve organizing huge or complex financial transactions for mergers to raise capital. Investment banking helps companies raise money by following a number of ways, including underwriting and issuing new securities for the company or any other institutions.

Investment banks manage a companys IPO, and they also provide financial advice on mergers, acquisitions, and reorganizations. In this regard, the investment bankers are the experts who provide you with all the financial assistance within the key areas of the investment bank.

Key Areas Within Investment Banking

Although investment banking may sound like a part that works for a corporate, there are further key areas within investment banking that are most appealing for businesses.

Corporate Finance

The corporate finance department is responsible for performing only one duty, which is maximizing the value of shareholder for their client. Due to this reason, the clients will approach the corporate finance teams to take advice for their big decision of making the investment.

Equities

The equity teams are responsible for keeping an eye on which stocks would be going up and which would be going down at what time. Their job is to analyze and predict the markets financial situation to understand when it is the right time to enter or exit.

While working as a member of an equity team, you may have to keep an eye on the stocks that are lowering and increasing abnormally. Such things could happen occasionally, but regular movement can indicate that there is something fishy in the market. For example, a stock can rise due to a strong brand promotion or fall due to the result of poor decision-making within the company.

Fixed Income

The fixed-income investment in investment banking is probably the safest choice as it will return income on a regular basis. Moreover, you might get reasonable results at predictable levels. The fixed income products usually involve bonds or other derivatives.

The fixed income investment highlights various complexities of the investment world. However, its a vital part of investment banking, and its the key weapon in the world of successful investment banking.

Who is an Investment Banker?

An Investment Banker is a financial expert who helps their corporate clients to attain funds in the capital market through various means. Investment bankers also act as financial advisors who often help companies to guide through merges and acquisitions. The starting position of an investment banker can start from the entry-level and lead to a high level like the other positions in the financial world.

In the corporate world, investment bankers hold a significant value. Without the assistance of investment bankers, the companies would be struggling to get the cash flow they need to serve their customers or clients. Moreover, assistance from investment bankers also helps the companies to establish a competitive position in the market.

What Does Investment Bankers Do?

The primary duties of the investment bankers are negotiating, planning, and advising business deals. Moreover, there are some other roles of investment bankers that are mentioned below.

Arranging Finances

Suppose a large investment company wants to build a new production plant but does not have the finances to do so. The investment company may decide to issue a bond to raise the finances for proceeding with the project. The costs for these bonds will be returned by the increased revenue generated by the production plant.

In a similar manner, the government may be required to finance a new initiative or any large project for the municipal corporation. If the government issues a bond, they can progress with the work right away and return the payments on the bond from tax revenues.

In both of the above-mentioned cases, the investment banker would be the one to arrange the finances. The bond issuance will be planned by the investment bankers, who will also price it properly and complete the SEC documentation. Moreover, the banker will be responsible for marketing the bonds as well.

Underwriting Deals

Investment bankers usually underwrite the deals for arranging any capital market financing. It means that the investment bankers take the risk of buying shares from the issuers and then selling them to the public or potential buyers.

Investment bankers attach a markup to the price of the share to generate profit for their employers. Usually, a lead investment banker works with a range of other investment bankers to underwrite an issue. Hence, the risk becomes divided among various bankers.

Private Placement

Investment bankers also help their clients who wish to raise capital via private placements. The reason is because the investment bankers have the resources and connections to get the sales done. The private placement is useful because not all companies are willing to sell bonds or stocks in the open market.

Besides the private placements, investment bankers also carry the negotiations between the companies by presenting offers. Merging and acquisitions initiate a long battle of planning and discussions on both ends, where an investment banker is the lead character. Hence its vital to have an investment baker on your side when making the crucial collaboration deals with the companies.

Conclusion

Investment bankers assist the company and their clients in making money by performing a range of activities within investment banking. Every large corporate that wants to arrange instant cash flow in large sums relies on investment bankers, which is why they hold significance in the finance sector. We hope this article has given you detailed insights into what investment banking is and what are the responsibilities of the investment banker.