What is investment banking?
When your business grows to the point that its ready to take part in larger, more complicated transactions, its time to think about enlisting the help of an investment banking partner. Find out more about whats involved in corporate investment banking below. Understanding investment banking  While many international banks have investment divisions, investment banks stand alone as a full-service portal for all investment activity. They assist with valuations, advising clients about the best course of action regarding acquisitions, sales, and mergers. One of the primary goals of investment banking is raising capital for businesses. This can be accomplished by issuing securities and helping a client go public. The bank underwrites debt and equity securities, aids in their sale, and helps provide guidance about issuing stock. Banks act as the middleman between investors and corporations, linking capital with growth. Some of the big names in investment banking include:  Barclays Capital  Credit Suisse  Deutsche Bank  Goldman Sachs  J.P. Morgan  Morgan Stanley  These work with a wide range of international corporations and government agencies. In the case of corporations, investment bankers play a key role in identifying project risk and investment opportunity. You might use the services of an investment bank to gain of-the-moment insight into the current market, which is vital if youre thinking about acquiring another company or planning a new development. One of the most important roles of corporate investment banking is in the issuance of stock and bonds. Investment banks price these financial instruments according to all regulatory requirements, ideally maximising revenue for the client company. If you decide to take your company public with an initial public offering (IPO), the investment bank purchases your shares directly. Theyll then act as the go-between for investors, selling your companys shares on your behalf. Theyll sell the shares at a mark-up price, turning a profit while absorbing risk. In order to make sure both client and bank make a profit, investment bankers must be experts about the current state of the market. If stock is overvalued, the bank will lose money on the deal. Asset management vs. investment banking  Full-service investment banks include a multitude of departments, performing numerous roles within the financial services industry. Typical services include:  Mergers and acquisition  Sales and trading  Equity research  Underwriting  Commercial banking  Retail banking  Asset management is also one major component of investment banking, although sometimes the terms are used interchangeably. You cant necessarily delineate the difference between asset management vs. investment banking; one is part of the other. Asset management takes place within investment banking, dealing directly with the everyday management of a clients portfolio. Skills used in investment banking  Successful corporate investment banking involves the heavy use of financial modelling. Heres a look at the various skills investment bankers use in the workplace:  Financial modelling  Analysts use a range of models in the workplace, including discounted cash flow models, 3-statement models, and others. Document preparation  An investment bank will prepare official financial documents on your behalf, such as confidentiality agreements and investment teasers. Business valuation  Bankers will use valuation methods like a DCF analysis and comparable company analysis to determine what your assets are worth. Business development  Its the job of an investment banker to pitch new development ideas, seeking out ways to add value to your business and boost capital growth. Communication and negotiating skills are also important in the everyday line of business. As a small start-up, you might not need to enlist any investment banking services. The answer can be yes, if youre in need of new ways to raise capital. If youre at the stage where youre thinking about selling shares in your company and taking it public, investment banks are well worth the price. Theyll also provide valuable advice about mergers and acquisitions, using the latest modelling to maximise profit. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.