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Investment Banking: A Guide to Understanding the Role of Investment Bankers

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Published on Feb 16, 2023

Today many large companies or organizations are widely exploring the path of making acquisitions and merging with other firms by buying off the maximum market shares. But have you wondered how these companies know when, how, and where to invest such a large amount of money in reaping the maximum benefits in return?  

This is where investment banking comes into the picture.  

Any corporation, large or small, needs advice before deciding on their investment and putting their hard-earned money and reputation on the line. And investment banks exist to facilitate capital funding through investment in corporations or government entities. They work to provide organizations with financing through various activities like underwriting - which implies finding buyers or investors for the issuance of stock or bonds. When handling bond offerings, investment bankers offer their clients services that are similar to those for an IPO. 

Investment banking may often seem like just a service facilitated by banks, but the term goes way deeper, and there are full-fledged investment banks present that help organizations, government firms, as well as high-income individuals, and other corporations with their investment planning. It is, therefore, vital to comprehend the term "investment banking" in more detail. 

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But the key element here is pricing, which is determined by the interest rate offered. Investment banking service has been implemented in recent years to make investments more convenient for large entities. 

What is Investment Banking?  

Investment banking is a financial service and assistance offered by a finance company or a banking division to assist multinational corporations in their investment plans. Along with top organizations, they are assisting high-net-worth individuals as well as governments in creating capital. Some of the significant roles that an investment bank plays are to subsidize securities for all types of organizations, assist in the sales of securities, and arrange for mergers and acquisitions.  

Investment banks strive to offer a way for large corporations and government firms to construct large financial transactions and make influential financial decisions with some help. To do that, investment banks often assist companies in issuing their IPOs or Initial Public Offerings, and when doing so, investment banks help in selling the shares on the market. 

To manage an IPO, investment banks are responsible for creating a prospectus that defines the company and the terms of the stock offering. It also assists in handling the necessary compliance issues with the appropriate financial regulatory body and setting the initial stock price to attract sufficient investment and obtain the company's financing requirements.  


In simple terms, we can say that investment banks are financial advisors to large companies, institutions, and governments. These advisors advise enterprises regarding the sales and trading undertaken between buyers and sellers and assist them in making large financial deals in the process of acquisitions and mergers.  

But before we get into what various job positions at an investment firm entail, it is important to understand the financial services offered by investment banks. 

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Types of Investment Banking 

Investment banking can be divided into two subsets, including corporate finance and industry coverage. Companies are now assigning investment bankers to operate in these subsets. Let's explore the types of investment banking. 

  • Corporate Finance: In corporate finance, investment bankers assist individuals and organizations in raising capital via stocks, bonds, and other investment options. They help in supervising mergers, acquisitions, and preparation for IPOs as well. 

  • Industry Coverage: A vital subset of investment banking, industry coverage focuses on businesses or diverse types of commerce. It is important for professionals to remain up to date with the trends in their assigned business sector. They help in reporting different findings to stakeholders. 

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Role of the Investment Banker 

Today, investment bankers play a significant role in many financial activities embarked on by companies and government institutions. Considered one of the most prestigious professions on Wall Street, investment banking features prominently coveted and financially rewarding positions in the banking industry. But it is an equally challenging profession. This career option is dreamed of because a successful investment banker can enjoy a high salary, abundant networking opportunities, as well as the ability to play a highly visible role in the success stories of an organization. Nevertheless, the day-to-day job of an investment banker is demanding, fast-paced, and can be considered stressful. 

Companies are turning to individuals in the financial sector to receive the right advice about which investment will be fruitful for their enterprise and which will potentially cause them to suffer future losses. These experts understand the feasibility of large projects and have a thorough understanding of investing. And are referred to as investment bankers. The investment bankers help identify the risks associated with a said project while informing them to suggest investing opportunities in the project. This helps in saving the client's time and money. 

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  1. Investment Bankers in Mergers and Acquisitions 

Investment banks assist clients, including top corporations, in transactions like mergers and acquisitions (M&A (Mergers & Acquisitions)), where the organization seeks to acquire another firm or when a company is proposed for sale. The company valuations produced by investment banks help in determining what an organization is willing to pay to take over another firm. 

For enterprises looking to acquire, investment banks advise them on the value of the corporation being acquired and the most favorable way to structure the right offer. Investment banks have clients who are looking for targeted acquisition and want the client to determine a reasonable price or value. Acting in the above-outlined capacities, investment banks serve as an advisor to their clients to secure the right capital markets and provide capital through the sale of equities or bonds.   

  1. Investment Bankers in Jobs and Titles 

It is important to understand that investment banking is not just a single job; rather, it is a business within the banking industry that incorporates several distinct roles. There are two ways to look at investment bankers. One is to identify by their job title, which helps in determining the type of tasks they handle. The other involves the division of the investment bank they operate in, which helps in determining the types of projects they work on. 

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Key Highlights 

  • Investment bankers assist companies and other government entities in raising money for expansion and improvement. 

  • They help organizations in managing their initial public offering (IPO). 

  • Investment bankers also help in scheduling a bond offering, negotiating a merger, or arranging the placement of bonds. 

  • Investment banking today holds a reputation for being a highly paid profession but a highly stressful one as well. 

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The Bottom Line  

Investment bankers today play a vital role in helping their clients raise capital to finance different activities and expand their businesses. They act as financial advisory intermediaries who aid businesses and governments in raising money for various uses. While investment banks have been scrutinized and criticized from different angles in recent years, they have become indispensable elements for the successful operation of a free market economy.  

The banking industry has come under scrutiny as it has been playing a key role in numerous elements of the process of raising money. With their roles evolving, investment bankers are now helping smooth the wheels of capitalism by assisting with capital financing. They help in allocating resources, price capital, and managing investments across diverse portfolios. 

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A market leader in Investment Insights, SG Analytics assists in strengthening investment decisions by leveraging custom research support. Contact us today if you are in search of an investment research firm that offers tailored research support across a broad range of asset classes.