A fast paced area of banking, advising corporations and governments on capital raisings and other corporate finance services.
What Investment Bankers Do
Investment Banking professionals are primarily concerned with raising capital for corporations through either equity or the issue of debt.
Investment Banks don’t take deposits like regular banks, they earn their money through fees for providing services or taking a percentage of any deal they are involved in. When a company needs to raise money to achieve a goal of theirs, they engage an Investment Bank to be a middle man and secure the money on their behalf.
Investment Banks also provide underwriting services where they help a company with their Initial Public Offering, from start to finish, guaranteeing a certain number of shares will be sold.
Investment Banking is a lucrative and high salaried position which is highly sought after by finance graduates. Investment bankers work with high profile corporations on large deals that have affects on the entire business landscape.
Working in Mergers and Acquisitions involves corporate strategies for buying or selling parts of a business or an entire business.
Responsibilities include identifying possible opportunities for acquisitions, valuing the asset of business, doing due diligence on the asset or business, checking legal, tax and accounting regulations that may be relevant, and strategizing the post acquisitions phase i.e. how the asset or business or new entity created will function after the acquisition is completed.
Mergers and Acquisitions is about growth and restructuring and involves project management in completing the acquisition and financial modelling in assessing its value.
Underwriting is done by Investment Banks when raising capital for a client. The underwriter will help to price the equity or debt securities being sold and find buyers for the client issuing the securities. Underwriters will engage the market to assess interest for the product being sold and try to gain commitments from buyers. They will help price the security and act as an intermediary for the buyer and seller.
The underwriter will also guarantee a certain amount of sales and absorb any shortfall. Underwriting is both the sales force behind and advisor of the issue of debt or equity by a corporation.
Private equity is concerned with the buying and selling of businesses, by unlisted companies, using debt, who then restructure and fix them up for resale at a higher price. Working in this sector would involve identifying businesses that are underperforming to buy, purchasing said business, polishing up the business and then selling it off for more than was paid.
Private equity transactions usually attract elite business people and some private equity companies are limited partnership funds which are attractive investments for high net worth individuals.
Venture Capital is similar to Private Equity but involves the financing of start up companies. Working in Venture Capital would involve identifying new businesses with great growth potential and supporting it so that it may achieve said growth. Support can be provided in the form of technical or managerial expertise as well as financial funding.
Venture Capital opportunities must have due diligence done in order to asses the viability of the investment, as most Venture Capital investments are long shot, high risk investments, which have low probability of success.