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Corporate Finance or Investment Banking

Corporate Finance or Investment Banking

The banks that take care of financial instruments like shares, bonds, etc. are known as the investment banks. They are nowhere close to the normal commercial banks that we have. They have no connections with the deposit and withdrawal customs that the everyday commercial banks have. Their primary job profile is to buy, sell and issue securities to its customers.

If the services of these banks are broadly categorised, they sum up to be an assistance rendered to various companies in the ‘buy side’ and ‘sell side’ activities. Private equity funds, hedge funds, mutual funds, proprietary trading desks, and pension funds; are among its buying side activities. On the other hand, its ‘selling side’ activities comprise of investment banking, investment research, broking and dealing in securities, and advisory functions.

Investment banking which is one of the sell side activities of an investment bank is often mistaken to be any activity performed by an investment bank. It is in reality, a term which refers to the advices given to various companies with regard to their mergers and acquisitions, along with the issues of raising capital. Jennifer Neighbours is an individual from Chicago who worked in this investment banking section in the firm SSB Capital Partners, of which she is also a founding member.

This investment is also called the corporate finance department of a bank, and it works in collaboration with other needful companies in presenting the IPO or Initial Public Offering. Also, if any company already has outstanding public stocks, then this department could assist it in putting together a secondary issuance of stock shares.2

Investment banking also enables a company to raise its capital through private placements, which it does by securing the capital from private equity groups. Jennifer Neighbours as an investment banker feels that this process of helping companies raise their capital is rather beneficial at times for a career like hers. Her opinion is designed in this manner because of the kind of connections this particular process helps in making. There are times when very influential officials of the government need to be encountered with, in the bid to understand their business policies.

The funds of a company can be raised by offering advices on issues related to their debts and other financial issues. The private and the public corporations are greatly helped by the investment banking. Services as a broker to public and institutional investors, is yet another aspect of investment banking.

The investment banks have assumed such a position in the corporate world, that it is almost impossible to imagine the business arena without it. Not only would the public and private companies have a tough time raising their capitals, but also the common man would have been in a ‘soup’ as to how to make their investments in places other than just the ‘savings account’.

These banks act as a catalyst in the flow of capital that is carried out on a daily basis in the corporate sector, and their absence would have greatly altered the profit scenario of most companies- both small and large.

 

Zenobia Spaulding

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