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What Is Investment Banking?
There’s an old Wall Street adage that “capital will gravitate to where it’s most effectively treated.” Investment banks aid companies in raising capital by opening up financial markets and making them operate more efficient. This helps businesses grow while individuals grow and the society at large expand.
Investment banks offer a vast array of services. Some, like research divisions, examine a company’s prospects and create reports with buy or hold recommendations. Certain M&A firms help clients navigate the process of buying or selling an organization. They also provide “broker-dealer services” which allow institutions to exchange securities like bonds, stocks and commodities for cash, or other securities.
Some investment banks focus on specific types of transactions. These include IPOs (initial public offerings) and follow-on offerings or bond issuances for both corporate and sovereign governments. They may also advise on spin-offs or leveraged buyouts which involve the sale of a company’s business units to shareholders.
Some investment banks have a significant Sales & Trading (S&T) division that trades publicly traded securities like bonds, stocks and commodities on their own behalf and for other institutions, such as mutual funds and life insurance companies private equity funds, and others. This is a crucial aspect of the business since it can provide a source of revenue when other activities like M&A or IPOs aren’t as successful. They also offer “market making” services that are crucial to the operation of financial markets. They serve as intermediaries between people who want to buy or sell securities, and ensure that there are enough buyers for every transaction.
