Tips For Understanding Investment Banking

When you are involved in the world of business, either as a business owner or as a key player in an organization, you will hear about investment banking and how important it is to growing organizations. The confusing thing about understanding investment banking is the word "banking." When you start to analyze and study investment banking, you begin to realize that the term banking may not really apply. The broad range of services offered by an investment bank are all financial in nature, but it is difficult to look at an investment bank as you would any other kind of banking institution.

No Deposits Required

One of the elements of an investment banking organization that is much different than a commercial bank is that an investment banking organization does not accept deposits or facilitate withdraws. This is not the kind of bank that you would go into and open an account. The kinds of business that an investment bank performs is very specific and geared towards a very specific kind of audience. Your company will not be receiving marketing fliers from an investment bank in your mail box anytime soon.

Mergers and Acquisitions

One of the primary functions of an investment bank is to help facilitate mergers and acquisitions between organizations. In many cases, these are large-scale transactions between two publicly traded companies. There is a long list of factors to consider when facilitating this kind of transaction and that is why the investment bank is involved.

The investment bank will evaluate the value of both organizations and then make recommendations as to how to proceed with the transaction. The bank underwrites the transaction and then it will file the necessary paperwork to get the transaction completed. It is a very long process that involves the expertise of financial experts from a variety of industries and disciplines.

Public Trading

If you read up on the latest companies who are preparing to make their initial public offering on an open exchange market, you may see some organizational names in the mix that do not seem to have any real purpose. Those are the investment banking organizations that made the IPO possible and they are critically important to the entire public securities trading process.

An investment bank will analyze the company's financial position and recommend starting share prices. The bank will also finance the IPO and help the company to navigate the sometimes intimidating process of dealing with the Securities and Exchange Commission. Without the services offered by investment banks, there would be almost no securities traded on open exchanges.


A very important service that investment banks offer their corporate customers is consultation on the many aspects of corporate investments and public exchanges. Investment bankers get involved in the financial activities of companies that most people never hear about. Investment banks can advise companies on how to invest in the securities offerings of other companies, and they can also offer companies guidance on how to handle their own stock offerings.

The relationship between an investment bank and a publicly traded company is ongoing. There are always federal trade regulations that need to be attended to along with a variety of other financial obligations that public companies have to worry about. Those are the kinds of concerns that are left for the investment bankers.

Public And Private

An investment bank has the ability to be split into two organizations. One organization deals with the public aspects of offering securities and exchange trading, and the private organization deals with insider concerns for companies that are not allowed to be released to the general public. As you can imagine, the regulations for separating these two kinds of organizations within the same investment banking firm are extremely comprehensive.

If you are interested in working for a financial organization that deals in the behind-the-scenes aspects of the corporate world, then you are interested in getting involved in investment banking. These are the highly-skilled financial professionals who understand how the very core of the securities exchange system works, and they use that knowledge to help companies bring their securities offerings to the public, or to advice companies on how to invest their money.