6/15/2014 What is Investment Banking?

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What is Investment Banking?
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Investment banking is a type of financial service that focuses on helping companies acquire
funds and grow their portfolios. Much of this comes in the form of stock and bonds transfer,
but investment capital and wholesale corporate acquisitions are also part of the equation.
Bankers within this sector are usually highly trained, and are widely recognized as some of the
most elite participants in the financial marketplace. They are often sought as much for their
consulting and advising services as they are for actually executing transactions.
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Investment bankers frequently give companies advice on mergers and acquisitions. They also
track the market in order to help executive officers determine when to make public offerings
and how best to manage public assets. Some of the consultative activities investment banking
firms engage in overlap with those of private brokerages which often give buy-and-sell advice
to the companies they represent. Investment banking is typically a much more nuanced
service, but many of the basic strategies are the same.
Most of the consultants and specialists working within investment bank firms are able to
actually execute transactions on behalf of clients, as well. Many large companies simply want
the advice, and will then make their own decisions in-house. Particularly for small businesses
and companies without robust financial services divisions, however, hiring an outside
consultant to manage investment decisions can make a lot of sense.
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6/15/2014 What is Investment Banking?
http://www.wisegeek.org/what-is-investment-banking.htm# 2/11
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When done properly, investment banking has the potential to benefit both those who are
selling corporate acquisitions and those who are buying. Asset sales generate substantial
revenues that companies can use to front new products, promote existing brands, or invest in
research and development. Breaking into business typically requires a lot of money upfront
before any profits are realized, but once those benefits come, primary investors usually profit
substantially.
Commercial banking that is, basic account management, loans, and standard investments
like certificates of deposit are typically kept separate from corporate investment activities,
and many banks engage in but one area. In the United States, it was illegal for a bank to have
both commercial and investment divisions until 1999, when the Gramm-Leach-Bliley Act
legalized multiple areas of specialty. Institutions that offer dual services usually do so through
different branches and staffs, and accounts are usually maintained separately.
Investment banking is often one of the most lucrative and sought-after jobs in finance, but
with this prestige comes great responsibility. Most of the professionals in this field have
extensive training. A college degree in finance or accounting is almost always required, and
graduate degrees particularly in business, corporate finance, or financial management are
quite common.
Investment bankers typically enjoy a great deal of job security. Corporations of all sizes and
maturity levels can make use of investment banking services, and there is almost always a
market for these skills. Entry-level workers almost always have wide horizons for growth and
promotion.
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