Investment banking is a method of controlling the flow of money. The goal of investment bank is channeling cash from investors look for returns into the hands of entrepreneurs and business builders who are long on ideas, but short on money.
Investment bankers raise money from investors, by selling securities, and then transfer that money to people who need cash to start businesses, build buildings, run cities, or bring other costly projects to reality.
Investment bankers simply find opportunities to unlock the value of companies or ideas, create business or route money from being idle to having a productive purpose.
Role of Investment banking.
Investment bankers get involved in every early states of funding a new project or endeavour Investment bankers are typically contacted by people, companies, or government who need cash to start a business, expand a factory, and build schools or bridges.
Representatives from the investment banking operations then find investors or organizations like pension plans, mutual funds, and private investors who have more cash than they know what to do and who want a return for the use of their money. Investment bankers also offer advice regarding what investment securities should be bought or the ones in investment might want to buy.
.Key business areas of investment banking.
Investment banking providers offer a wide range of financial services. Depending on the size of investment bank, the bigger ones will have more services while others will have less. Mathew Krants and Robert R. Johnson in their book “Investment Banking” lists the main services of investment banks.
Capital raising
This helps companies and organizations generate money from investors. This is typically done by selling shares of stock or debt.
Financial advisory
In this role, the investment banking operations is hired to help company or government make decisions on managing the financial resources. A advice may pertain to whether to buy another company or sell off part of the business. A common business decision tacked by this type of investment banking is whether to acquire another company or divest of a current product line. This is called mergers and acquisitions (M&A) advisory.
Corporate lending
Investment banks typically help companies and other large borrowers sell securities to raise money. But large investment banks do offer loans to their customers, often short-term loans (called bridge loans) to tide a company while another transaction ins in the works.
Sales and trading
Investment bankers are creative and innovative lot, in the business of constructing financial instruments to be bought and sold. It’s natural for investment bankers to also buy and sell stocks and other financial instruments either on the behalf of the clients or using their own money
Brokerage services
Some investment banking operations include brokerage services where they may hold client’s assets or help conduct trade,
Research
Investment banks not only help large institutions sell securities to investors, but also assist investors looking at buying securities. Many investment banks run research units that advise investors on whether they should buy a particular investment or not.
Investments
Investment banks typically serve the role of a middleman sitting between the entries that need money and those that have it. But from time to time, they may invest their own money in promising projects or companies. This type of investment This type of investment, often made in companies that don’t have investments that public can buy, is called private equity.
