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Investment Banking

This can get confusing as the whole bank is often referred to as an Investment Bank.  However there is also an Investment Banking Division (IBD).  This essentially comprises Corporate Finance and Mergers & Acquisitions (M&A).  Sometimes its called Merchant Banking, Global Banking or Corporate Banking. Corporate Finance is concerned with raising finance (capital) on behalf of a firm who wishes to develop, grow, acquire or create a business as well as providing financial and strategic advice. The division will also deal with firms that wish to merge with or acquire another firm.

There is often a change of ownership in a business, connected with some type of corporate transaction that leads to the creation of a new equity structure and shareholder base. Firms will also deal with the corporate finance division when they wish to list on a stock exchange for the first time, in order to raise funds. This is called an Initial Public Offering (IPO).

 

In order to raise capital on behalf of businesses the IBD department will carry out any number of transactions. These could include:

  • Raising seed, start-up, development or expansion capital
  • Mergers, demergers, acquisitions or the sale of private or public companies
  • Management buy-out, buy-in or similar of companies, divisions or subsidiaries - typically backed by private equity
  • Equity issues by companies, including the flotation of companies on a recognised stock exchange in order to raise capital for development and/or to restructure ownership
  • Raising capital via the issue of other forms of equity, debt and related securities for the refinancing and restructuring of businesses
  • Raising capital for specialist corporate investment funds, such as private equity, venture capital, real estate and infrastructure funds
  • Financing joint ventures, project finance, infrastructure finance, public-private partnerships and privatisations
  • Secondary equity issues, whether by means of private placing or further issues on a stock market,
  • Raising debt and restructuring debt,

The Investment banking division is generally divided into product teams and Client teams.  The later is a specialist area of the business, with senior professionals looking after clients in a specific region or industry, for example Healthcare or Industrials.  These are the people directly responsible for working with clients and growing their businesses, by using their skills, experience and expert knowledge of their market and industry. Client teams are sometimes referred to as working in 'client coverage'. Client coverage bankers identify a client's needs and then call on product specialists for advice on which products and services would be right for the client.

Product teams, as the name suggests, are the ones with the extensive product knowledge. They work with client coverage teams to advise on a range of services. These generally break down into:

  • Mergers & Acquisitions: M&A specialists provide strategic and financial advice regarding potential target companies, pricing and valuation, and how to integrate the companies post-acquisition.
  • Structured Finance: Its complicated! Structured finance is an alternative option to a standard business loan and is instead borrowed against a company's cash-flow history.
  • Equity Capital Markets: helps companies structure, buy, sell and issue shares.
  • Debt Capital Markets: Debt capital is the finance or assets that a business raises by taking out a loan

Is it for you?

One thing is certain – you can expect to work very hard. There are long hours in this area (often, well into the wee small hours) though the rewards are very good. Your work will have a direct impact on the financial fortunes of some of the biggest companies in the world. So it's not the sort of job you can do without a degree of obsession and incredibly hard work. It’s a very demanding environment and you need to thrive on challenge and pressure. You need to be highly numerate and happy crunching numbers. The learning curve is very steep. It’s also one of the most competitive areas of the bank to break into.

 

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