Introduction
Investment banking is a specialized segment of banking which helps in raising capital for companies and government. In simple terms, investment banks connect large investors with businesses and organizations that need funding. Investment banks also facilitate advisory services and help clients assess risks and opportunities to make informed decisions.
The Investment bankers are financial experts who are specialized in helping companies, government, and other institutions in raising capital and in navigating complex financial transactions. Investment bankers are professional in evaluating market conditions, assessing company valuations, and identifying potential risks and rewards associated with financial deals. Along with this, investment bankers assist in execution, negotiations and structuring.
Key Roles of an Investment Banker
Capital Raising
Capital raising means raising funds from different external sources to achieve the company’s strategic goals. Investment bankers help businesses and organizations raise funds by providing the best source of funding. They access the need, market conditions, determine the best timing, and set appropriate pricing to maximize capital raised.
Underwriting
Underwriting role means investment bankers access the risk associated with buying securities from a company and selling them to the public or institutional investors. This will help companies deal with the probable risks and help raise funds quickly. Investment bankers act as an intermediary between companies and investors. Under the underwriting role, investment banker has following roles:
- Risk Assessment
- Pricing the Securities
- Purchasing and Reselling Securities
- Marketing the securities to potential
Market Analysis and Risk Assessment
We know that investment bankers act as an intermediary to companies, corporations and investors. Before consulting anything to their client, investment bankers need to have detailed information and knowledge regarding the securities, market, risks, trends, potential etc. They must have in-depth knowledge so that they help clients make informed decisions regarding investment and other financial strategies.
Financial Restructuring
Another role of an investment banker is financial restructuring. Companies are facing various financial challenges and require various strategies to overcome challenges. Some of the ways how investment banker contribute in financial restructuring are:
- Investment bankers help companies negotiate the terms of debts i.e. debt restructuring. Debt restructuring includes negotiating the terms like debt maturities, debt interest rates, debt proportion etc. Such debt restructuring helps manage the cost, cash flow and solvency.
- Investment bankers assist companies in case of any immediate cash requirement. In such cases, investment bankers identify and sell the non-core or underperforming assets. Divestiture strategy is handled by investment bankers.
- Investment banker has to negotiate sometimes on behalf of the company with creditors and stakeholders. In such cases, investment bankers ensure the best deal which will benefit financially to its client.
Advisory Role for Merger and Acquisitions
Investment bankers are experts in conducting and negotiating the Merger and Acquisition terms. Bankers provide the proper valuation, negotiate terms, and structure the deal to ensure the benefits of the clients.