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Investment Banking

What is Investment Banking?

Investment banking is a banking service that helps people or organizations get funding and advice for their financial goals.

They work as intermediaries between those who issue securities and those who invest in them and help new companies go public. They either buy all the shares at a price they estimate and sell them to the public or sell shares for the issuer and get a commission for each share.


 

Investment Banking Explained

Investment banks help corporations with various financial services, such as issuing and selling new stocks and bonds, facilitating mergers and acquisitions, reorganizations, and trading for institutions and private investors. Investment banks advise issuers on how to offer and place their stock in the market.

Investment bankers are supposed to be experts who know the current trends and opportunities in the investing world, so businesses and institutions rely on investment banks for guidance on how to plan their growth, as investment bankers can customize their suggestions based on the current economic situation.

 

Example of Investment Banking

A company XYZ acquiring a stake in company ABC. XYZ wants to expand its market share and diversify its product portfolio by investing in ABC, which has a loyal customer base and a strong brand image. However, XYZ is not sure how to value ABC's assets and liabilities and how to integrate its operations and culture with ABC's. In this scenario, the investment bank will help XYZ conduct due diligence to assess ABC's financial performance, risks, and growth potential. The investment bank will also advise XYZ on the best way to structure the deal, negotiate the terms and price, and finalize the legal documents