Investment banks provide four primary types of services: raising capital, advising in mergers and acquisitions, executing securities sales and trading, and performing general advisory services. Most of the major Wall Street firms are active in each of these categories. Smaller investment banks may specialize in two or three of these categories.
Raising Capital
An investment bank can assist a firm in raising funds to achieve a variety of objectives, such as to acquire another company, reduce its debt load, expand existing operations, or for specific project financing. Capital can include some combination of debt, common equity, preferred equity, and hybrid securities such as convertible debt or debt with warrants. Although many people associate raising capital with public stock offerings, a great deal of capital is actually raised through private placements with institutions, specialized investment funds, and private individuals. The investment bank will work with the client to structure the transaction to meet specific objectives while being attractive to investors.
Mergers and Acquisitions
Investment banks often represent firms in mergers, acquisitions, and divestitures. Example projects include the acquisition of a specific firm, the sale of a company or a subsidiary of the company, and assistance in identifying, structuring, and executing a merger or joint venture. In each case, the investment bank should provide a thorough analysis of the entity bought or sold, as well as a valuation range and recommended structure.
Sales and Trading
These services are primarily relevant only to publicly traded firms, or firms which plan to go public in the near future. Specific functions include making a market in a stock, placing new offerings, and publishing research reports.
General Advisory Services:
Advisory services include assignments such as strategic planning, business valuations, assisting in financial restructurings, and providing an opinion as to the fairness of a proposed transaction.
