The Investment Banking Division specialises in mergers & acquisitions and capital raisings for businesses and private equity clients
Investment bankers have both origination and execution responsibilities.
Origination is the process of building and maintaining client relationships and pitching the bank’s capabilities with the objective of winning transaction mandates. Execution is the process of guiding the client through the steps to realise the transaction.
Investment banking divisions are typically organised into:
- Product teams
- Industry coverage teams
- Regional / country coverage teams
Junior bankers are required to perform extensive financial analysis, valuation and modelling work. Senior bankers roles include negotiation, strategy and managing relationships.
Mergers & Acquisitions (“M&A”)
Investment banks act as agents connecting potential buyers and sellers of companies, business divisions and assets. They act as advisors to potential buyers (“buy-side”) or the seller (“sell-side”) in M&A process.
A typical deal team would include bankers from the M&A team, industry coverage team and / or country coverage team.
The nature of M&A involves a great deal of secrecy and investment bankers are party to market sensitive confidential information.
When a company chooses to sell itself or divest a business division, investment banks are invited to compete at a “beauty contest” for the mandate to act as advisor to the selling company. Investment bankers pitch their credentials for the role, strategy, identifies potential buyers, gives initial views on valuation and a fee proposal.
The primary objective of the seller is usually to get the highest price possible for the asset. There may also be other factors that are of great importance to seller.
The role of the sell-side advisor is to manage the sales process, coordinating the client, potential buyers, lawyers and accountants.
Investment banks not acting on the sell-side of a M&A transaction often seek to represent potential buyers of the asset.
The primary objective of the buyer is to win the auction at the best possible price and terms. There may also be other factors that are of great importance to buyer.
The role of the buy-side advisor is to guide the client through the auction process and coordinate with the sell-side advisor and other advisors including lawyers and accountants.
Companies may raise capital to fund business needs, growth, acquisitions and refinance existing debt.
Investment banks act as advisors and underwriters to businesses raising debt and / or equity capital. Instead of providing the funds itself, the investment bank places the newly issued financial securities with investors.
As with M&A transactions, investment banks are invited by clients to pitch at a “beauty contest” to pitch for a role in the issuance. Typically, multiple banks (“syndicate”) will be hired, with some banks holding more senior roles than others.
Capital may be raised by issuing new shares to investors in exchange for funds.
An initial public offering (“IPO”) is taking a privately-held company into (at least part) public ownership (shares traded on a stock exchange).
Other examples of equity issuances include secondary (follow-on) offerings and private placements.
Capital may be raised by issuing new bonds (public debt) to investors in exchange for funds or issuing loans (private debt).