There’s an old Wall Street adage that “capital will gravitate to where it’s most effectively managed.” Investment banks assist in raising capital for businesses by allowing financial markets to be opened and improving their efficiency. This helps people prosper and the society grow.
Investment banks offer a vast variety of services. Certain, like research divisions, evaluate the potential of a company and then write reports that include recommendations for buying, holding or sell. Certain M&A firms help clients navigate the acquisition or sale of an organization. They also offer “broker-dealer” services that allow institutions to trade securities such as bonds, stocks, and commodities for cash or other securities (a process referred to as market-making).
Some investment banks specialize in certain types of transactions. These include IPOs (initial public offerings) and follow-on offerings or bond issuances for both corporate and sovereign governments. They can also offer advice on spin-offs and leveraged buyouts that involve the sale of business units of a company to its shareholders.
Certain investment banks have a large Sales & Trading (S&T) division that trades publicly-listed securities such as bonds, stocks, and commodities on their own behalf and for other institutions, such as mutual funds, life insurance companies, private equity funds, and others. This is a crucial aspect of the business as it provides a base of revenue even when other activity, such as M&A or IPOs, is weak. They also offer “market-making” services that are vital to the operation of the financial markets. They serve as intermediaries between parties who want to sell or buy securities, ensuring that there are buyers and sellers for every transaction.
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