Investment Banking
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Investment Banking
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Investment Banking
- 1. Investment Banking A Report by Raymund Sanchez
- 4. Functions of an Investment Banker
- 22. Events in a Negotiated Sale
- 32. -END-
Notas do Editor
- An investment bank is a financial institution that raises capital, trades securities and manages corporate mergers and acquisitions. Investment banks work for, and profit from, companies and governments, by raising money through issuing and selling securities in capital markets (both equity and debt) and insuring bonds (e.g. selling credit default swaps), and providing advice on transactions such as mergers and acquisitions. A majority of investment banks offer strategic advisory services for mergers, acquisitions, divestiture or other financial services for clients, such as the trading of derivatives, fixed income, foreign exchange, commodity, and equity securities
- Investment banks offer security to both corporations issuing securities and investors buying securities. For corporations investment bankers offer information on when and how to place their securities in the market. The corporations do not have to spend on resources with which it is not equipped. To the investor, the responsible investment banker offers protection against unsafe securities. The offering of a few bad issues can cause serious loss to its reputation, and hence loss of business. Therefore, investment bankers play a very important role in issuing new security offerings.
- In market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade
- While the research division generates no revenue, its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients There is a potential conflict of interest between the investment bank and its analysis in that published analysis can affect the profits of the bank. Therefore in recent years the relationship between investment banking and research has become highly regulated requiring a Chinese wall between public and private functions.
- to ensure that the above mentioned economic risks are captured accurately (as per agreement of commercial terms with the counterparty), correctly (as per standardized booking models in the most appropriate systems) and on time (typically within 30 minutes of trade execution).
- A method is negotiated for determining the price the investment banker & his syndicate will pay for the securities.
- The firm does not directly select the investment banker. The investment banker that underwrites & distributes the issue is in effect chosen by an auction process. confined to 3 situations by legal issues (1) railroad issues (2) public utility issues (3) state & municipal bond issues
- The securities are not underwritten. The investment banker attempts to sell the issue in return for a fixed commission on each security sold. Unsold securities are returned to the corporation.
- Speed: because SEC registration is not required Reduced floatation costs: same as above & inv banking underwriting & distribution costs does not have to be absorbed Financing flexibility: terms of issue can be precisely tailored to meet specific needs of a company Restrictive covenants: dividend policy, working capital levels, raising of additional debt capital maybe affected by provisions in the private placement debt contract Possibility of SEC registration: if the investor should decide to sell the issue to a public buyer before maturity, it must be registered with the SEC