What is investment banking?
Investment Banking is a financial service provided by a banking division or a finance company that advises governments, corporations, and large financial institutions on raising money, merging or taking over companies, and restructuring their business to be more effective and efficient. It is also known as corporate finance.
The situation in different countries: brief description
Countries like the USA and UK have excelled in this field and are home to the top investment banks and firms. However, a few Asian countries (India, Pakistan, Philippines, etc.) and Australia are not progressive. This could be due to failure of understanding, lesser recognition of Asian or Australian investment firms and investment banks.
Critical areas in the investment banking division
There are 5 essential areas, namely:
Mergers & Acquisitions (M&A Business) –
Corporate Advisor – Bankers advise companies on Mergers & Acquisitions.Buy RDP From reliable sites.
When two companies come together, it is a Merger; When a more prominent company takes over a smaller company, it is an Acquisition.
Equity Capital Markets (ECM) & Debt Capital Markets (DCM) –
Here, bankers advise companies, businesses, and governments on raising capital(money).
- ECM – Raising money through Equity. For example: if Google wants to raise capital through ECM, it sells a part of its company (through shares/bonds) to the public in exchange for money. Now, the ones who buy become shareholders of Google.
- DCM – Raising money through Debt. For example: if you take a loan from the bank, it benefits through the interest you pay along with the principal. (Except here, the bank and you are large corporations, and interest runs in millions).
Bankers scrutinize and analyze the company’s structure (debt/equity ratio, etc.) or business to see if it is efficient and designed in a beneficial way to shareholders.
Leveraged Finance –
A riskier form of DCM. DCM involves safe loans and government bonds, but Leveraged Finance consists of raising capital with Debt: buying a company using Debt. Here, the buyer(private company owner) will not have enough money but borrows it from a banker who is a conduit between the borrower and many interested investors. If the owner fails to repay the Debt, the company automatically ends up in the investor’s hands. Therefore, to gain maximum benefit from an investment firm(e.g. Australian investment firm – Investors Central, etc.), the borrower must carefully evaluate all options available.
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To apply for an investment banking job, one must have:
- A bachelor’s degree with a major in economic/finance or any field related to them.
- A master’s or advanced degree in business management or finance.
- An internship experience in a top firm
Additional Skills involve:
- Financial modeling.
- Network marketing.
- Well-versed in a variety of valuation methods and presentation making.
- Basic work knowledge and ability to research.
- Impeccable communication and networking skills.
- Qualities of a team player.
- Analytical thinking and negotiation skills.
- Ability to organize and prioritize assignments and projects.
- Fluent explanation about market events and valuable advice to clients.
- Experience in the usage of Microsoft Office applications.
Besides these skills, they need to be intelligent and hardworking.
Jobs and salaries
- Depending on their strengths, and investment bankers can work as:
- M&A Banker – must have creative ideas and impeccable soft skills to outsmart bankers from other firms.
- An underwriting specialist – is someone who analyzes the level of risk involved in accepting a stakeholder(someone who shows interest in a company’s business). This is a very critical role and is done keeping in mind the capital needs of a company. The specialist should have contacts and be well-researched.
- Private Equity professionals – obtain profit for a company while claiming a % of it. Must have prior experience and exceptional academic credentials.
Investment bankers’ salaries depend on the post they hold (analyst/associate/vice-president/managing director) and their country.