Investment banking is a branch of banking specializing in assisting individuals and businesses in raising funds and providing financial advice.
They serve as a conduit between security issuers and investors and a resource for new enterprises seeking to go public. They either buy all existing securities specified by their authorities and resell them to common people or sell stock on behalf of the issuers and collect payment on each sold.
Who can benefit from investment banking?
Investment bankers provide capital raising, mergers, and acquisition advice to a wide variety of customers. These clients can be found all around the world.
Clients of investment banks include:
Governments
Investment banks assist governments in raising funds, trading securities, and purchasing and selling crown businesses.
Corporations
Bankers assist private and public firms in going public (IPO), raising extra cash, expanding their operations, making acquisitions, selling company segments, and providing research and general corporate finance assistance.
Banks
Collaborate with institutional investors that handle other people’s money to assist them in trading securities and providing research. They also assist private equity firms in acquiring portfolio companies and exiting those positions, either through a sale to a strategic bidder or an IPO.
Types of Investment banking
Investment banking is crucial to the growth of the economy since they enable the household sector to get the highest return on investment. They also make it possible for the industrial sector to acquire low-cost financing.
The investment banking sector is frequently described as if it were a single entity. This, however, is not the case. There are different types of investment banks spread across the globe. These various investment banks can also be classified in a variety of ways.
The sorts of financial goods that these banks provide, as well as the geographical region to which they belong, are the most common categories of distinction between these banks. They are also frequently classified according to the magnitude of the transactions that they mediate. The role of investment banks changes dramatically depending on the magnitude of these transactions.
The different types of Investment banking have been described below:
Bulge Bracket Investment Banks:
Bulge bracket investment banks are among the world’s most recognizable financial services firms. Companies like Barclays, JP Morgan, Citibank, and others are among these banks. These companies already have significant commercial interests in retail banking, mortgage lending, and other areas of consumer and corporate banking. This sets them apart in the market. The word “bulge bracket” has no universally accepted meaning. However, it is most commonly used to refer to well-known global investment banks in most regions of the world.
Bulge brackets are pretty finicky about who they do business with. They are generally only involved in deals if the deal size is over $1 billion. Another distinguishing aspect of bulge bracket investment banks is that they offer a wide range of investment banking services, including advising and research.
It’s also important to remember that bulge bracket investment banks have offices all over the world. This enables them to build a stronger worldwide network and better fulfil the demands of clients who are also global behemoths that require services in several locations across the world. Bulge bracket investment banks are, without a doubt, the world’s largest investment banks.
Mid-Market Investment Banks:
Following the bulge bracket banks, the mid-market investment banks are the next type of investment banks. The firm focuses on mid-market customers and transactions, as the name implies. This implies they concentrate on transactions that are too large for boutique businesses but too small for bulge brackets. Their average deal size is between $500 million and $1 billion.
The names of mid-market investment banks aren’t well-known. They do, however, frequently have extensive investment banking expertise and are well-known in the financial community. The range of services they provide is fairly comparable to what bulge bracket businesses do. They do, however, have a smaller geographic spread.
Mid-market investment banks are frequently focused in one geographic period. It’s possible that they have many offices in the same nation or region. They do not, however, have a presence on the international level. Mid-market banks are rarely used by Fortune 500 businesses and other global behemoths. Medium-sized businesses are the primary users of their services. The range of services they provide is fairly comparable to what bulge bracket businesses do. They do, however, have a smaller geographic spread.
Mid-market investment banks are frequently focused on one geographic period. It’s possible that they have many offices in the same nation or region. They do not, however, have a presence on the international level. Mid-market banks are rarely used by Fortune 500 businesses and other global behemoths. Medium-sized businesses are the primary users of their services.
Elite Boutique Investment Banks:
Elite boutique investment banks specialize in a limited number of activities. They don’t participate in every activity available at bulge bracket businesses. Some of these high-end boutiques will specialize in a single industry. For example, some top boutique investment banks will concentrate solely on capital restructuring, while others would concentrate solely on mergers and acquisitions advice services.
Occasionally, premium services investment banks will limit their activity to a single industry. This means they exclusively work with customers in the oil and gas and consumer products industries. It’s important to remember that top boutique investment banks are referred to as such for a reason. They work on deals that are around the same magnitude as those done by mid-market companies. In reality, the deal sizes can occasionally rival those of bulge bracket corporations.
Regional Boutique Investment Banks:
The smallest sort of investment bank is the regional boutique bank. They frequently get into agreements with tiny local companies. The regional boutique investment bank’s usual deal size is less than $10 million. They are, nevertheless, frequently involved in transactions worth up to $50 million. Furthermore, they have a restricted geographic reach. They don’t require competencies like public problem management or mergers and acquisitions advising because they work with smaller companies. They usually assist businesses with loan financing. There aren’t many equity investors willing to put money into these little startups. Even if such investments are made, they will be made through venture capitalists and angel investors. In most circumstances, the services of regional boutique investment banks are not used.
Since Regional boutique banks do not release much information, not much information about them is available to the general public.
Each sort of investment bank has its own set of advantages and disadvantages. Different sorts of investment banks can be chosen depending on the size of the deal and the type of service that the clients demand.
India’s top ten investment banks are:
- ICICI Securities Ltd.
- Axis Bank Ltd.
- HDFC Bank Ltd.
- The Reserve Bank of India
- Credit Suisse Securities (India) Private Ltd.
- Deutsche Equities India Private Ltd.
- Edelweiss Financial Services Ltd.
- HSBC Securities & Capital Markets (India) Private Ltd
- IDBI Capital Market Services Ltd.
- JP Morgan India Private Ltd.
