Just like how financial advisors are for families and individuals, an investment banker is for the corporates. The role of the banker in many ways would be different from that of the advisor although at the core they perform the same function of handling and growing finance.
The primary task of Investment bankers is to help the corporates raise money in the market. They help lay out the financial plans with respect to the phases the company is going through and assist in all exit strategies of the firm. They typically tie up with a firm for years together.
- Raising Capital
Whether you have a company that wants to expand or you are representing the government that has to undertake an infra-structural project, an investment banker is approached in both the cases to assist in issuing bonds which in turn bring in the needed finance into the system.
From here on, the investment banker creates and issues the bond with appropriate price so that there is a great demand for it created.
In a case where the company is deciding to raise funds by IPO, the investment banker helps to lay out the terms, the workings of the IPO as well as in setting the price of each stock just to ensure again that maximum traders purchase it.
In a nutshell, whatever be the strategy to expand, an investment banker helps in building that up.
Investment bankers act as underwriters for the deals. An underwriter is a person who evaluates the risk in the corporation or a strategy in return for a small payment.
Investment bankers generate profits by buying and selling securities. The amount is earned either through a fee or commission.
- Private raising of funds
In order to avoid bearing the cost of IPO and also to initiate a faster capital raising process, many investment bankers begin to offer bonds through insurance companies or similar retirement funds.
- Advice on Mergers
The investment banker is the vital advisor on the merger or acquisition of one company by the other. It analyzes the company and comes up with a value. The banker suggests what should be the terms of the merger. Also the other party might need assistance to analyze the price which is asked for and initiate any offers if possible.
While the investment banker is an important extended member of the company as they are responsible to look into all growth opportunities, they do have confidential information about the company with them. As a result, there have been several cases of conflict of interest with the investment bankers. However, selecting a well – known banker and analyzing the services and security they provide must curb the issue completely.