What Is Investment Banking? How Do Investment Banks Function & Whom Do They Serve?

What Is Investment Banking? How Do Investment Banks Function
Investment banking is a type of bank that mainly deals with raising debt and equity capital (IPO), underwriting services, and equity sales & trading for corporations and other entities. These financial institutions also assist in the sale of shares and help in mergers, acquisitions, and restructuring. They fall under the category of Wholesale Banking Services or also called Merchant Banking

They fall under the category of Wholesale Banking Services or also called Merchant Banking

Article Highlights

  • Key Characteristics, Fun Facts
  • What Do Investment Bankers Do?
    • Equity Financing
    • Underwrtiting
    • M&A
  • Type Of Clients They Serve
  • How To Become An Investment Banker

Fun Facts for Aspirants!

  • Analysts who work at investment banks tend to spend up to 80-90 hours per week at the office (i.e., 16-18 hours a day)
  • It is one of the highest paying jobs in the world of finance
  • Bonuses can be higher than the annual salary if you are effective at your work
  • Analysts are the best entry point if you want to become an investment banker
  • All bulge bracket banks offer Analyst programs worldwide

What do Investment Bankers Do?Bulb Min

Investment Bankers are financial advisors and act as middlemen between corporations and investors. If a business needs capital and investors need to spend their money on profitable organizations, Investment Bankers merge these two ends by helping both parties.

Below are some of the major work Investment Bankers do:

  •     Equity Financing
    Equity Finance Min

    Corporations and PSUs try to raise capital by offering equity ownership in the market. It is one of the most cost-effective ways companies get a massive amount of funding. In that scenario, Investment bankers help corporations in preparing the prospectus for the listing of the shares. Investment bankers also take care of the regulators’ guidelines from time to time.
  •     Underwriting

Underwriting Min
Investment bankers also help corporations in underwriting. Underwriters collaborate with the corporations to determine the initial offering price of the securities, buy the securities from the corporation, and sell the securities to investors through its distribution network.

  •     M&A

MA Min
M&A is usually a lengthy task involving multiple negotiations, planning, and following regulatory requirements. In that scenario, Investment Bankers play the role of an advisor so that the deal comes at a fair price.

Type of clients they serveClient Min
Investment Banks serve a wide range of clients across the globe. Below we have penned down the most significant sectors in which investment banks help raise capital and perform M&A.

  •     Government

Investment Banks help governments build funding and trade shares.

  •     Institutions

Investment banks help Institutional investors trade securities by providing researched data.

  •     Corporations

Investment banks aid private and public organizations in getting IPOs, M&A, and restructuring.

How to Become an Investment Banker?

Generally, the profile of investment banking features a minimal requirement of a bachelor’s degree in economics, finance, business, accounting. Moreover, an MBA (preferably from Ivy League) would be an added advantage for the Associate position.

To get a detailed understanding, please see our other blog “How To Get Into An Investment Bank (Skills & Requirements)


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