Investment banking is a type of financial entity whose purpose is to advise various corporations, entities and administrations on many processes, such as raising capital or mergers and acquisitions. Investment banks play an important role in transactions as they are the link between investors and institutions and through them, various types of investments are made possible. In this article, we will take a closer look at the concept of investment banking and its processes and highlight its main elements.
Why we need investment banking: its main aims
Investment banking provides an extensive list of services, but it can often be confused with another concept, namely IBD. Their main difference relies precisely on the number of services they provide. Below we will take a closer look at the main features of investment banks:
- Capital Raising -Investment banks help connect investors who want to profitably invest their money with companies that need financing, or in the case of a company going public
- M&A – they provide advice to both sides of the transaction and support the management of the transaction process from inception to closing
- Sale and trade – investment banks either act as clients’ agents or trade the firm’s capital themselves
- Securities market research – these services aim to help investors make better decisions and support stock trading
- Asset management – to help manage investments by using different types of investments
Investment Bankers Skills
To perform such complex financial transactions, investment bankers must have several specific skills. An investment banker’s typical day is spent snuggling up with an Excel program, where they build financial models and make assessing worth by means of different techniques, consulting clients and closing transactions efficiently. What to know about investment banking skills is that investment bankers should be able to:
- Do financial modeling -Financial modeling is divided into several types. The banker must not only be aware of their existence but also conduct complex operations to recreate them (DCFs, LBOs, three-report models, etc.)
- Business valuation -business valuation methods are also extensive, and for an investment banker to make the most accurate valuation, he or she must tailor the valuation methods to the specifics of the client’s company
- Marketing books and presentations – your presentation skills have to be top-notch as you have to provide your clients with ideas that appeal to them and thereby win new business
- Transaction documents – an investment banker must work with sensitive information, prepare it for secure exchange, create a data structure in data rooms, and so on
- Relationship management – being able to build communication is another important skill that will help successfully close a deal
- Sales and business development – entails constant meetings and negotiations with potential clients, valuable advice and counseling for starting a new business
Is an MBA for investment banking necessary?
An MBA for investment banking is not a prerequisite for working in this field, but with this degree, finding a job will be much faster and easier. Former business school students have significant advantages that are welcomed in large-scale banks, and it allows them to achieve high salaries in a shorter period. Also, an IBA degree will give you a strong foundation to hone the investment banker skills listed above.
Although it can be a grueling job at times, the field of investment banking is still extremely competitive and stable, so if you want to further your career, having the right education is a must.