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What is Investment Banking?

Companies often consult investment bankers for advice on mergers and acquisitions.
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  • Originally Written By: Brendan McGuigan
  • Revised By: C. Mitchell
  • Edited By: Niki Foster
  • Last Modified Date: 24 September 2014
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Investment banking is a type of financial service that focuses on helping companies acquire funds and grow their portfolios. Much of this comes in the form of stock and bonds transfer, but investment capital and wholesale corporate acquisitions are also part of the equation. Bankers within this sector are usually highly trained, and are widely recognized as some of the most elite participants in the financial marketplace. They are often sought as much for their consulting and advising services as they are for actually executing transactions.

Consulting Services

Investment bankers frequently give companies advice on mergers and acquisitions. They also track the market in order to help executive officers determine when to make public offerings and how best to manage public assets. Some of the consultative activities investment banking firms engage in overlap with those of private brokerages which often give buy-and-sell advice to the companies they represent. Investment banking is typically a much more nuanced service, but many of the basic strategies are the same.

Transactions and Purchases

Most of the consultants and specialists working within investment bank firms are able to actually execute transactions on behalf of clients, as well. Many large companies simply want the advice, and will then make their own decisions in-house. Particularly for small businesses and companies without robust financial services divisions, however, hiring an outside consultant to manage investment decisions can make a lot of sense.

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Benefits for Both Buyers and Sellers

When done properly, investment banking has the potential to benefit both those who are selling corporate acquisitions and those who are buying. Asset sales generate substantial revenues that companies can use to front new products, promote existing brands, or invest in research and development. Breaking into business typically requires a lot of money upfront before any profits are realized, but once those benefits come, primary investors usually profit substantially.

Distinction Between Commercial and Investment Banking

Commercial banking — that is, basic account management, loans, and standard investments like certificates of deposit — are typically kept separate from corporate investment activities, and many banks engage in but one area. In the United States, it was illegal for a bank to have both commercial and investment divisions until 1999, when the Gramm-Leach-Bliley Act legalized multiple areas of specialty. Institutions that offer dual services usually do so through different branches and staffs, and accounts are usually maintained separately.

Breaking Into the Field

Investment banking is often one of the most lucrative and sought-after jobs in finance, but with this prestige comes great responsibility. Most of the professionals in this field have extensive training. A college degree in finance or accounting is almost always required, and graduate degrees — particularly in business, corporate finance, or financial management — are quite common.

Career Prospects and Growth Potential

Investment bankers typically enjoy a great deal of job security. Corporations of all sizes and maturity levels can make use of investment banking services, and there is almost always a market for these skills. Entry-level workers almost always have wide horizons for growth and promotion.

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Discuss this Article

anon263841
Post 63

I am an MBA second semester student and I want to know about investment banking, so please give related information about investment banking.

anon250696
Post 60

I'm currently doing my undergraduate degree in Commerce, majoring in IT. I want to apply for internship at an investment bank and I'm wondering what to expect of the recruitment process. I also want to know more about investment banking. Any information related to this will be highly appreciated.

anon243813
Post 59

Can anyone give an idea about banking investments?

Please give me advice.

anon184981
Post 56

I am a final year MBA (finance) student I have an interest in working in a investing bank. Could you tell me more about this sector, how can I get in to this sector, --Rafiq

anon179673
Post 55

sony ericsson was no merger. it is a joint venture.

anon154741
Post 54

I am first year bachelor of accounting science student wanting to pursue a career in investment banking (investment banker),what courses should I be taking at varsity. Please help.

anon138710
Post 52

I am Satyendra pursuing PGDM, want to know the basic differences among joint venture, merger and acquisition.

anon137745
Post 51

i am pursuing pgdm(finance/marketing). i am in the fourth semester. I am interested to built my career in investment banking, so i seek some guidance about what is this and how can i succeed in this path. please give me some information in this regard. --shyam

anon136479
Post 48

anon5011, Sony Ericsson is not a successful merger. It is a joint venture between Sony and Ericsson to manufacture mobile phones, and is not even a merger between these two corporations.

anon129930
Post 46

hello i m b.com graduate and currently doing advanced professional program in management. will i be able to get any job in investment banking?

anon128842
Post 45

i am arjun, presently pursuing my MBA in the first year, first semester. i want to know more about industrial banking. will i have a great future if i do this?

anon120805
Post 43

I can't believe the comments. After completing an MBA, these people are clueless about Investment Banking.

anon109690
Post 40

So many graduates posting, who want to go into investment banking, but have no idea about the field?

anon100601
Post 39

I've done MBA international marketing and i want to know whether I am eligible for investment banking. kindly guide me in this aspect. thank you. --suri

anon98482
Post 38

i have completed my MBA Finance. now i want to know about investment banking.

anon93521
Post 37

I am Devendar M. i am an mba finance graduate. now i want to make my career in the field of investment banking. please guide me. what should i do for making my career in investment banking?

anon84870
Post 36

i want to know how many investment banks are in the world?

anon84555
Post 35

Are the above comments real? How are these people MBA graduates? You need to speak English before getting an Investment Banking job in the US.

anon83991
Post 34

I've completed my MBA in finance and now am working in investment banking Co. and i want know the SAP Course and how it's related to IB. I have a plan to do SAP FICO.

anon82193
Post 33

i m a banking and insurance student. i want a project on banking, i want information on marketing in banking.

lawlaw
Post 32

I'm an MBA student, I'm writing my dissertation about investment banking. can you help me in how to find information about this topic?

anon75414
Post 30

I am md ahmed. i am an mba finance graduate. now i want to make my career in the field of investment banking. please guide me. what should i do for making my carrier in investment banking?

anon73982
Post 29

I am reading bsc mathematics and statistics in university of cape coast, ghana and i also have a certificate in fundamentals of investment and finance and financial market. Can someone kindly help me to know more about investment banking and also institutions in ghana that are into investment banking?

anon72966
Post 28

i completed my mba in finance and i need information about investment banking. in an interview, what type of questions will they ask regarding this matter. i need full information.

anon69216
Post 26

I've done my graduation in science. can I go for a career in investment banking?

anon68152
Post 25

I completed my MBA and doing challenging job in US based PUB co. I want a career in Investment Banking so what sort of skills do i need to acquire to get it. Thanks.

anon67474
Post 24

How does investment bank work practically? Thanks.

anon66356
Post 23

I am working as a Business development manager in one leading brokerage company. I need information regarding investment banking.

anon66007
Post 22

What is the role of investment banking in an organization?

anon62665
Post 20

i completed my MBA finance from OU university,

i want to know about investment banking.

anon58694
Post 19

Investment Banking is the key to getting our economy growing in the future. Worldwide application of matching capital, labor and human ingenuity will benefit all of us. 2010

Robert usa

anon58106
Post 18

I want to know about investment banking and its carrier.

anon54178
Post 17

I am Sumant. i am pursuing my mba from chitkara university. I want to know more about investment banks.

anon49367
Post 16

I am pursuing MBA in Finance from RBS Delhi. I want more info about Investment Banking. -Parag

anon47835
Post 14

i am pursuing an M.B.A from IIeBM(pune). i am doing my specialization in finance, but i don't know much about how investment banking works. i want detailed information.

anon45255
Post 13

I a Liberian currently doing my MBA. I would like to be an Investment Banker but my country is not developed to the extent that a career in this area could be useful. Please advise.

anon45242
Post 12

i am pursuing an M.B.A from Amity university. i am doing my specialization in finance, but i don't know much about how investment banking works. i want detailed information.

anon44906
Post 11

i am interested in investment banking so please if anyone can help me please.

anon36599
Post 10

I am a Ghanaian studying Spanish and psychology in my third year in the University of Ghana.I want a career in investment banking. How do I get into investment banking, which possible schools in my country could help me after my first degree and what can I do now to prepare me. Are there courses I could take now and how do I do it? What are the courses required?

rambista
Post 9

I am doing my graduate level. I am really interested in wholesale banking, but I'm really oblivious regarding how to go into this sector. I would be obliged if you let me know what skills are crucial?

nitingauda
Post 8

I am doing my MBA and I am very much interested in the investment banking sector but I do not know how to get into this sector and I want to know what skills are needed and which courses I may take?

anon18499
Post 6

pls am a fresh graduate from one of the university in nigeria as a banking and finance student, pls i want to ask how i can be a good banker and contribute as well and what really makes one a good banker

poreddyvenu
Post 5

could you please send me the information about private Equity and its applications?

anon8394
Post 4

I am working as a domain expert in our company. I need information regarding banking domain and the procedure of banking in U.S.

Candidly,

vamsi krishna.Kunasani

anon5011
Post 3

Can we consider Sony Ericsson the case of successful merger?

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