Investment banks provide advisory-based financial services to corporations, governments, and individuals. These advisory-based services, long associated with corporate finance, are offered to clients for underwriting or for debt or equity issuances. Investment banks don't accept deposits like retail banks and commercial banks do. Let's take a closer look at what these firms do.
Relatively mature companies often have the opportunity to grow rapidly. This is when growth capital comes into play. Businesses use it to enhance profitability and revenues by expanding operations, entering new markets, and, in some cases, acquiring new businesses. The combination of high growth and low risk of investment makes growth capital an appealing choice for these relatively mature businesses. Every day, PE/VC companies receive a large number of fundraising proposals and very often seek recourse to investment banking businesses to sort and analyse them.
Raising funds from debt and equity markets is one of the main functions of investment banking firms. These firms perform a central role in launching IPOs for companies preparing to go public.
Private placements, another key function of these firms, involve selling shares or bonds to investors and institutions instead of selling them on the open market. It could be a faster and easier way to raise funds because placements do not need to be registered with the SEBI.
These firms also collaborate with PE/VC firms and assist businesses with alternate funding methods. Moreover, the process of fund-raising also entails determining the appropriate pricing for the business. To determine the pricing, they consider the market conditions, investor experience, and comparable offerings, among other criteria.
Investment banking firms are typically consulted when corporations consider selling their business. Selling a business may be a lengthy and arduous process. Hiring an investment bank to help with the deal might alleviate a part of the burden for you and your management team while also increasing the chances of a successful outcome.
Having access to investment bankers' wide network of cash-rich investors is a big advantage when raising funds to invest in innovative technology, make smart acquisitions, or expand a company's operations. Moreover, wide experience and resources are required for structuring and implementing deals, which these firms supply. Furthermore, structuring and implementing deals require extensive experience, skill and resources, which these firms supply.