Everything About Investment Banking That You Absolutely Need To Know

investment banking involves lots of research and analysis

Investment banking is a prestigious and lucrative field that can shape entire industries. Investment banks oversee mergers and acquisitions, underwriting, asset management, equity research, and more.

Here we’ll discuss what investment banking is, what these bankers do, and how the process works.

What Is Investment Banking?

Investment banking (IB) involves working with corporations, governments, and institutions by offering various services to help clients expand their businesses. Many banks have their own investment banking division, but full-service investment banks offer even more services.

Investment banks are intermediaries between those who have the capital to invest and entities that need capital to grow and function. Investment bankers help clients make financial decisions that impact their bottom line.

What Do Investment Bankers Do?

Full-service investment banks offer a variety of services, including underwriting, mergers and acquisitions (M&A), asset management, and equity research. Investment banking divisions of larger financial institutions offer underwriting and M&A services alone. 

Let’s break down the offerings of a full-service investment bank, including those of investment banking divisions.

Underwriting Services

Underwriting involves selling stocks and bonds to investors on behalf of corporations to raise capital. Investment banking means helping clients acquire money, and investment bankers do so by positively marketing their clients.

Underwriting comes in three varieties:

  1. Firm commitment: The underwriter buys the entire issue at an agreed-upon price. Should the underwriter neglect to sell the whole issue, the underwriter assumes financial responsibility for unsold shares.
  2. Best efforts: This form of underwriting is most common. The underwriter agrees to sell as much of the issue at its decided price as possible, but the underwriter isn’t held financially responsible for unsold shares. 
  3. All-or-none: To receive compensation, the underwriter must sell the entire issue at the offering price.

Underwriting services in investment banking involve planning, assessing timing and demand, and developing issue structure. It’s an involved commitment that helps ensure the process is as successful as possible.

Mergers and Acquisitions

One of the strengths of investment banking is the banks’ extensive relationships and networks. M&A involves helping businesses find, evaluate, and ultimately acquire other companies. Bankers advise both buyers and sellers to negotiate on behalf of their client.

There are ten steps to the M&A process:

  1. Acquisition strategy: what does the acquirer expect to make?
  2. Acquisition criteria: how can the banker identify qualified target companies? Factors include customer base, location, stage, profit margins, and more.
  3. Searching for target: using the above criteria, bankers evaluate potential companies.
  4. Acquisition planning: after contacting qualified companies, the acquirer begins talks to see if it’s a good fit.
  5. Valuing and evaluating: if the first talk goes well, the acquirer asks for considerable financial information to check if the target is actually a great fit.
  6. Negotiation: after receiving all this information, the acquirer presents an initial offer; the buy-side and sell-side begin negotiations.
  7. Due diligence: if the offer is accepted, due diligence is performed to evaluate all aspects of the target company. This ensures no catastrophic details are missed.
  8. Purchase and sales contract: if there are no problems during due diligence, the parties decide on the type of purchase agreement (asset vs. share purchase).
  9. Financing: how exactly will the deal be financed?
  10. Implementation: management teams on both sides work together and merge both companies.

Equity Research

Equity research involves producing recommendations, analyses, and reports in various investment opportunities that clients may be interested in. The primary purpose is to advise investors on whether to buy, sell, or hold an investment via detailed financial reports. This process closely supports investment banking clients.

A typical equity research report includes:

  1. Industry research
  2. Management commentary
  3. Financials over time
  4. Forecasting
  5. Valuation
  6. Recommendations for clients based on 1-5

Sales and Trading

Sales and trading groups match sellers and buyers of securities. These groups within investment banks are agents for clients and can trade the firm’s capital.

Asset Management

Investment banking means managing investments for institutions, individuals, and all types of investors across many investment types.

Investment Banking Process

Remember that investment bankers are the intermediary between a company and investors when the company prepares to issue bonds or stocks. 

Firstly, investment banks help clients maximize revenue and price appropriately while navigating regulations. 

When a company IPOs, the investment bank buys shares directly and then acts as a proxy, selling shares to the market. Thus, the company offloads a lot of the exhaustive IPO work by contracting out to the IB.

How does an investment bank make money? Since IBs buy and then resell offerings, they mark them up on the resell side; this involves considerable risk, but bankers use their experience to price as appropriately as possible to sell off shares and turn a profit effectively. Investment banks must not overvalue the stock and end up unable to sell it.

Investment Banking Job Description

Interested in hiring an investment banker or pursuing a career in investment banking? This is what a typical job description involves.


  • Create financial models to value equity and debt for capital raising transactions and M&As.
  • Review pitchbooks, investment materials, and management presentations that are involved in financing clients.
  • Form recommendations for M&As, valuations, product offerings, and private equity transactions.
  • Conduct research, analysis, due diligence, and documentation.
  • Develop relationships with existing and new clients to grow the firm.

Skills and experience:

  • MBA or equivalent
  • Bachelor’s degree from a prestigious university
  • 3+ years of experience on the quantitative side of a finance career
  • Understanding of deal structure and closing principals
  • Enjoys fast-paced environments with little supervision
  • Strong financial modeling abilities
  • Excellent networking and people skills
  • Excellent quantitative, research, and analytical skills

Hire The Right Investment Banking Leadership

To effectively oversee all aspects of investment banking, you need exemplary leadership at your helm. Hiring the wrong executive can cost up to $1.5 million, and when clients depend on you, it’s not the time to make that mistake.

Jennings Executive specializes in hiring the best investment banking talent to drive your bank forward. We understand how the industry evolved in the face of COVID-19 and are here to bring in qualified leadership. Learn more today.

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