Q. 1 What is investment banking?

Investment banking is a special segment of banking

operation that helps individuals or organisations
raise capital and provide financial consultancy
services to them. They act as intermediaries
between security issuers and investors and help
new firms to go public.
They either buy all the available shares at a price
estimated by their experts and resell them to public or sell
shares on behalf of the issuer and take commission on each
share.
Description: Investment banking is among the most complex financial mechanisms in the world.
They serve many different purposes and business entities. They provide various types of financial
services, such as proprietary trading or trading securities for their own accounts, mergers and
acquisitions advisory which involves helping organisations in M&As,; leveraged finance that involves
lending money to firms to purchase assets and settle acquisitions, restructuring that involves
improving structures of companies to make a business more efficient and help it make maximum
profit, and new issues or IPOs, where these banks help new firms go public.

Let’s understand how an investment bank earns money by providing acquisition advisories.

Think of company ABC buying another company XYZ. ABC is not sure how much company XYZ is
really worth and what will be the long-term benefits in terms of revenues, costs, etc. In this scenario,
the investment bank will go through the process of due diligence to determine the value of the
company, settle the deal by helping ABC prepare necessary documents and advising it on the
appropriate timing of the deal.

Here the investment bank works on the buy side and some other investment banks may be working on
the sell side to help XYZ. The bigger the deal size, the more commission the bank will earn.

Bank of America, Barclays Capital, Citigroup Investment Banking, Deutsche Bank, and JP Morgan
are some of the largest investment banks in India.

Q. 2 Explain 4 Types of investment

banking?
1. Bulge Bracket Investment Banks:
o The Bulge Bracket Bank covers the top most recognizable investing firms
throughout the world. They have the highest brand values among other banks.
o Banks that are falling under this category are Goldman Sachs, JP Morgan,
Morgan Stanley, and others. They provide financial services for huge
investments, advising, and research. These banks typically categorize their
investment banking division into product groups and coverage groups. They
are well-known outside the finance industry.
o They focus on huge projects rather than working on smaller ones, making sure
that any sector which is seeking their assistance is asking for heterogeneous
projects.
o Their primary goal is to provide one genuine product, providing a wide range
of financial services, also including advising and analysis.
o You will find that Bulge Bracket Banks has offices in major financial hubs
globally, making their network strong with various major clients over all the
world, but you will not be able to find them in small cities.
o The deals for these types of banks should be of huge amounts in the range of
over $1 billion or even greater. These banks are the biggest investment banks
with the greatest parties as their clients.
2. Elite Boutique Investment Banks:
o If you are looking for a higher-paying investment bank for an analyst, these
banks are where you have to stop looking. Lazar LLC, Moelis & Company,
and Evercore Group LLC are known as Elite Boutique Banks.
o They tend to give higher salaries to their employees as compared to any other
bank, not even Bulge Bracket, which has the highest brand value. They are
known for limited types of activities.
o These banks don’t have the constraints of location, one will be able to find
these types of banks all over the locations whether a posh one or a local one,
hence they have more exposure than Bulge Bracket Banks.
o Different Elite Boutique will focus on single services say if one elite bank is
providing a service of advising, the other will be concentrating on capital
restructuring. Getting homogenous projects from their clients is their primary
 goal, with a deal size approximately of $1 billion, making them the competitor
of Bulge Bracket.
3. Regional Boutique Investment Banks:
o Regional Boutique Banks are those that are dealing in smaller transaction
sizes. Deals that they carry forward are usually less than the size of $10
million.
o You will find out that they usually assist the companies with the work of loan
financing. Raymond James, Robert W. Baird, and Brown Brothers Harriman
are the banks that fall under this category.
o These types of banks are not specialized for any specific product or in any
specific sector. They will be working on different projects and different clients
from different sectors but in smaller cities that have quite local companies or
organizations.
o These banks have strong connections and networks within a particular
location, they don’t focus on clients who are outside their specified geography.
4. Middle Market Investment Banks:
o Middle Market Investment banks focus on small emerging businesses to get
financial advice and assistance. Working in these banks will let employers
make connections within a region. It focuses on the middle market customers
and finance that surrounds its office.
o They don’t have as much brand value as the upper-mentioned banks have. It
focuses on middle-market customers and finance. Jefferies, Macquarie, and
RBC Capital Markets are the banks that work as Middle Market Banks.
o These types of banks are categorized as those banks that deal in transactions
the size of $500 Million to $1 Billion. They usually target clients who are too
big for the Relational boutique type or too small for the Bulge Bracket type.
o They don’t serve a wide area but are under a specific spread, not presented
internationally. Mediocre-sized businesses are the main client of these banks.