Investment banks are financial institutions that provide a number of financial services to corporations, wealthy individuals, governments. They services they provide are centered around the investment of capital, and typically involve helping clients in the issuance of securities. Investment banks also assist those who want to purchase securities and other assets. These banks also usually manage the financial assets or investment portfolios of some clients, and make investments using their own funds.
An investment bank can also help companies with mergers and acquisitions. The primary services provided by an investment bank include: equity research, corporate finance, asset management, and sales and trading. Investment banks make their profit by charging commissions and fees for rendering these services and other business and financial advice.
You may be wondering how investment banks assist companies in mergers and acquisitions transactions. Well, investment banks play a very important part from the moment a company contemplates an acquisition to the final process. When a seller or buyer contemplates an acquisition, the parties involved and their board of directors may decide to form a special committee that will assess the merger proposal, and then retain an investment bank for the evaluation of the transaction’s price and terms. They will also help the acquiring company find financing for the acquisition.
An investment bank helps a client issue stocks, bonds and other securities to the marketplace. Unlike commercial banks which lend money from their own capital, investment banks look for new investors to buy the securities for their client, thereby raising funds for the company or organization. In order to accomplish this, investment bankers must estimate or determine the value of the company or organization, and then price the securities accordingly. The success of investment banks is determined by their ability to raise the maximum amount possible for their clients.
Investment bankers can help organizations go public. Investment banks act as the intermediary between investors and organizations, and have both the capital financing skills and Enterprise management expertise. For a public offering transaction to go through, satisfactory evaluation or analysis of the organization has to be supported by the appropriate capital market conditions. Their network of financial outlets of dealers and brokers can supply details of capital market performance.
James Dondero is the Co-Founder and President of Highland Capital Management. He has over 30 years of experience in the equity and credit markets, focused mostly on distressed and high-yield investing. Highland Capital has contributed greatly in developing credit-oriented solutions for retail and institutional investors around the world. James Dondero is Chairman of CCS Medical, Cornerstone Healthcare, and Nexbank, and he is also a board member of MGM Studios and American Banknote. Mr. Dondero is active in philanthropic activities, supporting initiatives in veteran’s affairs, education, and public policy.