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Investment banks
Investment banks serve as the middleman between investors and corporations that need
capital to grow their business. These banks provide their services so that there can be a smooth
transfer of money and for the purpose, agreement operations running the way they are
supposed to. They do not offer the same range of services that full-service banks also known as
commercial banks do, such as Regions and Bank of America.
There are two camps involved in investment banks and how they work. One side is the
buy-side and the other is the sell-side. The sell-side deals with facilitating client transactions,
engaging in market-making services, placing bond issues, and selling shares of newly issued
Initial Public Offerings, or IPOs. On the other side, the buy-side has the goal of maximizing
returns when trading or investing in securities. They do this by investing in the public and
working with hedge funds, mutual funds, and pension funds.
Investment banks have been around for a long time but gained their popularity largely
during the end of the nineteenth century riding into the twentieth century. The oldest
investment banks originated as merchants trading through items such as silk, metal, and spices,
and commodity. The United Kingdom still today remains one of the largest financial centers in
the world and still using the term merchant banks instead of investment banks. The Great
Depression hit not long after investment banks made their way to the United States with major
consequences. A dramatic spike in stock prices triggered one of the worst financial crises in
history in 1929. This resulted in much more stringent regulations in the industry bringing about
the Glass-Steagall Act of 1933 which required separation in commercial and investment banks.
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Investment banks mostly stayed on a steady increase excluding a few points in time but today,
this job field inspires a large interest from people to pursue through its success.
Although investment banks have had an immense amount of success, executives have also
contributed to the destruction of their respective firms in 2008 in the worst financial crisis since
the Great Depression. Many factors led to this crisis to occur all stemming from bank
executives. They began having poor underwriting practices as well as regulatory issues including
deregulation, lenient regulation, and in some cases a complete lack of regulating. There was a
subprime mortgage market that led to a drastic decrease in the prices of houses that lead to
foreclosures and delinquencies by people.
One of the two services investment banks offer is providing mergers and acquisitions
(M&A) advisors. M&A advisors provide institutes and corporations with the assistance of
completing business acquisitions. The banks use their resources and connections to give the
client networking and relationship opportunities to strike a deal. The process for mergers and
acquisitions is an extended process broken up into ten steps. The banks first form an acquisition
strategy to assess how they will be going about their business. They then review the acquisition
criteria to discover what the company or corporation has requested as their checklist for the
M&A. The bank proceeds with searching for a target followed by the acquisition planning to
follow through on their strategy. The bank will then decide on which target has the best value
and the best to offer to their client. Negotiation will then take place after evaluating and they
will then carry on with due diligence to ensure that the proper legal steps are taken. Next, the
bank will collaborate to form a purchase and sales contract to ensure that both sides follow
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through with their respective sides of the deal. The last steps are to deal with all the financial
obligations with financing and finally achieving the end goal of implementation.
Investment banks also act on the behalf of corporations and entities by selling stocks
and bonds to investors to raise capital. Generally, there are three different types of
underwriting. All-or-none underwriting is when the issuing company will receive nothing if the
issue cannot be sold at the offer price resulting in the deal being called off. Best efforts
underwriting deals with selling the most amount of the issue as possible but unsold shares can
be returned to the issuer without resulting in any financial penalties. A firm commitment is the
reverse situation of best efforts where the buyer is financially responsible for any of the unsold
shares and buying the entire issue.
The investment banking industry is generally split into three tiers: bulge bracket, middle
market, and boutique market. The bulge bracket generally consists of clients such as large
corporations and institutions. They do a range of things for these large organizations to be
successful through conducting research, advising, and providing financial services. The middle
market deals with the same types of tasks as the bulge bracket but they target smaller business
companies. A boutique market does not provide services in the same way that middle markets
and bulge bracket does. Generally, this market chooses one aspect of investment banking to
specialize in and/or one industry such as health care or insurance firms.
Investment banking is also split into three sections in its structure based on what their
daily duties consist of the front office, middle office, and back office. The front office is who the
public and the customers first see. They deal with the advising meetings on mergers and
acquisitions, trading, sales, and providing firms with strategies to raise their capital. The middle
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office is responsible for overseeing risk management by mitigating risk as well as implementing
a risk management plan to ensure negative impacts are reduced as much as possible. The
middle office also deals with information technology or IT. This department is a crucial part of
the firm dealing with the ins and outs of the computer system and dealing with any issues that
occur in the system. The back-office handles customer service, office management, and human
resources. Aside from customer service, they mostly deal with their employees and ensure that
proper work protocol is taken in the workplace and dealing with the hiring and firing processes.
The industry for jobs in the investment banking field continues to grow as sought after and
highly competitive. Many companies in this field are starting to shift their hiring to expecting
their new employees to have a substantial amount of previous knowledge through training and
specialized courses that get them to hire compared to the previous way of hiring fresh out of
college raw graduates and training them on the job. Some courses that are offered include but
are not limited to Investment Banking Networking Toolkit, BIWS Premium and Platinum (Excel,
PowerPoint, etc.), Bank and Financial Institution Modeling, Investment Banking Interview
Guide, and Real Estate Financial Modeling. By completing these courses, new people in the field
give themselves a step above to place themselves in prestigious job opportunities such as
private equity that pay $150,000 a year. Jobs in this industry tend to be high-stress and high-
pressure jobs but the plus side is that there are great benefits and high salaries involved. An
entry-level job such as an analyst makes on average $130,000 to $200,000 of compensation just
starting. The top tier level jobs such as Managing Directors make $1,000,000 or more in
compensation after accounting for bonuses and sales. This amount ranges from company to
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company having variance from a company’s success along with the success of the person's sales
each year.
Investment banks around the world like many other firms were highly impacted by the
COVID-19 pandemic that struck the economy. They sat well in growth before the pandemic hit
but afterward required for a change of strategy to be implemented. Investment banks had to
find a way to balance serving their anxious clients and responses that drove the market all at
the same time as containing the pandemic’s impact. 2021 has come around and investment
banks skyrocketed as the pandemic began to slow down. In just the first half of 2021,
investment banks generated nearly $80 billion in revenue up 26% from the first half of 2020
also the highest in over twenty years. JP Morgan, Goldman Sachs, Morgan Stanley, Bank of
America Securities, and Citigroup accounted for 32% of that revenue as the largest investment
bank firms in the world.
Overall, investment banks make a huge impact on the economy and the business
industry. These banks provide their services so that there can be a smooth transfer of money
and for the purpose, agreement operations running the way they are supposed to. Investment
banks have been around for a long time, and they will continue to provide substantial value to
the economy. Without them, the economy would not have the capabilities of prospering as it
does. They add liquidity to the market allowing money to be circulated and being used
compared to sitting in an account holding little to no economic benefit. This concept of putting
money to work allows for investors to generate a return on their money and at the same time
allow businesses to have the money to give out loans to other businesses which leads to the
circle of growth. Businesses can build new buildings and expand their product with the money
Showing Page:
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invested by the investors. The businesses can then create revenue of their own to eventually
have enough money to invest it themselves following the circulation of money for others and
themselves to grow. Investment banks are a substantial part of our economy and our
businesses to sustain continuous growth.
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Sources
G2. “Learn Hub.” G2, https://learn.g2.com/.
“Investment Banking.” Corporate Finance Institute, 5 Nov. 2019,
https://corporatefinanceinstitute.com/resources/careers/jobs/investment-banking-overview/.
“Investment Banking: The Ultimate Industry Overview.” Mergers & Inquisitions, 14 Oct. 2021,
https://www.mergersandinquisitions.com/investment-banking/.
Kennon, Joshua. “What Is an Investment Bank?” The Balance, The Balance, 10 May 2021,
https://www.thebalance.com/what-is-an-investment-bank-357318.
Ross, Sean. “How Do Investment Banks Help the Economy?” Investopedia, Investopedia, 13
Sept. 2021, https://www.investopedia.com/ask/answers/032515/how-do-investment
TCS Lending and Securitisation Solution.
https://www.tcs.com/content/dam/tcs/pdf/Industries/Banking%20and%20Financial%20Ser
vices/tcs-lending-securitisation-brochure.pdf.
“The History of Investment Banking.” International Finance Institute - The Global Leader in
Finance and Investment Banking Training, http://www.financeinstitute.com/blog/the-
history-of-investment-banking/.

Unformatted Attachment Preview

Investment banks Investment banks serve as the middleman between investors and corporations that need capital to grow their business. These banks provide their services so that there can be a smooth transfer of money and for the purpose, agreement operations running the way they are supposed to. They do not offer the same range of services that full-service banks also known as commercial banks do, such as Regions and Bank of America. There are two camps involved in investment banks and how they work. One side is the buy-side and the other is the sell-side. The sell-side deals with facilitating client transactions, engaging in market-making services, placing bond issues, and selling shares of newly issued Initial Public Offerings, or IPOs. On the other side, the buy-side has the goal of maximizing returns when trading or investing in securities. They do this by investing in the public and working with hedge funds, mutual funds, and pension funds. Investment banks have been around for a long time but gained their popularity largely during the end of the nineteenth century riding into the twentieth century. The oldest investment banks originated as merchants trading through items such as silk, metal, and spices, and commodity. The United Kingdom still today remains one of the largest financial centers in the world and still using the term merchant banks instead of investment banks. The Great Depression hit not long after investment banks made their way to the United States with major consequences. A dramatic spike in stock prices triggered one of the worst financial crises in history in 1929. This resulted in much more stringent regulations in the industry bringing about the Glass-Steagall Act of 1933 which required separation in commercial and investment banks. Investment banks mostly stayed on a steady increase excluding a few points in time but today, this job field inspires a large interest from people to pursue through its success. Although investment banks have had an immense amount of success, executives have also contributed to the destruction of their respective firms in 2008 in the worst financial crisis since the Great Depression. Many factors led to this crisis to occur all stemming from bank executives. They began having poor underwriting practices as well as regulatory issues including deregulation, lenient regulation, and in some cases a complete lack of regulating. There was a subprime mortgage market that led to a drastic decrease in the prices of houses that lead to foreclosures and delinquencies by people. One of the two services investment banks offer is providing mergers and acquisitions (M&A) advisors. M&A advisors provide institutes and corporations with the assistance of completing business acquisitions. The banks use their resources and connections to give the client networking and relationship opportunities to strike a deal. The process for mergers and acquisitions is an extended process broken up into ten steps. The banks first form an acquisition strategy to assess how they will be going about their business. They then review the acquisition criteria to discover what the company or corporation has requested as their checklist for the M&A. The bank proceeds with searching for a target followed by the acquisition planning to follow through on their strategy. The bank will then decide on which target has the best value and the best to offer to their client. Negotiation will then take place after evaluating and they will then carry on with due diligence to ensure that the proper legal steps are taken. Next, the bank will collaborate to form a purchase and sales contract to ensure that both sides follow through with their respective sides of the deal. The last steps are to deal with all the financial obligations with financing and finally achieving the end goal of implementation. Investment banks also act on the behalf of corporations and entities by selling stocks and bonds to investors to raise capital. Generally, there are three different types of underwriting. All-or-none underwriting is when the issuing company will receive nothing if the issue cannot be sold at the offer price resulting in the deal being called off. Best efforts underwriting deals with selling the most amount of the issue as possible but unsold shares can be returned to the issuer without resulting in any financial penalties. A firm commitment is the reverse situation of best efforts where the buyer is financially responsible for any of the unsold shares and buying the entire issue. The investment banking industry is generally split into three tiers: bulge bracket, middle market, and boutique market. The bulge bracket generally consists of clients such as large corporations and institutions. They do a range of things for these large organizations to be successful through conducting research, advising, and providing financial services. The middle market deals with the same types of tasks as the bulge bracket but they target smaller business companies. A boutique market does not provide services in the same way that middle markets and bulge bracket does. Generally, this market chooses one aspect of investment banking to specialize in and/or one industry such as health care or insurance firms. Investment banking is also split into three sections in its structure based on what their daily duties consist of the front office, middle office, and back office. The front office is who the public and the customers first see. They deal with the advising meetings on mergers and acquisitions, trading, sales, and providing firms with strategies to raise their capital. The middle office is responsible for overseeing risk management by mitigating risk as well as implementing a risk management plan to ensure negative impacts are reduced as much as possible. The middle office also deals with information technology or IT. This department is a crucial part of the firm dealing with the ins and outs of the computer system and dealing with any issues that occur in the system. The back-office handles customer service, office management, and human resources. Aside from customer service, they mostly deal with their employees and ensure that proper work protocol is taken in the workplace and dealing with the hiring and firing processes. The industry for jobs in the investment banking field continues to grow as sought after and highly competitive. Many companies in this field are starting to shift their hiring to expecting their new employees to have a substantial amount of previous knowledge through training and specialized courses that get them to hire compared to the previous way of hiring fresh out of college raw graduates and training them on the job. Some courses that are offered include but are not limited to Investment Banking Networking Toolkit, BIWS Premium and Platinum (Excel, PowerPoint, etc.), Bank and Financial Institution Modeling, Investment Banking Interview Guide, and Real Estate Financial Modeling. By completing these courses, new people in the field give themselves a step above to place themselves in prestigious job opportunities such as private equity that pay $150,000 a year. Jobs in this industry tend to be high-stress and highpressure jobs but the plus side is that there are great benefits and high salaries involved. An entry-level job such as an analyst makes on average $130,000 to $200,000 of compensation just starting. The top tier level jobs such as Managing Directors make $1,000,000 or more in compensation after accounting for bonuses and sales. This amount ranges from company to company having variance from a company’s success along with the success of the person's sales each year. Investment banks around the world like many other firms were highly impacted by the COVID-19 pandemic that struck the economy. They sat well in growth before the pandemic hit but afterward required for a change of strategy to be implemented. Investment banks had to find a way to balance serving their anxious clients and responses that drove the market all at the same time as containing the pandemic’s impact. 2021 has come around and investment banks skyrocketed as the pandemic began to slow down. In just the first half of 2021, investment banks generated nearly $80 billion in revenue up 26% from the first half of 2020 also the highest in over twenty years. JP Morgan, Goldman Sachs, Morgan Stanley, Bank of America Securities, and Citigroup accounted for 32% of that revenue as the largest investment bank firms in the world. Overall, investment banks make a huge impact on the economy and the business industry. These banks provide their services so that there can be a smooth transfer of money and for the purpose, agreement operations running the way they are supposed to. Investment banks have been around for a long time, and they will continue to provide substantial value to the economy. Without them, the economy would not have the capabilities of prospering as it does. They add liquidity to the market allowing money to be circulated and being used compared to sitting in an account holding little to no economic benefit. This concept of putting money to work allows for investors to generate a return on their money and at the same time allow businesses to have the money to give out loans to other businesses which leads to the circle of growth. Businesses can build new buildings and expand their product with the money invested by the investors. The businesses can then create revenue of their own to eventually have enough money to invest it themselves following the circulation of money for others and themselves to grow. Investment banks are a substantial part of our economy and our businesses to sustain continuous growth. Sources G2. “Learn Hub.” G2, https://learn.g2.com/. “Investment Banking.” Corporate Finance Institute, 5 Nov. 2019, https://corporatefinanceinstitute.com/resources/careers/jobs/investment-banking-overview/. “Investment Banking: The Ultimate Industry Overview.” Mergers & Inquisitions, 14 Oct. 2021, https://www.mergersandinquisitions.com/investment-banking/. Kennon, Joshua. “What Is an Investment Bank?” The Balance, The Balance, 10 May 2021, https://www.thebalance.com/what-is-an-investment-bank-357318. Ross, Sean. “How Do Investment Banks Help the Economy?” Investopedia, Investopedia, 13 Sept. 2021, https://www.investopedia.com/ask/answers/032515/how-do-investment TCS Lending and Securitisation Solution. https://www.tcs.com/content/dam/tcs/pdf/Industries/Banking%20and%20Financial%20Ser vices/tcs-lending-securitisation-brochure.pdf. “The History of Investment Banking.” International Finance Institute - The Global Leader in Finance and Investment Banking Training, http://www.financeinstitute.com/blog/thehistory-of-investment-banking/. Name: Description: ...
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