What Does Investment Banking Involve?

Paul Inouye

September 13, 2022


Investment banking is a multi-faceted career that involves purchasing and selling securities. It also involves creating and maintaining technology platforms to track transactions and develop new trading algorithms. In addition, small teams usually conduct deals. These teams are known as investment banks. They are responsible for ensuring that all securities are bought and sold accurately and at the correct settlement amounts.

Deals are done in small teams

Deals in investment banking are typically done in small teams of four to six bankers. Team members may include a senior banker, associate, director, and lead managing director. The analysts are responsible for developing and negotiating the terms of the deal while the lead managing director approves it. Team members may come from different teams and different banks.

Teams are organized into different categories based on the expertise and experience of the team members. Typically, an analyst will work with an associate responsible for most client deliverables. Those in the risk management group may be responsible for approving a deal or assigning a trading cap.

Sales and trade

Sales and trading are important aspects of investment banking. However, these activities are carried out by employees with different types of expertise. Typically, the hierarchy of investment banking activities includes an analyst, an associate, a vice president, a director, and a managing director. Each of these professionals is responsible for different types of deliverables for clients. These professionals also need to understand the fundamentals of business development and sales. This is because they always meet clients and offer advice on earning more.

Equity research

Investment banking activities include equity research, stock analysis, and merger and acquisition consulting. Analysts and researchers must be knowledgeable about the universe of companies they cover and maintain detailed financial models of these companies. They must also have strong communication skills and be able to process new information quickly. They must also report their findings to their firms’ sales force, clients, and the media. Senior analysts are known as experts on the companies they cover, and the media may seek them out to comment on a company’s recent announcements.

While investment banking and equity research are similar, they differ in some ways. Equity research analysts perform in-depth research and analysis on individual companies to provide investment advice to salesforce agents, traders, institutional investors, and the general investing public. They analyze companies from all angles and create research reports, analyzing everything from their financials to their industry outlook, share price, and competition. Equity research analysts also work with corporate financial statements to determine whether a company is a good fit for a merger or acquisition.

Asset management

The investment banking industry offers a broad range of financial services. It is made up of two main segments: buy-side and sell-side. The former involves trading, market-making, and the promotion of securities. The latter involves advising institutional clients, such as money-market funds, mutual funds, and life insurance companies.

Asset management is a specialized division within investment banking. The main task of an asset manager is to manage money for clients. In addition, they may handle portfolios of different types of securities, including private equity, debt, commodities, real estate, and infrastructure. They may also be involved in mergers and acquisitions.

Defense against activist investors

Defense against activist investors is one of the hottest areas of investment banking today. The practice has seen significant growth over the past five years as hedge funds have pushed for changes at publicly traded companies. As a result, companies of all sizes can find themselves in an activist situation. Investment banking firms can help prepare companies for this scenario and provide shareholder support for strategic transactions.

Some investment banking firms focus on providing shareholder advisory services to companies to defend against activist investors. These firms usually serve large companies, but there are also mid-market firms that target mid-size to small companies. These firms can provide these services for a fee.

Seniority structure

A clear hierarchy makes it easier for investment bankers to share information. Even entry-level investment banking professionals know that they can approach people in higher positions if they have questions or concerns about the company. This helps align with company goals and effectively distribute information throughout the organization. This structure also provides multiple opportunities for checking work.

The senior vice president or executive director is the most senior-level investment banking professional. At this level, their responsibilities are similar to those of an analyst, though they may be in charge of supervising junior analysts. They also work with other associates and analysts to maintain their performance. It may take three to four years to advance to this level.