Investment Bank

Last updated: March 22, 2024

What Does Investment Bank Mean?

An investment bank (IB) is an organization that helps its clients in all aspects of corporate finance including raising capital and advising on mergers and acquisitions (M&A). At a very high level, the activities of an investment bank can be summarized as follows:

  • Buy-side: Providing advice to a client on the acquisition of another business;
  • Sell-side: Providing advice to a client on the sale process of part or all of their own business; and
  • Financing: Providing advice on raising capital required for various corporate initiatives.

Divestopedia Explains Investment Bank

Investment banks play an important role in assisting mid-market businesses maximize value. They assist with the execution of corporate finance strategies including the sale of a business, recapitalizations, and raising debt. Most mid-market companies usually engage a boutique investment bank to assist them with their sell-side strategies. When selecting a boutique investment bank, it is important to evaluate the following:

  • Track record of success – Ask the IB to provide details of their last deal completed, and the value created through their involvement. Also, ask to speak with previous clients for deals that were both successful and unsuccessful. If the boutique IB refuses to provide names for unsuccessful assignments, look elsewhere.
  • Regional focus – This will plays a big part in determining what type of buyers an investment bank can bring to the table. If the business is big or unique enough to garner the attention of larger players, then it would be best to engage an investment banker that can reach them. Ask the IB to provide a list of the buyers who they think will be interested in the company.
  • Industry expertise – You want an investment bank that knows the details of your business and industry so the company’s value proposition is best articulated. Also, if the IB is focused on your industry, it will have intimate knowledge of the current M&A environment and the best potential buyers available.

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