MEET THE REAL BANKERS

Yay! I don’t care what you think right now. I don’t mind if you label me a “finance-divisionist”. The coolest peeps in any investment bank are the Investment Banking division peeps [tongue out]. Before you grow goose pimples all over, this is strictly my opinion; yours may differ. Aii, meet the real bankers (I’m sure someone is fuming already), [drum roll] The Investment Banking Division!

The Investment Banking division of Investment Banks, as the name imply, are the ones that do the classic investment banking work. They are sometimes called corporate finance division in some firms but the core elements of their activities are the same. The functions of the Investment Banker (of the investment banking division) is primarily divided into two – Corporate finance and Mergers & acquisitions.

Corporate finance involves raising capital for businesses, corporations and governments. A simple scenario is if a company ABC, based in Nigeria wants to expand its business operations into say Ghana as a means to reach a larger market. Company ABC approaches investment bank XYZ on the best financing options available to its business. I believe everyone knows that financing is a fancy way of saying funding, yea?

Investment bank XYZ refers this matter to…. You got it – THE INVESTMENT BANKING DIVISION. The great guys in this division, in turn, do some research and look into the financials of company ABC to get the best solution to the problem. For example, if ABC is a private company with no credit history, it may not really be a good idea to finance ABC through a loan option because since they do not have any credit history, it might be very costly to get a loan because their risk of defaulting cannot particularly be ascertained. The case is even worse if ABC does not have a strong cash flow.

On the other hand, since ABC is a private company, raising capital through an Initial Public Offering (IPO) is not a bad idea especially if ABC shows strong signs of growth. If ABC is a publicly traded company, a secondary offering may not also be a bad idea especially if the share price of the company is relatively doing well such that a dilution will not particularly harm shareholders’ interests. There is still the option of issuing bonds. This works exactly like loans except for the fact that bonds are tradable securities while loans are not. Issuing bonds is a good option particularly when the management of ABC is very sure that such financing option will yield good returns.

On mergers and acquisitions, there is already a post that explains the practical details of M&As. You can check that post out here. However, the game is not less intense with M&As especially if it is a hostile takeover. Anyways, if you think you have the flirty nerves of Brad Pitts, the extreme goal orientation of Harvey Spector and the swagger of Denzel Washington rolled into one, this is the best division for you trust me [wink].

PS: Before I’m labelled a chauvinist, if you have super sexy nerves like Scarlett Johansson, the finishing moves of Jessica Alba and the swagger of Angelina Jolie rolled into one, this is definitely your division [kisses].