An investment banker advises governments and corporations about their financial activity in capital markets. Investment bankers work to raise money for their clients, assist with mergers or acquisitions, and serve as financial advisors. Almost all of their actions rely on the capital market doing well. If those markets go up, they can expect to make a ton of money.
Offerings & Funds
A common example of investment banking is helping a company expand by financing a new factory or store location. By issuing bonds, the banker can help raise enough capital to help start the new venture. Governments use investment bankers in a very similar way when creating new public projects such as building parks or airports. A business can also choose to start an IPO to raise more funds. The role of an investment banker in that case is to write the prospectus that dictates the terms of the offering. This includes setting the price of each share. Price setting is so vital because that is where an investment banker can make or break a company. If priced right the stock will soar, if priced too high the public won’t want to touch it.
Investment bankers also tend to take on a great deal of risk when underwriting deals on the capital markets. They must navigate the stress of buying the securities initially from the issuer before hopefully marking them up and selling for a profit. But with great risk come great reward, as well timed transactions can lead to some massive payouts. They can also choose to merely market deals and not take on all the underwriting risk.
Investment bankers help facilitate acquisitions and mergers as well. They work with companies to evaluate their businesses and then suggest an offer price. Investment bankers would be used on both sides of the businesses being merged. This is to ensure that the offer is fair on both sides of the spectrum. In a sense it is similar to how lawyers representing each company in a deal compete against each other. Both bankers are trying to get the best price for the company they are aligned with.
Ultimately, investment bankers play an important role in the progression of capitalism. There are so many moving parts in business that corporations need dedicated experts to keep track of all their wheeling and dealing.