Investment Banking Background & History

Simply put an Investment Bank (aka “iBanking”) provides corporations and governments help in raising capital by underwriting securities. Investment banks will also assist companies involved in mergers and acquisitions, trading of derivatives, fixed income instruments, commodities, and equity securities.  Bottom Line: Investment bankers advise and raise money for companies.

For a bit of history, during the Stock Market Crash of 1929, the U.S. created the Glass-Steagall Act prohibiting banks from taking both deposits and underwriting securities.  Banks were forced to choose between Investment Banking and Commercial Banking.  In 1999, Glass-Steagall was repealed by the Gramm-Leach-Bliley Act allowing banks to take deposits while underwriting securities.

A good investment banking transaction example is when Disney acquired Marvel Entertainment for $4 billon in 2009.  Bank of America Merrill Lynch’s investment banking team advised Marvel on the acquisition to Disney.  For this acquisition, there as an investment banking deal team that spent months advising Marvel on the best alternative for their company.

It is good to know how an Investment bank works.  The core activities of an investment bank include:

  1. Investment Banking or sometimes called corporate finance:  This involves helping clients raise capital or giving them advice on M&A or LBO’s.
  2. Sales and Trading: the larger banks will buy and sell securities on behalf of the bank and its clients
  3. Research: This division reviews companies and writes reports about them with a “buy” or “sell” rating

Investment banking groups are divided between:

  1. Capital Markets
  2. Industry Groups
  3. Coverage Groups

Breaking into one of these groups is exactly what Street of Walls (SOW) can help you with.  SOW was founded in order to help bridge the gap between what schools teach you and what investment banks expect you to know.  I’m an ex-Investment Banker and I’m here to help you get a job in Investment Banking!

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