Investment banks act as underwriters or agents for corporations and municipalities issuing securities. They maintain markets for previously issued securities and offer advisory services to investors. Unlike traditional banks, investment banks do not accept deposits or provide loans. Investment banking facilitates mergers and acquisitions, private equity placements, and corporate restructuring.
This document provides an overview of investment banking and financial services. It defines investment banking as a division of banking related to creating capital for other companies through underwriting new debt and equity securities. It also defines an investment bank and describes their major functions such as underwriting stocks and bonds, mergers and acquisitions advisory services, trading, research, asset management, and wealth management. The document further discusses merchant banking services, types of investment banks, and SEBI guidelines for merchant bankers in India.
The document provides an overview of the history and functions of investment banking. It discusses how modern banking originated in Italy in the 13th century and the earliest stock markets emerged in the 1500s-1600s. Investment banks help companies raise capital through public/private offerings and provide advisory services for mergers and acquisitions. They earn fees from capital raising and trading activities. The document outlines the key business lines of investment banks and differences between commercial and investment banking. It also discusses the front, middle and back office functions within investment banks and the roles they play.
The document discusses primary markets and the process of issuing securities through an initial public offering (IPO). It describes how companies can raise funds through public offers, rights issues, follow-on offers, and private placements in the primary market. The steps of an IPO include appointing merchant bankers, drafting a prospectus, fulfilling regulatory norms, marketing the issue, and listing the securities on a stock exchange. Requirements for listing include minimum market capitalization, issue size, and post-issue paid up capital. The document outlines various pricing methods and guidelines for listing on an exchange.
The document discusses how to build a hedge fund. It begins by explaining what hedge funds are and why they exist, noting they promise higher returns than traditional asset managers in exchange for higher fees. It then discusses the key characteristics of hedge funds, such as their fee structure, use of leverage and derivatives, and promise of uncorrelated returns. The document outlines the rapid growth of the hedge fund industry in terms of assets under management and number of funds since the 1990s. It also discusses some sceptical perspectives about whether hedge funds truly deliver alpha. Finally, it examines the various entities and jurisdictions involved in building a hedge fund structure.
An investment banking is a financial institution that assists individuals, corporations and governments in raising financial capital by underwriting or acting as the client’s agent in the issuance of securities or both
An investment bank is a financial institution that assists corporations, governments, and individuals in raising capital by underwriting securities or facilitating mergers and acquisitions. The document discusses different types of investment banks such as bulge bracket, middle market, and boutique banks. It also outlines the key functions of investment banks such as capital markets activities, mergers and acquisitions advisory, and asset management.
This document provides an overview of various financial services. It discusses banking services, insurance services, investment management services like mutual funds and portfolio management, and capital market services. It describes the key entities that offer these services like banks, insurance companies, asset management companies, stock brokers, etc. It also outlines the major types of products and services offered within each category of financial services.
This document provides an overview of investment banking and financial services. It defines investment banking as a division of banking related to creating capital for other companies through underwriting new debt and equity securities. It also defines an investment bank and describes their major functions such as underwriting stocks and bonds, mergers and acquisitions advisory services, trading, research, asset management, and wealth management. The document further discusses merchant banking services, types of investment banks, and SEBI guidelines for merchant bankers in India.
The document provides an overview of the history and functions of investment banking. It discusses how modern banking originated in Italy in the 13th century and the earliest stock markets emerged in the 1500s-1600s. Investment banks help companies raise capital through public/private offerings and provide advisory services for mergers and acquisitions. They earn fees from capital raising and trading activities. The document outlines the key business lines of investment banks and differences between commercial and investment banking. It also discusses the front, middle and back office functions within investment banks and the roles they play.
The document discusses primary markets and the process of issuing securities through an initial public offering (IPO). It describes how companies can raise funds through public offers, rights issues, follow-on offers, and private placements in the primary market. The steps of an IPO include appointing merchant bankers, drafting a prospectus, fulfilling regulatory norms, marketing the issue, and listing the securities on a stock exchange. Requirements for listing include minimum market capitalization, issue size, and post-issue paid up capital. The document outlines various pricing methods and guidelines for listing on an exchange.
The document discusses how to build a hedge fund. It begins by explaining what hedge funds are and why they exist, noting they promise higher returns than traditional asset managers in exchange for higher fees. It then discusses the key characteristics of hedge funds, such as their fee structure, use of leverage and derivatives, and promise of uncorrelated returns. The document outlines the rapid growth of the hedge fund industry in terms of assets under management and number of funds since the 1990s. It also discusses some sceptical perspectives about whether hedge funds truly deliver alpha. Finally, it examines the various entities and jurisdictions involved in building a hedge fund structure.
An investment banking is a financial institution that assists individuals, corporations and governments in raising financial capital by underwriting or acting as the client’s agent in the issuance of securities or both
An investment bank is a financial institution that assists corporations, governments, and individuals in raising capital by underwriting securities or facilitating mergers and acquisitions. The document discusses different types of investment banks such as bulge bracket, middle market, and boutique banks. It also outlines the key functions of investment banks such as capital markets activities, mergers and acquisitions advisory, and asset management.
This document provides an overview of various financial services. It discusses banking services, insurance services, investment management services like mutual funds and portfolio management, and capital market services. It describes the key entities that offer these services like banks, insurance companies, asset management companies, stock brokers, etc. It also outlines the major types of products and services offered within each category of financial services.
This chapter discusses the major international financial markets known as the Euromarkets. It covers the Eurocurrency markets, Eurobonds, Note Issuance Facilities, and Euro-commercial paper. The Eurocurrency market is composed of eurobanks that accept deposits in foreign currencies, dominated by US dollars. Eurobonds are bonds sold outside the country of the currency's denomination, often US dollars, and have grown substantially due to interest rate swaps. Note Issuance Facilities allow borrowers to issue their own notes placed by banks as a low-cost substitute for loans. Euro-commercial paper are unsecured short-term debt securities denominated in US dollars and issued by corporations and governments.
Merchant banking provides a combination of banking and consultancy services to clients. It assists companies with financial, marketing, managerial, and legal matters from starting a business through ongoing operations. Merchant banks deal primarily in international finance and business loans for companies. They specialize in international trade and serve multinational corporations. Unlike investment banks, merchant banks do not provide regular banking services to the general public. In India, the need for merchant banking grew with the rapid expansion of the primary market for stock issues.
How winning the Battle for the Wealthy Investor, a new Cisco IBSG Study Uncovers Significant Opportunity To Address Needs of Wealthy Under-50 Investors
The document provides information on credit ratings. It begins by defining credit and explaining what a credit rating is. A credit rating evaluates a debtor's ability to repay debt and the likelihood of default. It is determined by credit rating agencies based on both public and private information. The document then discusses the different types of ratings including sovereign, short term, and corporate credit ratings. It provides details on the rating scales and categories used by major agencies. The benefits of credit ratings for both investors and companies are outlined. Finally, it discusses some leading credit rating agencies globally and domestically in India.
An investment bank provides three main functions:
1. They assist corporations and governments in raising capital by underwriting securities issuances or acting as an agent.
2. They advise companies on mergers and acquisitions.
3. They provide trading and market making services for securities.
This presentation will give users a general overview of many aspects of the industry and its purpose, including:
• The benefits of hedge fund investing
• Who invests in hedge funds?
• Who regulates the hedge fund industry?
• The various strategies and types of hedge funds
• How do hedge funds generate returns for their investors
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
This document provides an overview of hedge funds, including their history, structure, strategies, regulations and fees. It discusses how hedge funds were pioneered in 1949 and aim to generate absolute returns through a variety of investment techniques. The document outlines the key features of hedge fund regulations in India, including the different categories of funds, registration requirements, investment conditions and disclosure obligations. It also explains common hedge fund strategies like arbitrage, short selling, and event driven investments.
Investment banking aids companies in acquiring funds through public offerings or private equity investments. It also provides advisory services for mergers, acquisitions, and other strategic decisions. While large corporations have internal finance teams, investment banks provide objectivity, expertise, and access to capital markets. The top global investment banks include Goldman Sachs, JPMorgan, and Merrill Lynch. Regulation of the industry increased in the 1930s to separate commercial and investment banking and protect investors. In India, investment banking evolved from traditional merchant banking services provided by foreign banks starting in the 1960s.
Introduction to financial system and financial servicesdrpvkhatrissn
The document provides an introduction to financial systems and financial services. It defines key terms like financial assets, financial intermediaries, and financial markets. It describes the major components of India's financial system including banks, capital markets, money markets, and development institutions. It also outlines some weaknesses of India's historical financial system as well as modern financial services and products that have emerged.
Mutual funds pool money from individual investors to purchase securities like stocks and bonds. They provide benefits like diversification and lower costs than individual investors can obtain. The mutual fund industry has grown dramatically in recent decades as more households invest in mutual funds for retirement. However, the industry has also faced scandals involving late trading, market timing, and other conflicts of interest between fund managers and investors.
This document provides an overview of swaps, including:
- A history of swaps beginning with the first interest rate swap in 1981 and growth to $250 trillion by 2006.
- Definitions and key characteristics of swaps, which involve the exchange of cash flows between two counterparties according to a pre-arranged formula.
- The main types of swaps are interest rate swaps, currency swaps, equity swaps, credit default swaps, and commodity swaps. Interest rate swaps and currency swaps make up the largest portion of the swap market.
Investment banks in Malaysia provide various services including corporate financial advisory, portfolio management, corporate banking, and share trading. They were introduced in 2005 to strengthen the financial sector by consolidating merchant banks, stockbroking companies, and universal brokers into a new investment bank framework. Investment banks play important roles in developing the capital market by raising capital, facilitating mergers and acquisitions, managing investments, and providing other financial services. They offer a wider scope of activities and larger facilities than commercial banks.
The document discusses the Capital Adequacy Ratio (CAR) and its evolution over time from Basel I, II, and III accords. CAR is a ratio used by regulators to assess a bank's capital adequacy by comparing its capital to risk-weighted assets. The Basel accords established international standards for CAR and defined components like Tier 1 capital, Tier 2 capital, and risk weighting of assets. Basel III aimed to strengthen banks' ability to absorb shocks by improving capital quality and introducing liquidity ratios and leverage ratios.
The document discusses investment banking. It defines investment banking as controlling the flow of money by channeling cash from investors looking for returns to entrepreneurs and businesses that need funding. Investment bankers raise money from investors by selling securities and transferring that money to those who need cash for projects. They are involved in large financial transactions like mergers and acquisitions (M&A), initial public offerings (IPOs), and other securities offerings. Investment banking provides capital raising, financial advisory, corporate lending, sales and trading, brokerage, research, and private equity investment services.
Credit ratings are evaluations of an entity's ability and willingness to repay debt. They originated in the US in 1909 and gained importance after the Great Depression. Credit rating agencies analyze factors like an entity's finances, management, and industry to assign ratings symbols indicating different levels of default risk. In India, the top three rating agencies are CRISIL, ICRA, and CARE Ratings. They use methodologies involving economy, business, financial, management and fundamental analyses to determine ratings that guide investors and policymakers.
This document provides an introduction to Islamic investment. It defines key terms like investing, finance, and investors. It also classifies investments as real or financial, marketable or non-marketable, and transferable or non-transferable. The nature of investment management is discussed, including balancing risk and return. The investment management process is outlined in five steps - setting an investment policy, analyzing securities, valuing assets, constructing a portfolio, and evaluating performance. Finally, the objectives of investment are explained as earning income, achieving capital appreciation, ensuring safety and liquidity of funds.
Chapter 2 Financial Institutions, Financial Intermediaries and Asset Manageme...Nardin A
Chapter 2 Financial Institutions, Financial Intermediaries and Asset Management Firms
Foundations of Financial Markets and Institutions 4th edition 2009
Frank J. Fabozzi
Franco Modigliani
Frank J. Jones
This document provides an overview of the Capital Asset Pricing Model (CAPM). It defines key terms like systematic and unsystematic risk. It explains that CAPM considers only systematic risk and uses the beta coefficient to measure risk. It also describes the security market line and capital market line graphs that are used in CAPM. The document outlines the assumptions of CAPM and notes both the benefits and drawbacks of using the model to determine expected returns based on an asset's risk level.
The document is a student's project on loan syndication. It includes a declaration by the student that the information submitted is true and original. It also includes a certificate from the student's project guide. The acknowledgements section thanks various individuals who provided guidance and support. The index lists the contents of the project, which covers topics such as the meaning of loan syndication, the syndication process, reasons for syndicated lending, and the role of parties involved. It also includes an overview of ICICI Bank and its syndication services.
Role of investment bank in the economic development of bangladeshLamia Akter
This document analyzes the role of investment banks in the economic development of Bangladesh. It begins with an introduction and literature review, followed by the research methodology. It then discusses the key roles of investment banks, such as facilitating capital raising and mergers and acquisitions. Several sections analyze the relationship between investment banks and economic indicators like GDP, GNI, employment, inflation, and stock market development. It also examines how investment banks can contribute to sectors like SMEs and women's empowerment. The document concludes by presenting findings on how investment banks have positively impacted Bangladesh's economic growth and providing recommendations to further strengthen this relationship.
The document discusses applied analytics in healthcare. It describes how Nexus is involved in healthcare technology integration and clinical integration. It also discusses challenges in applying analytics in healthcare, including understanding where data is generated, breaking transcription barriers, and using data to impact clinical outcomes. The presentation calls for partnerships to improve analytics in healthcare.
This chapter discusses the major international financial markets known as the Euromarkets. It covers the Eurocurrency markets, Eurobonds, Note Issuance Facilities, and Euro-commercial paper. The Eurocurrency market is composed of eurobanks that accept deposits in foreign currencies, dominated by US dollars. Eurobonds are bonds sold outside the country of the currency's denomination, often US dollars, and have grown substantially due to interest rate swaps. Note Issuance Facilities allow borrowers to issue their own notes placed by banks as a low-cost substitute for loans. Euro-commercial paper are unsecured short-term debt securities denominated in US dollars and issued by corporations and governments.
Merchant banking provides a combination of banking and consultancy services to clients. It assists companies with financial, marketing, managerial, and legal matters from starting a business through ongoing operations. Merchant banks deal primarily in international finance and business loans for companies. They specialize in international trade and serve multinational corporations. Unlike investment banks, merchant banks do not provide regular banking services to the general public. In India, the need for merchant banking grew with the rapid expansion of the primary market for stock issues.
How winning the Battle for the Wealthy Investor, a new Cisco IBSG Study Uncovers Significant Opportunity To Address Needs of Wealthy Under-50 Investors
The document provides information on credit ratings. It begins by defining credit and explaining what a credit rating is. A credit rating evaluates a debtor's ability to repay debt and the likelihood of default. It is determined by credit rating agencies based on both public and private information. The document then discusses the different types of ratings including sovereign, short term, and corporate credit ratings. It provides details on the rating scales and categories used by major agencies. The benefits of credit ratings for both investors and companies are outlined. Finally, it discusses some leading credit rating agencies globally and domestically in India.
An investment bank provides three main functions:
1. They assist corporations and governments in raising capital by underwriting securities issuances or acting as an agent.
2. They advise companies on mergers and acquisitions.
3. They provide trading and market making services for securities.
This presentation will give users a general overview of many aspects of the industry and its purpose, including:
• The benefits of hedge fund investing
• Who invests in hedge funds?
• Who regulates the hedge fund industry?
• The various strategies and types of hedge funds
• How do hedge funds generate returns for their investors
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
This document provides an overview of hedge funds, including their history, structure, strategies, regulations and fees. It discusses how hedge funds were pioneered in 1949 and aim to generate absolute returns through a variety of investment techniques. The document outlines the key features of hedge fund regulations in India, including the different categories of funds, registration requirements, investment conditions and disclosure obligations. It also explains common hedge fund strategies like arbitrage, short selling, and event driven investments.
Investment banking aids companies in acquiring funds through public offerings or private equity investments. It also provides advisory services for mergers, acquisitions, and other strategic decisions. While large corporations have internal finance teams, investment banks provide objectivity, expertise, and access to capital markets. The top global investment banks include Goldman Sachs, JPMorgan, and Merrill Lynch. Regulation of the industry increased in the 1930s to separate commercial and investment banking and protect investors. In India, investment banking evolved from traditional merchant banking services provided by foreign banks starting in the 1960s.
Introduction to financial system and financial servicesdrpvkhatrissn
The document provides an introduction to financial systems and financial services. It defines key terms like financial assets, financial intermediaries, and financial markets. It describes the major components of India's financial system including banks, capital markets, money markets, and development institutions. It also outlines some weaknesses of India's historical financial system as well as modern financial services and products that have emerged.
Mutual funds pool money from individual investors to purchase securities like stocks and bonds. They provide benefits like diversification and lower costs than individual investors can obtain. The mutual fund industry has grown dramatically in recent decades as more households invest in mutual funds for retirement. However, the industry has also faced scandals involving late trading, market timing, and other conflicts of interest between fund managers and investors.
This document provides an overview of swaps, including:
- A history of swaps beginning with the first interest rate swap in 1981 and growth to $250 trillion by 2006.
- Definitions and key characteristics of swaps, which involve the exchange of cash flows between two counterparties according to a pre-arranged formula.
- The main types of swaps are interest rate swaps, currency swaps, equity swaps, credit default swaps, and commodity swaps. Interest rate swaps and currency swaps make up the largest portion of the swap market.
Investment banks in Malaysia provide various services including corporate financial advisory, portfolio management, corporate banking, and share trading. They were introduced in 2005 to strengthen the financial sector by consolidating merchant banks, stockbroking companies, and universal brokers into a new investment bank framework. Investment banks play important roles in developing the capital market by raising capital, facilitating mergers and acquisitions, managing investments, and providing other financial services. They offer a wider scope of activities and larger facilities than commercial banks.
The document discusses the Capital Adequacy Ratio (CAR) and its evolution over time from Basel I, II, and III accords. CAR is a ratio used by regulators to assess a bank's capital adequacy by comparing its capital to risk-weighted assets. The Basel accords established international standards for CAR and defined components like Tier 1 capital, Tier 2 capital, and risk weighting of assets. Basel III aimed to strengthen banks' ability to absorb shocks by improving capital quality and introducing liquidity ratios and leverage ratios.
The document discusses investment banking. It defines investment banking as controlling the flow of money by channeling cash from investors looking for returns to entrepreneurs and businesses that need funding. Investment bankers raise money from investors by selling securities and transferring that money to those who need cash for projects. They are involved in large financial transactions like mergers and acquisitions (M&A), initial public offerings (IPOs), and other securities offerings. Investment banking provides capital raising, financial advisory, corporate lending, sales and trading, brokerage, research, and private equity investment services.
Credit ratings are evaluations of an entity's ability and willingness to repay debt. They originated in the US in 1909 and gained importance after the Great Depression. Credit rating agencies analyze factors like an entity's finances, management, and industry to assign ratings symbols indicating different levels of default risk. In India, the top three rating agencies are CRISIL, ICRA, and CARE Ratings. They use methodologies involving economy, business, financial, management and fundamental analyses to determine ratings that guide investors and policymakers.
This document provides an introduction to Islamic investment. It defines key terms like investing, finance, and investors. It also classifies investments as real or financial, marketable or non-marketable, and transferable or non-transferable. The nature of investment management is discussed, including balancing risk and return. The investment management process is outlined in five steps - setting an investment policy, analyzing securities, valuing assets, constructing a portfolio, and evaluating performance. Finally, the objectives of investment are explained as earning income, achieving capital appreciation, ensuring safety and liquidity of funds.
Chapter 2 Financial Institutions, Financial Intermediaries and Asset Manageme...Nardin A
Chapter 2 Financial Institutions, Financial Intermediaries and Asset Management Firms
Foundations of Financial Markets and Institutions 4th edition 2009
Frank J. Fabozzi
Franco Modigliani
Frank J. Jones
This document provides an overview of the Capital Asset Pricing Model (CAPM). It defines key terms like systematic and unsystematic risk. It explains that CAPM considers only systematic risk and uses the beta coefficient to measure risk. It also describes the security market line and capital market line graphs that are used in CAPM. The document outlines the assumptions of CAPM and notes both the benefits and drawbacks of using the model to determine expected returns based on an asset's risk level.
The document is a student's project on loan syndication. It includes a declaration by the student that the information submitted is true and original. It also includes a certificate from the student's project guide. The acknowledgements section thanks various individuals who provided guidance and support. The index lists the contents of the project, which covers topics such as the meaning of loan syndication, the syndication process, reasons for syndicated lending, and the role of parties involved. It also includes an overview of ICICI Bank and its syndication services.
Role of investment bank in the economic development of bangladeshLamia Akter
This document analyzes the role of investment banks in the economic development of Bangladesh. It begins with an introduction and literature review, followed by the research methodology. It then discusses the key roles of investment banks, such as facilitating capital raising and mergers and acquisitions. Several sections analyze the relationship between investment banks and economic indicators like GDP, GNI, employment, inflation, and stock market development. It also examines how investment banks can contribute to sectors like SMEs and women's empowerment. The document concludes by presenting findings on how investment banks have positively impacted Bangladesh's economic growth and providing recommendations to further strengthen this relationship.
The document discusses applied analytics in healthcare. It describes how Nexus is involved in healthcare technology integration and clinical integration. It also discusses challenges in applying analytics in healthcare, including understanding where data is generated, breaking transcription barriers, and using data to impact clinical outcomes. The presentation calls for partnerships to improve analytics in healthcare.
Investment Bank - Viewing M&A Advisory from the Service Operations PerspectiveSarang Bhutada
This document summarizes the key functions and operations of the mergers and acquisitions (M&A) advisory division of investment banks. It discusses how M&A advisory provides strategic advice and financial analysis to corporations on deals. It also outlines the typical deal team structure and process, from target identification to post-close integration. Additionally, it notes that demand for M&A advisory depends on business and economic cycles and that investment banks focus on high-value deals with select clients.
The document provides information about investment banks, including their organizational structure, functions, and examples of investment banks in Pakistan. It discusses that investment banks are split into front office, middle office, and back office activities. The front office includes investment banking, investment management, sales and trading, and research and structuring. It also summarizes some of the major functions of investment banks such as IPOs, mergers and acquisitions advisory, trading, research, and risk management. The document then provides details about several prominent investment banks in Pakistan, including their investment banking services, such as NIB Bank, IGI Investment Bank, Citibank, and Meezan Bank.
Merchant banks provide a wide range of financial services to help start and grow businesses. They offer capital in the form of stock ownership rather than loans. Merchant banks also provide advisory services on corporate matters. Their services include raising finance, managing public stock offerings, advising on mergers and acquisitions, and helping with project management. Overall, merchant banks act as the financial engineer for businesses by facilitating and advising on production, trade, and various corporate needs.
Investment banking assists companies and governments in raising capital through activities like underwriting securities and advising on mergers and acquisitions. It plays an important role in capital market intermediation by helping move funds from investors to issuers. In India, investment banking encompasses merchant banking and a range of other services. It has evolved a heterogeneous structure to meet regulatory requirements and provide different services like advisory, asset management, and secondary market activities.
Banks play several important roles in an economy. They act as financial intermediaries by taking deposits from savers and lending to borrowers. This intermediation role helps allocate funds to their most productive uses. Banks also reduce transaction costs for both savers and borrowers. Additionally, banks provide important services like liquidity, payment systems, risk pooling, and monitoring of borrowers, which supports economic activity. While some argue banks are unnecessary in a perfect market, evidence shows banks remain central to economic growth in reality due to market imperfections.
Role Of Commercial Banks In The Economic Development Of A CountrySayed Janan
Commercial banks play an important role in a country's economic development in several ways:
1. They promote capital formation by accepting deposits and lending to businesses for productive purposes.
2. They provide loans to entrepreneurs to invest in new enterprises, increasing productive capacity.
3. They support trade and industry through services like bank drafts, checks, and letters of credit that revolutionized commerce.
4. They also aid agricultural development through loans that boost farm productivity and incomes.
Investment banking assists companies and governments in raising capital by issuing and selling securities. It has two main functions - assisting the capital markets and helping companies raise money. Investment banking provides various primary market services like helping companies issue IPOs and bonds, and secondary market services like mergers and acquisitions advice. It raises capital for corporations and provides investment opportunities for individuals, with clients ranging from large corporations to small businesses. While investment banking helps facilitate capital raising and trading, it faces challenges in India from a lack of developed capital markets and institutional financing.
Commercial banks in India play an important role in economic development by providing capital, credit, and financial services. They accelerate capital formation, provide financing to agriculture, industry and infrastructure, help monetize the rural economy by expanding branches, and implement monetary policy. Nationalization of banks in 1969 and 1980 aimed to ensure credit allocation aligned with development priorities and expand access to agricultural communities. The structure of the Indian banking system includes public sector banks, private sector banks, foreign banks, regional rural banks, and cooperative banks. Commercial banks perform key functions like accepting deposits, advancing loans, discounting bills, and providing agency and general services.
The document discusses investment banking, including:
1) The main functions of investment banking are capital intermediation by facilitating the transfer of resources from savers to investors, and bringing users of funds to the market. Investment banks also provide allied services like asset management and securities trading.
2) The evolution of investment banking in the US, Europe, and India is described, tracing the development from the early 20th century to present day.
3) Key aspects of investment banking like the revenue mix, prerequisites for clients, and allied activities like book building, underwriting, M&A advisory and asset management are explained at a high level.
Investment banking assists in capital intermediation by moving funds from investors to those who need capital to generate economic growth. It pools and allocates funds in capital markets like banks do in traditional banking. Investment banks also provide services like advising on financial matters, selling securities, facilitating mergers and acquisitions, and trading for their own accounts. In the future, full service investment banks and financial conglomerates providing a wide range of banking, investment, and insurance products are likely to dominate the industry.
Banks and NBFCs: Types of Banks & NBFCs: Central Bank, Nationalized & Co Operative Banks, Regional Rural
Banks, Scheduled Banks, Private Banks & Foreign Banks, Mudra Bank, Small Finance Banks, Specialized Banks, NBFCs.
Types of Banking: Wholesale and Retail Banking, Investment Banking, Corporate Banking, Private Banking, Development
Banking.
Difference bet Investment Banking Vs Commercial Banking.pptxvivekanandindurkar
Investment banks handle large transactions and advise corporate clients, while commercial banks provide everyday financial services to individuals and small businesses. The main roles of investment banks are advising on mergers, acquisitions, and IPOs, while commercial banks accept deposits, provide loans and mortgages. Investment banking involves higher risks but also higher potential fees, while commercial banking has lower risks but earns profits from interest rate spreads on loans and deposits.
Commercial banks are financial institutions that accept deposits and make loans. They offer the widest range of services of any financial institution. In the past, banks focused on traditional services like deposits, loans, and check cashing. However, they now offer many diversified financial services as general financial providers. Nonbank competitors also provide similar services, like insurance companies and brokerages. Banks can be categorized as depository institutions like commercial banks and credit unions, or non-depository institutions like insurance companies and pension funds. The top 10 largest banks in the world by assets are led by Barclays and include other international banks like UBS and BNP Paribas.
Financial services refer to services provided by banks and other financial institutions, including mobilizing and allocating savings, providing loans, insurance, investment products, and more. Some key types of financial institutions discussed are commercial banks, cooperative banks, and non-banking financial institutions. Financial markets allow for short-term lending and capital raising. Financial instruments can be primary, secondary, short-term, long-term or medium-term. Financial services are classified as fund-based, involving direct investment of funds, or fee-based, where institutions earn fees through specialized services.
Financial institutions offer a variety of banking and financial services including savings and checking accounts, loans, investments, and financial advising. They are divided into depository institutions like banks that accept deposits, and non-depository institutions like insurance companies and brokerages. Financial institutions serve as intermediaries that pool funds from many customers and direct them to borrowers, facilitating the flow of money in the economy.
Investment banks perform various services including facilitating capital raising activities for corporations through public offerings and private placements, advising on mergers and acquisitions, and making markets for securities. They earn fees from underwriting securities, providing financial advisory services, and engaging in proprietary trading. Research divisions within investment banks analyze companies and publish reports to assist internal and external clients. Regulations governing investment banking activities are established by government entities like the SEC in the US and SEBI in India.
Role of financial markets ands institutionsKnhantu
Financial markets allow individuals and organizations to trade financial assets like stocks and bonds. They facilitate the flow of funds from those with savings to those who need financing. Financial institutions like banks and non-bank financial institutions further help this process by channeling funds from savers to borrowers and helping to determine prices through supply and demand. Bangladesh has both traditional banks and non-bank financial institutions that operate under regulation to efficiently mobilize resources in the economy.
Role of Investment Banks in the Financial Crisis of 2008Mujtaba Zeeshan
This presentation explains how the investment banks played a vital role in the occurrence of the global financial crisis of 2008.
There's a brief discussion on Investment banks in general including their functions. Then briefly explaining the crisis in a manner that students can easily remember. And finally to support our claim, a research paper is used as a reference.
Merchant banking provides non-fund based financial services like advising on mergers and acquisitions, underwriting securities issuances, and portfolio management. It originated in Italy and England in the 12th-18th centuries and was formally introduced to India in 1967. Merchant banking plays an important role in the growing Indian economy by facilitating corporate fundraising and restructuring, project financing, and connecting companies to capital markets.
The document discusses primary and secondary capital markets. The primary market issues new securities, allowing companies to raise funds. The secondary market allows investors to buy and sell existing securities from other investors. It also discusses the roles of investment banks in originating, underwriting, and distributing new securities issues through public offerings. The public offering process involves investment bank tasks like due diligence, negotiating the offering price, and distributing securities to investors.
Investment banks help companies and governments raise money through issuing and selling securities. They assist with raising funds through equity or debt offerings and provide strategic advisory services for mergers, acquisitions, and other financial transactions. Investment banks also act as intermediaries in trading securities for clients. While their roles have blurred in recent years, investment banks differ from commercial banks in that they do not take deposits or make retail loans.
This document defines key terms in finance and describes various financial institutions and markets. It begins by defining finance, money, and credit. It then discusses two main classifications of finance - public and private. Next, it examines different types of financial institutions like banks, investment companies, insurance companies, and credit unions. It also explores various financial markets and instruments. In closing, the document emphasizes the relationship between financial institutions and markets.
Defination of financail istituation and typesSaqlain Kazmi
Financial institutions include banks, investment banks, insurance companies, brokerages, and investment companies. They perform important roles such as accepting deposits, making loans, facilitating transactions, underwriting securities, pooling risks, managing investments, and enabling access to capital markets. While they differ in their specific operations, all financial institutions help individuals and businesses conduct financial activities.
Definition and history of merchant and investment banking, Who is a merchant banker, difference between investment and commercial banking and roles and functions of merchant and investment banking.
This document defines and describes various types of financial institutions. It discusses common financial institutions like banks, insurance companies, investment companies, and mutual funds. It also outlines specialized financial institutions including central banks, commercial banks, investment banks, savings banks, and Islamic banks. The functions of financial institutions are also summarized, which include facilitating the flow of cash between investors and those needing funds.
The document provides an overview of investment banking, including:
1) It discusses the concept, evolution, and functions of investment banking such as assisting with capital markets, mobilizing capital through institutional intervention, and services like mergers and acquisitions advising.
2) It describes key events that shaped the industry such as the Great Depression leading to the Glass-Steagall Act separating commercial and investment banking.
3) It outlines the types of products and services offered by investment banks such as public offers, private placements, advisory work, and underwriting.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
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[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Understanding how timely GST payments influence a lender's decision to approve loans, this topic explores the correlation between GST compliance and creditworthiness. It highlights how consistent GST payments can enhance a business's financial credibility, potentially leading to higher chances of loan approval.
2. Investment bank is an individual or institution which acts
as an underwriter or agent for corporation and
municipalities issuing securities.
Most also maintain brokerage/dealer operations, maintain
markets for previously issued securities, and offer advisory
services to investors. Investment banks also have a large
role in facilitating mergers and acquisitions, private equity
placements and corporate restructuring.
Unlike traditional banks, investment banks do not accept
deposits from and provide loans to individuals. Also called
investment bankers.
Investment BankingInvestment Banking
3. Investment banking is concerned with the allocation of
financial resources. It works as an intermediary which
deals with how and why money is moved from those who
have it (investors) to those who need it (issuers).
In traditional sense, the role of investment banking is one
of intermediation in resource allocation.
Now-a-days, investment banking is meant include primary
market making, secondary market making, trading,
corporate restructuring, financial engineering, advisory
services, merchant banking, investment management,
consulting, clearing, research, internal finance and
information services.
Investment BankingInvestment Banking
4. Although investments banking and merchant banking
often are used interchangeably in Bangladesh, in the
USA merchant banking is used to denote only a very
small segment of investment banking activities.
Originally, merchant banks were established in the UK
to provide special service to the merchants. Gradually,
its activities expanded quite significantly over time.
History of InvestmentHistory of Investment
BankingBanking
5. Glass-Steagall Act 1933
The modern concept of “Investment Bank” was
created in the Glass-Steagall act (Banking Act of
1933).
Carter Glass, Senator from Virginia, believed that
commercial banks securities operations had
contributed to the crash of 1929, that banks failed
because of their securities operations, and that
commercial banks used their knowledge as lenders to
do insider trading of securities.
Passed During the Great Depression
Glass Steagall Act separated commercial banking
from investment banking
History of InvestmentHistory of Investment
BankingBanking
6. Since then, investment banking had been narrowly
defined as those financial services associated with the
issuance or floatation of new (mainly corporate)
securities.
This definition confines its activities to primary market
making for securities.
At a little broader level, investment banking is also
understood to include secondary market making.
History of InvestmentHistory of Investment
BankingBanking
7. Controversy over Glass Steagall
Prof. George Benston showed that unregulated banks
have lower failure rate.
Other countries (Germany, Switzerland) have always
allowed universal banking
In 1990s, regulators nibbled away at Glass Steagall by
allowing commercial banks to engage in certain
securities operations
History of InvestmentHistory of Investment
BankingBanking
8. Graham-Leach Act 1999
President Clinton November 1999 signs Graham-
Leach Bill which rescinded the Glass-Steagall Act of
1933.
Consumer groups fought repeal of Glass-Steagall
saying it would reduce privacy. Graham-Leach calls for
a study of the issues of financial privacy
Permits Banking-Insurance-Securities Affiliations
History of InvestmentHistory of Investment
BankingBanking
9. Mergers among Commercial Banks, Investment
Banks & Insurance Companies
Travelers’ Group (insurance) and Citicorp (commercial
bank) 1998 to produce Citigroup, on anticipation that
Glass-Steagall would be rescinded. Brokerage Smith
Barney
Chase Manhattan Bank (commercial bank) acquires JP
Morgan (investment bank) (2000) for $34.5 billion
UBS Switzerland buys Paine Webber (brokerage) 2000
Credit Suisse buys Donaldson Lufkin Jenrette
(investment bank) 2000
History of InvestmentHistory of Investment
BankingBanking
10. Investment Bank
Revenue Generating Activities Support Activities
Primary Market Making
• Corporate Finance
• Municipal Finance
• Treasury & Agency Finance
Clearing
Research
Internal Finance
Information Service
Secondary Market Making
• Dealer Activity
• Brokerage Activity
Trading
• Speculation
• Arbitrage
Corporate Restructuring
• Expansion
• Contraction
• Ownership and Control
Financial Engineering
• Zero Coupon Securities
• Mortgage-backed Secu.
• Asset-backed securities
• Derivative Securities
Other Activities
• Advisory Services
• Investment Management
• Merchant Banking
• Venture Capital
• Consulting
Functions of IB
12. Types of InvestmentTypes of Investment
BankingBanking
Types by Size
• Bulge Bracket–(special bracket): Largest
investment banking firms with goodwill. Often their
names are printed larger and bolder on the public
offering announcements (called tombstones).
2. Major Bracket – They are the middle-sized firms
existing at the second tier.
3. Submajors and regionals – They are the small firms
existing at the third tier.
13. Types by Range of Service
1. Full Service Shops – provide full range of
investment banking services. Vary in their strengths.
Some are largely issuer-driven, some are largely
investor driven, some are essentially trading
organizations and some are primarily warehouses
(retail brokerage firms with large investor base).
2. Boutiques (also called specialty shops) – specialize
in just a few services.
Types of InvestmentTypes of Investment
BankingBanking
14. Investment Banking vs. Commercial BankingInvestment Banking vs. Commercial Banking
• In the USA, the Banking Act of 1933 (Glass-Steagall Act)
prohibited the commercial banks to perform investment-
banking activities. The main objective of this separation
was to restrain the commercial banks from undertaking
risky activities that may go against the interest of
depositors.
• However, because of the advancement of risk
management, the prohibitions on securities underwriting
had been relaxed. They were allowed to underwrite
municipal general obligation bonds, industrial bonds and
some corporate issues.
15. • Now-a-days, both investment banks and commercial
banks became players for the new range of services
(as the Act did not restrict commercial banks to perform
these functions).
• These services include swaps, structured solutions (to
solve financial problems), the Fed fund market,
repurchase agreements (repos) etc.
• In Bangladesh, commercial banks can perform the
functions of investment banks.
Investment Banking vs. Commercial BankingInvestment Banking vs. Commercial Banking
16. Investment Banking vs. Financial EngineeringInvestment Banking vs. Financial Engineering
• Financial engineering is the lifeblood of financial
innovation and a cornerstone of modern investment
banking.
• Finance has been transformed from descriptive discipline
to an analytical one.
• Financial Engineering can be defined as the
development and the creative application of financial
technology to solve financial problems, exploit financial
opportunities, and to otherwise add value.
18. Fixed-Income InvestmentsFixed-Income Investments
• Contractual payment schedule
• Recourse varies by instrument
• Bonds
– investors are lenders
– expect interest payment and return of principal
• Preferred stocks
– dividends require board of directors approval
19. Savings AccountsSavings Accounts
• Fixed earnings
• Convenient
• Liquid
• Low risk
• Low rates
• Certificates of Deposit (CDs)
- instruments that require minimum deposits for
specified terms, and pay higher rates of interest than
savings accounts. Penalty imposed for early
withdrawal
20. Money Market CertificatesMoney Market Certificates
• Compete against Treasury bills (T-bills)
• Minimum $10,000
• Minimum maturity of six months
• Redeemable only at bank of issue
• Penalty if withdrawn before maturity
21. Capital Market InstrumentsCapital Market Instruments
• Fixed income obligations that trade in secondary market
• U.S. Treasury securities
• U.S. Government agency securities
• Municipal bonds
• Corporate bonds
22. U.S. Treasury SecuritiesU.S. Treasury Securities
• Bills, notes, or bonds - depending on maturity
– Bills mature in less than 1 year
– Notes mature in 1 - 10 years
– Bonds mature in over 10 years
• Highly liquid
• Backed by the full faith and credit of the U.S.
Government
23. U.S. Government AgencyU.S. Government Agency
SecuritiesSecurities
• Sold by government agencies
– Federal National Mortgage Association (FNMA or
Fannie Mae)
– Federal Home Loan Bank (FHLB)
– Government National Mortgage Association
(GNMA or Ginnie Mae)
– Federal Housing Administration (FHA)
• Not direct obligations of the Treasury
– Still considered default-free and fairly liquid
24. Municipal BondsMunicipal Bonds
• Issued by state and local governments usually to
finance infrastructural projects.
• Exempt from taxation by the federal government and
by the state that issued the bond, provided the
investor is a resident of that state
• Two types:
– General obligation bonds (GOs)
– Revenue bonds
25. Corporate BondsCorporate Bonds
• Issued by a corporation
• Fixed income
• Credit quality measured by ratings
• Maturity
• Features
– Indenture
– Call provision
– Sinking fund
26. Corporate BondsCorporate Bonds
• Senior secured bonds
– most senior bonds in capital structure and have
the lowest risk of default
• Mortgage bonds
– secured by liens on specific assets
• Collateral trust bonds
– secured by financial assets
• Equipment trust certificates
– secured by transportation equipment
27. Corporate BondsCorporate Bonds
• Debentures
– Unsecured promises to pay interest and principal
– In case of default, debenture owner can force
bankruptcy and claim any unpledged assets to
pay off the bonds
• Subordinated bonds
– Unsecured like debentures, but holders of these
bonds may claim assets after senior secured
and debenture holders claims have been
satisfied
• Income bonds
– Interest payment contingent upon earning
sufficient income
28. Corporate BondsCorporate Bonds
• Convertible bonds
– Offer the upside potential of common stock and the
downside protection of a bond
– Usually have lower interest rates
• Warrants
– Allows bondholder to purchase the firm’s common
stock at a fixed price for a given time period
– Interest rates usually lower on bonds with warrants
attached
• Zero coupon bond
– Offered at a deep discount from the face value
– No interest during the life of the bond, only the
principal payment at maturity
29. Preferred StockPreferred Stock
Hybrid security
• Fixed dividends
• Dividend obligations are not legally binding, but
must be voted on by the board of directors to be
paid
• Most preferred stock is cumulative
• Credit implications of missing dividends
• Corporations may exclude 70% of dividend income
from taxable income
30. International BondInternational Bond
InvestingInvesting
Investors should be aware that there is a very
substantial fixed income market outside the United
States that offers additional opportunity for
diversification
• Bond identification characteristics
– Country of origin
– Location of primary trading market
– Home country of the major buyers
– Currency of the security denomination
• Eurobond
– An international bond denominated in a currency not
native to the country where it is issued
31. International BondInternational Bond
InvestingInvesting
• Yankee bonds
– Sold in the United States and denominated is U.S.
dollars, but issued by foreign corporations or
governments
– Eliminates exchange risk to U.S. investors
• International domestic bonds
– Sold by issuer within its own country in that
country’s currency
32. Equity InvestmentsEquity Investments
• Returns are not contractual and may be better or
worse than on a bond
Common Stock
– Represents ownership of a firm
– Investor’s return tied to performance of the
company and may result in loss or gain
33. Corporate Finance: UnderwritingCorporate Finance: Underwriting
And SyndicationAnd Syndication
• Primary market making is one of the basic functions of
investment banking.
• As primary market maker, the investment bank acts as an
intermediary between a business or government enterprise
that requires financing and persons or institutions that have
funds to invest.
35. Three Distinct Functions of InvestmentThree Distinct Functions of Investment
BankerBanker
1. Origination: It involves development and
registration of securities.
2. Underwriting: It involves purchase of securities
from the issuer by the underwriting syndicate for
subsequent sale to the public.
3. Distribution: It involves the final sale of the
securities to the public.
36. Factors affecting the Role ofFactors affecting the Role of
Investment BankInvestment Bank
The precise role of investment bank in origination,
underwriting and distribution depends on a number of
factors. These include:
i. The type of issuer – Corp., Treasury, Govt Agency,
Municipality
ii. Where issued – USA or International– registration/shelf-
registration
iii. The type of security– exemption from registration
(e.g.,com. paper)
37. Corporate FinanceCorporate Finance
• Corporations issue different types of securities:
- Equity Security – Common stock
- Hybrid Security – Preferred Stock
- Debt Security – Mortgage bond, debenture or notes,
commercial papers etc.
38. • Two fundamental ways to intermediate issuers and
investors.
- Public Offering, where securities that are issued are
offered for sale to the public investor.
- Private Placement, where the securities are placed,
through negotiations, in the hands of a small group of
sophisticated, usually institutional investors.
Ways to intermediate issuers and investorsWays to intermediate issuers and investors
39. • For making public offering, issuers must satisfy a
number of well-defined criteria and in Bangladesh, an
issuer has to get the prospectus approved from the
Securities and Exchange Commission (SEC).
• The public offering process involves a tedious,
sometimes complex and time-consuming undertaking
that can expose the corporate officers and directors to
financial and even criminal liabilities.
Ways to intermediate issuers and investorsWays to intermediate issuers and investors
40. • For this reason, issuers employ investment bankers
(a) to perform due diligence and
(b) to understand what information investors want and need to know
to make a reasonable investment decision.
This is the originating phase. Following this, the investment
banker works in the capacities of underwriter and
distributor.
Ways to intermediate issuers and investorsWays to intermediate issuers and investors
41. Investment Banker’s Role in the IPO Process
Origination Underwriting Distribution
Investment Banker’s Role in IPO ProcessInvestment Banker’s Role in IPO Process
42. The Public Offering ProcessThe Public Offering Process
1. At the first step, the investment bank negotiates a
mandate to “do the deal and prepares the issuance to
the satisfaction of the SEC. This part of the process is
called origination. The process involves an investigation
of the issuer, preparation and filing of required
documents, and organization of an underwriting
syndicate.
2. In the underwriting phase, the investment banker
negotiated, on behalf of an underwriting syndicate, with
the issuer for (1) an offering price for securities and (2)
the size of the issuance. They must also negotiate the
underwriting spread – the difference between the
offering price to the public and the proceeds to the
issuer. This is also known as the gross spread or
underwriting discount.
43. 3. In the distribution phase, an underwriting syndicate
and an affiliated selling group distribute the securities
to the public. Together, the underwriting syndicate and
the selling group constitute the distribution syndicate.
The Public Offering ProcessThe Public Offering Process
44. OriginationOrigination
• Investment banking, particularly primary market making, has
long been a very “relationship oriented” business. Corporations
used to get the service of the same investment bank.
• This has changed in recent years particularly due to the advent
of shelf registration. Now-a-days, the preparation of securities
for issuance and the subsequent underwriting and distribution
of those securities and not strongly linked.
• The separation of issuance preparation from underwriting and
distribution allows competition among underwriters. This had
reduced the floatation cost significantly.
• But preparation of issuance is still a very relationship-driven
business. Because it requires the investment banker to have
detailed knowledge of the firm and its management. This
knowledge takes time and considerable energy to develop.
45. Reasons for approaching investment bankersReasons for approaching investment bankers
(a) Assistance in issuing securities;
(b) Cashing our the shares of a privately held grown up firm;
(c) Acquiring capital to effect a transition of ownership and
control –as in the case of the sale of junk bonds to finance
an LBO.
(d) Altering the capital structure – the debt-equity ratio.
Firms leverage up when earning prospect is high and
leverage down when debt load is heavy compared to
earning prospect.
46. Steps for Issuance PreparationSteps for Issuance Preparation
1. First, the investment banker must perform a very
thorough investigation of the issuer. This is called due
diligence investigation.
2. Second, a primary filing with the SEC may be required.
3. Third, after addressing the concerns of the SEC, a
preliminary prospectus is prepared.
4. Then, a second and final filing with the SEC is made. At
this point, the origination phase is complete.
47. Due Diligence InvestigationDue Diligence Investigation
• A firm making public offering of securities should make a
reasonable effort to disclose to potential investors all material
information, otherwise the may be held liable for its absence.
• The responsibility for due diligence investigation, together with
financial liability, extends to the underwriter as well.
• Primary responsibility for the due diligence investigation
generally falls on the investment bank that will subsequently
manage the underwriting syndicate. This firm is referred to as
the lead underwriter, the lead manager, or the boo-running
manager.
• Often, on or more additional investment bank will share some
deal management responsibilities. They are referred to as co-
managers.
• The potential liability associated with the due diligence
investigation compels the investment bankers to dig deep and
ferret out all material information. The opinion of Chartered
Accountant is an integral part of the process.
48. • The disclosure of information required in this process may lead to
a conflict between investment banker and issuing firm. Because,
the firm had probably never had to disclose all material
information and they have to disclose a great deal of information
that they consider confidential and competitively sensitive.
Moreover, the investment banker will probably downplay all rosy
projections.
• The role of investment banker in this process is paradoxical. On
the one hand, investment banker represents the firm and is being
paid by the firm; it needs to present the firm favorably to preserve
the relationship with the firm. On the other hand, the bank is ever
conscious of its legal responsibilities and the potential liabilities
for misstatement and misrepresentations.
• Investment banks are required to perform a reasonable
investigation of the issuer. But the definition of the term
reasonable investigation is little cloudy.
Due Diligence InvestigationDue Diligence Investigation
49. The SEC Filing ProcessThe SEC Filing Process
In the USA, it consists of two parts:
1. Preliminary prospectus (or a red herring) – It is the
principal document used by investors in evaluating the
offering and is the only marketing document used by the
underwriters.
2. Exhibits including legal documents and a draft of the
underwriting agreement.
50. • Acceptance of the registration by the SEC does not
constitute an endorsement of the securities by the SEC.
• While the registration process is progressing,
a. An underwriting syndicate is formed.
b. Arrangements are to print the red herring in large
quantities for distribution.
c. Share certificates are printed.
d. Roadshows are arranged.
52. a. Firm commitment:
Underwriters guarantee that they will sell a specified
minimum quantity of issuance at the offer price. If they
fail to sell the quantity, they must take it themselves.
- An insurance against issue failure.
- The risk is transferred to the underwriter.
- The underwriting spread is generally higher.
- But the issuer may become biased to make
underpricing.
- This may create a natural friction between issuer and
underwriter.
- Most of the deals are on firm commitment basis.
UnderwritingUnderwriting
53. b. Best Efforts:
Underwriters do not make any guarantee. They
simply sell securities.
Unsold securities are returned to the issuer.
c. Standby Underwriting:
Standby underwriting is employed when the issuer
makes right offering and uses the underwriter only as
a backup for any securities not taken through the
right offering.
UnderwritingUnderwriting
54. DistributionDistribution
• New issues of securities are distributed through the
distribute syndicate. It includes both the underwriting
syndicate and the selling group.
• The primary purpose of the distribution syndicate is to
distribute the securities as quickly as possible.
• The speed is important, because between the time of
commitment to the offer price and the time of actual sale in
the market, the market price may decline. (But benefit
cannot be sought from a price rise.)
• Faster the distribution, better off the underwriters.
55. They often try to make the distribution syndicate large.
Because if each participant receives a small portion of
total issuance, they can participate in many issuances.
This makes them diversified across securities and
reduces the risk.
Distribution of securities:
For the purpose of allocating the revenues from the
underwriting and distribution, the syndicate is divided into
three groups:
a. The managers, who sell the majority of shares.
b. The preferred group of dealers, responsible for a bulk of
the distribution.
c. The non-preferred group dealers.
DistributionDistribution
56. • The lead underwriter is expected place a stabilization
bid in the market. (To offer same price for all at least
for a time).
• Sometimes over-allotment option is given to the
underwriter that puts the underwriter in the Green
Shoe.
- It allows the underwriter to issue additional shares up
to a stipulated amount (usually 5 to 15 percent) if the
issue is well received by the market.
DistributionDistribution
57. Division of RevenuesDivision of Revenues
a. Management Fee: It goes to the managers for their
role in preparing the offering. This fee is a partial
compensation for due diligence investigation.
b. Underwriting Fee: To cover the miscellaneous costs of
underwriting – advertising, legal expense, stabilization
expense, postage and others.
The remainder is distributed among the syndicate
members based on the their level of participation.
c. Selling Concession: To the syndicate based on the
number of shares they are responsible for selling.
58. Shelf RegistrationShelf Registration
In a shelf registration (or a shelf) the issuer prepares an
offering in the usual way, but the filing is good for two years.
This is in contrast to traditional registration in which filing is
good for a very short period of time.
• The firm may issue new securities with a 24 hours notice to
the SEC.
The major advantages are:
1. It allows the firm to get the costly and time-consuming part
of the issuance process over and done with in one shot.
2. It allows the firm to come into the market on a very short
notice in order meet the unexpected needs and to exploit
any windows of opportunities that might arise.
• In Bangladesh, there is no provision for shelf- registration.
59. Offshore Markets & Dual SyndicationOffshore Markets & Dual Syndication
The derivative markets allow a firm to raise money in almost any
country and currency by selling securities to investors and
swapping these liabilities into desired currency.
• For example, a US firm may sell dollar-denominated bonds in the
Eurobond market. If it is not sold in the USA, it does not require
an SEC registration in the USA. Later on, seasoned issues can
be offered in the USA.
• A dual syndication is one in which two separate syndicates are
employed – one for distribution in the USA and the other for
distribution outside the USA.
• Special terms:
Yankee bonds: Dollar denominated bonds issued in the USA by
any non-USA firm.
Samurais: Yen denominated bonds issued in Japan by non-
Japanese firms.
Bulldogs: Sterling denominated bonds issued in the UK by non-
British firms.
60. Syndication DepartmentSyndication Department
• The syndication department of an investment bank is
responsible for assembling the underwriting syndicate
and for helping to select the selling group in cooperation
of the issuing firm.
• It maintains close ties with many broker/dealer firms,
known collectively as the street.
• The syndication department plays an important role in
working gout problems and conflicts that occasionally
arise between members of syndicate.
61. Seasoned Public OfferingSeasoned Public Offering
• Seasoned public offering is a new offering of
securities to the public by a firm that has already
issued securities.
• Three distinct types of seasoned public offering:
a. Primary seasoned offering
b. Secondary public offering (secondary placement):
c. Combined offering
62. a. Primary seasoned offering:
An offering of a new issue by a firm that has already done
an IPO.
Its primary purpose is to raise new capital for the firm.
b. Secondary public offering:
A public offering of securities that are purchased by the
underwriters directly from the pre-public owners and not
from the firm.
Usually used by firm’s founders, other pre-public owners
and some post public holders of securities to cash out of
the firm.
Seasoned Public OfferingSeasoned Public Offering
63. c. Combined offering:
It is partly primary and partly secondary. It is used to both
raise new capital for the firm and to cash out some of the
pre-public owners.
- Often it is difficult to persuade the investors that the stock
is attractively priced when insiders are selling out.
Many underwriters do not handle a public offer that includes
the sale of securities by owners.
As an alternative, the owners could simply sell in the
secondary market through broker/dealer. But this may
send a negative signal to the market.
Seasoned Public OfferingSeasoned Public Offering