SEBI
Section 2(e) of SEBI Act, 1992 defines merchant banker as any person who is engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management.
Whattypicallyan Investment Bank? is consists of three distinct, but related businesses: An investment bank
Traditional Investment Banking Capital raising Debt Equity Strategic advisory services Mergers & acquisitions Restructuring Takeover defense Sales & Trading Distribution and execution arm of the investment bank Sells and trades stocks and bonds Manages the firms risk and makes markets for the securities underwritten by the investment bank Research Analysis and recommendations of stocks and bonds Includes company coverage and sector coverage
Bridge Commitments
Strategic Advisory
A good investment banker is a trusted advisor to their client a CEOs first call for strategic advice Investment bankers are most valuable when they can provide unique insight regarding a companys operations or strategic direction As part of a normal client dialogue, investment bankers will show clients strategic ideas that may or may not be obvious to their client CEOs often use their bankers to approach potential counterparties on an informal basis
Strategic Advisory
Investment bankers typically handle negotiations and most other aspects of the M&A process, allowing management to focus on running their business Valuation Process management Structuring Fairness opinion Purchase/Sale documentation Whatever else it takes
One of the most common functions of investment bankers is to assist companies in raising capital Investment banks are the intermediaries between users of capital and providers of capital Equity IPO Secondary Offering Debt Investment Grade High Yield Debt Structured & New Product Financing
Pricing / Closing
Post-deal follow-up
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Establish agenda, timetable, information request list and working group list
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Underwriting
Buying the securities from the issuer is called underwriting. When an investment banking firms buys the securities from issuer and accepts the risk of selling securities to investor at a lower price, it is referred underwriter. Investment bankers need not to undertake the second function of buying the securities from the issuer.
An investment banker may merely act as an advisor and/or distributor of the new security.
Underwriting
When an investment banking firms agrees to buy securities from the issuer at a set price, the underwriting arrangement is referred to as a firm commitment. Best effort underwriting arrangement investment banking firms agrees only to use expertise to sell the securities; it does not buy the entire issue from issuer.