What is Investment Banking? Everything You Need to Know


A career in investment banking and investment banking jobs may be right for you if you have a keen interest in finance and the stock market. Investment bankers, as opposed to other bankers, specialize in working with governments and corporations, providing financial consulting services as well as assistance with transaction execution. Finding out more about the work of investment bankers will help you decide if this is a career path you wish to pursue.

We go over what investment banking is, what it entails, how much it usually pays, what it takes to become an investment banker, and what skills are necessary for success in this JobsBuster post.


What is investment Banking?

Investment banking is the term used to describe a wide range of financial services, the majority of which are focused on capital raising and advising wealthy individuals, governments, and corporations. Investment banks are frequently hired by corporations and other organizations to assist in facilitating capital market transactions because these transactions are frequently complicated and fraught with regulatory obstacles.

For investors, it’s critical to recognize the distinction between investment banking and consumer, or commercial, banking, as the two are significantly different from one another.


What does an investment banker do?

Investment bankers provide firms and governments with advice. They assist their clients in raising funds on the financial markets, offer a range of advisory services, and offer advice on mergers and acquisitions. Among their main duties are the following:

  • Creating various financial models to assess debt and equity for capital-raising deals, mergers, and acquisitions.
  • Formulating suggestions for product offerings, valuations, private equity deals, and mergers and acquisitions
  • Using a range of valuation techniques
  • Drafting and going over investment memoranda, pitch books, management presentations, and other documents that clients need to secure funding.
  • Researching, analyzing, and documenting before a transaction
  • Building and preserving connections to grow the company.
  • Producing presentations for various customer portfolios


Functions of investment banking

There are seven primary investment banking functions, including:


  • IPOs: Companies work with investment banks when they’re issuing an IPO, or initial public offering. The bank helps the company to set everything up and list the IPO in a stock exchange.


  • Mergers and acquisitions: This is another major function of investment banks. A merger and acquisition in the area of finance, strategy and management that deals with the joining or purchasing of companies. Investment banks can represent either the buyer or seller in a merger and acquisition. It helps complete a company valuation and can help a company raise funds for mergers or acquisitions.


  • Risk management: Investment banks help companies manage their financial risks in terms of loans, liquidity or currency. Investment banks also help companies control legal and compliance risks, operational risks, business risks and investment risks.


  • Research: Investment banks perform a wide variety of research, including fixed income research, equity research, qualitative research and macroeconomic research. The bank then shares the results of its research with its clients.


  • Merchant banking: Investment banks provide consultancy for financial, legal, managerial and marketing matters. They can help clients to raise financing, manage portfolios and even provide special assistance to small businesses and entrepreneurs, among other services.


How to become an investment banker?

Here are the basic steps you need to take to pursue a career as an investment banker:

1.Get a bachelor’s degree

Investment bankers are required, at a minimum, to hold a bachelor’s degree. Consider pursuing a degree in accounting, finance, business administration or another closely related business degree. Regardless of the specific degree you choose, it’s important to complete coursework in finance, economics and mathematics.


2.Complete an internship

While investment banks don’t require that entry-level candidates have work experience in investment banking, the hands-on experience you gain within an internship can make you more competitive as a candidate, especially if you complete your internship in a relevant industry.


3.Pursue entry-level opportunities

The next step you need to take is to find an entry-level position in an investment banking firm. If you choose to seek employment after completing your master’s degree, then you will likely have an edge over other applicants. You may also qualify for more advanced positions.


4.Consider a master’s degree

Though not necessarily required to work in investment banking, you likely will be required to have one to advance in the field. Additionally, completing a master’s degree makes you more competitive as a candidate for advanced positions.


5.Pursue licensing

Investment banks often require securities licenses, such as the Series 63 or Series 79. In order to obtain these licenses, you must pass an exam. Candidates must be sponsored by a Financial Industry Regulatory Authority (FINRA) member firm to take one of these exams.


Investment Banking Skills

Investment banking work requires a lot of financial modeling and valuation.  Whether for underwriting or M&A activities, Analysts and Associates at banks spend a lot of time in Excel, building financial models and using various valuation methods to advise their clients and complete deals.

Investment banking requires the following skills:


  • Financial modeling

Performing a wide range of financial modeling activities such as building 3-statement models, discounted cash flow (DCF) models, LBO models, and other types of financial models.


  • Business valuation

Using a wide range of valuation methods such as comparable company analysis, precedent transactions, and DCF analysis.


  • Pitchbooks and presentations

Building pitchbooks and PPT presentations from scratch to pitch ideas to prospective clients and win new business (check out CFI’s Pitchbook Course).


  • Transaction documents

Preparing documents such as a confidential information memorandum (CIM), investment teaser, term sheet, confidentiality agreement, building a data room, and much more (check out CFI’s library of free transaction templates).


  • Relationship management

Working with existing clients to successfully close a deal and make sure clients are happy with the service being provided.


  • Sales and business development

Constantly meeting with prospective clients to pitch them ideas, offer them support in their work, and provide value-added advice that will ultimately win new business.


  • Negotiation

Being a major factor in the negotiation tactics between buyers and sellers in a transaction and helping clients maximize value creation.


Read Also: A Complete Guide to Start Your Career in Finance



So, this was all about the role of investment banks and how they really work. We hope you got a clear understanding of the same and understood how investment banks differ from commercial banks based on several criteria.

A career in investment banks can offer a fulfilling and rewarding professional journey. By following the step-by-step guide outlined in this article, you can pave the way for a successful career in investment banks, whether you’re starting at an entry-level position or aiming for high-level roles. Stay motivated, continue learning, and seize opportunities to grow and excel in the dynamic world of finance.

We hope that this will help you with a better understanding of what investment banking is, what it entails, how much it usually pays, what it takes to become an investment banker, and what skills are necessary for success.

If you have any questions or queries, feel free to post them in the comment section below. Our team will soon contact you.

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