What do Investment Bankers do?
Investment bankers provide strategic financial advice, help companies raise capital, facilitate mergers and acquisitions, underwrite securities offerings, conduct research and analysis, manage client relationships, mitigate financial risks, and ensure regulatory compliance.

Introduction to Investment Banking
What is the role and importance of IB in the financial industry
01
The Role of Investment Banking
Investment banking is very important to the financial world. They swoop in to help companies and governments raise money, make smart financial decisions, and navigate complex transactions. It's all about providing the expertise and guidance needed to keep the wheels of the economy turning smoothly.
03
Importance of Investment Banking
Investment banking is like the backbone of the financial system. It plays a crucial role in stimulating economic growth, fostering innovation, and enhancing liquidity and market efficiency. Without investment banking, many businesses would struggle to raise the capital they need to grow and expand. This includes many small firms which find it difficult to raise capital by other means.
02
Key Functions of Investment Banks
Investment banks wear many hats, but their main job is to help companies raise capital. They do this by underwriting securities offerings, which basically means they guarantee to buy the securities at a certain price, ensuring the company gets the money it needs. They also provide advisory services, helping companies with mergers, acquisitions, and other financial matters.
04
Impact on Global Finance
Investment banking isn't just important on a local level – it has a big impact on the global economy too. Investment banks help shape global markets, influence corporate development, and contribute to financial stability and growth. They design the structures of the finance industry that keep everything running smoothly.
Main Responsibilities of Investment Bankers

1
Capital Raising
Investment banks play a crucial role in helping companies raise money by issuing stocks or bonds to investors. They assist companies in determining the right price and quantity of securities to sell and then reach out to potential investors to market these offerings. Additionally, investment banks ensure that companies comply with government regulations and disclose all necessary information to investors. By providing these services, investment banks help companies raise the funds they need to expand their business, while also ensuring that investors can trust the investments they make.
2
Advisory Servicess
Investment banks also offer advisory services, which involve providing expert financial advice to companies on various matters. This includes helping companies raise capital by issuing stocks or bonds, providing guidance on restructuring debt, and offering strategic advice on navigating complex financial situations. Investment banks use their expertise to analyze the financial health of companies and provide recommendations on the best course of action to achieve their financial goals. By offering advisory services, investment banks help companies make informed decisions that can drive their growth and success.
3
Merger and Acquisitions (M&A)
Investment banks play a crucial role in mergers and acquisitions (M&A), which is when one company buys another or they combine to form a new company. Investment banks help their clients through every step of the M&A process, from identifying potential targets or buyers to negotiating the terms of the deal. They also help in valuing the companies involved, structuring the transaction, and securing financing. Additionally, investment banks provide advice on how to integrate the two companies after the deal is completed. By providing these services, investment banks help their clients navigate the complexities of M&A transactions and achieve their strategic objectives.
4
Risk Management
Investment banks also play a crucial role in risk management for their clients. They help companies identify, assess, and mitigate financial risks, such as interest rate fluctuations, currency exchange rate changes, and market volatility. Investment banks use various financial instruments, such as derivatives, to hedge against these risks. By managing risks effectively, investment banks help their clients protect their financial assets and investments, ensuring stability and minimizing potential losses.
What is a Discounted Cash Flow? (DCF)
We hear all the time about how Investment Banks are valuing firms, but how do they actually achieve a fair firm value? Well the most common method used by the industry is with a discounted cash flow. The steps and explanations of this are summarize below.
01
Project Future Cash flows
Estimate the future cash flows the investment is expected to generate. These cash flows should include both the operating cash flows and the terminal value of the investment at the end of the projection period.
02
Calculate the Discount Rate (WACC)
Determine the appropriate discount rate to use in the analysis. This rate is often based on the riskiness of the investment and is used to discount the future cash flows back to their present value.
03
Discount Future Cash Flows
Discount each future cash flow back to its present value using the discount rate. This involves dividing each cash flow by (1 + discount rate) raised to the power of the number of periods into the future the cash flow is expected to occur.
04
Calculate Terminal Value
Determine the terminal value of the investment, which is the value of the investment at the end of the projection period. This can be calculated using the perpetuity growth method or the exit multiple method.
05
Discount Terminal Value
Discount the terminal value back to its present value using the discount rate.
06
Calculate the Present value of the Firm
Sum the present values of the future cash flows and the discounted terminal value to calculate the total present value of the investment.
07
Making Investment Decision
Conduct sensitivity analysis by varying the key assumptions, such as the discount rate or the projected cash flows, to understand the impact on the estimated value of the investment. Based on the estimated present value of the investment and the results of the sensitivity analysis, make a decision on whether to proceed with the investment.