Investment Banker Job Description

A business can expand only if it raises sufficient capital. This can be done by issuing stock or by assuming debt. Generally, the former is preferred since stockholders are the owners of the company and are entitled to dividends, while creditors have to be paid interest and the company has to ensure the eventual repayment of principal. An investment bank helps companies and governments raise capital by acting as an intermediary between the issuer of the security and the investing public. People who act as representatives for financial institutions, that are involved in raising equity and debt for companies, are known as investment bankers. Investment banks assume the risk and the responsibility of selling the IPO and the bond issue to the investors by underwriting the issue. Besides underwriting, the investment banker also performs a horde of other activities.

Job Description of an Investment Banker
As mentioned earlier, an investment banker is the representative of the financial institution (investment bank) that helps companies and governments raise capital. Unlike traditional banks, they do not give loans or accept deposits from the public. Once the investment banker decides to underwrite the issue, the securities both debt as well as equity are purchased by the investment bank at the agreed price, thus guaranteeing the issuer of receiving funds. This guarantee holds good even if the investment banker is unable to resell the issue due to under-subscription. In this case, the investment bank is forced to hold a part of the issue. In case of over-subscription, the investment bank earns a huge profit by selling the issue for a high mark-up. The risk and reward are thus proportional. Sometimes, investment bankers may be required to buy the issue in the open market to peg prices.

Investment bankers are contacted in case of mergers and acquisitions to negotiate either the buy or the sell side of the deal. A merger refers to the process by which two companies become one entity. Mergers could be horizontal, vertical or conglomerate. In case of an acquisition, a larger company takes over the smaller company. If the target has a strong brand name, the acquirer prefers retaining it. One must note that an acquisition does not result in the formation of a new company. An investment banker may be called upon to work for the buy side or the sell side. The latter involves finding an acquirer with a strong strategic fit while the former involves pursuing a suitable target. An investment banker's advice may be sought when the prudence of a merger or an acquisition is questionable. While working for the sell side, the investment banker may help find a solution to help the company restructure its equity or debt and ease its financial distress. In other words, corporate restructuring is also one of the duties of an investment banker.

Investment bankers are also called upon for facilitating private placements. Many times, companies may decide to opt for private placement to avoid the hassles associated with public offering. In case of private placements, companies do not have to register the placement with the Securities and Exchange Commission (SEC) or submit audited reports on a yearly basis to the SEC. Sometimes, companies that were previously public may also decide to become private to tide over difficult times.

Hopefully, the article would have provided some insight on 'investment banker job description'. People who are comfortable with the idea of crunching numbers, working long hours and those having excellent analytical skills may enjoy a career in investment banking.