Overview of Traditional Investment Banking Groups
A traditional investment bank is composed of multiple divisions, including sales and trading and investment banking. The investment banking division is an intermediary between companies that need capital and clients wanting to invest capital.
Bankers advise clients that need capital or are planning a strategic action, such as a merger or acquisition. Bankers also help execute these strategic actions. Normally, the investment banking division is divided between industry, product, and capital markets groups.
Industry Group
As the name implies, industry groups are divided by sectors. Examples of traditional industry groups are financials, industrials, and energy. Bankers in a specific industry group have specialized knowledge and expertise for the sector.
They try to win business from clients in their specific industry that are seeking to raise capital or execute a strategic action. Bankers in industry groups are exposed to multiple products such as mergers and acquisitions (M&A).
Product Group
Working in partnership with the industry groups, product groups primarily help execute transactions. Normally, M&A is the largest product group. The M&A group, for example, may provide valuation and deal structure services. The other product groups include leveraged finance and restructuring.
Capital Markets Group
Bankers in the capital markets group assist clients in raising capital. The capital markets group is traditionally divided by financial instruments. Capital markets groups include equities, high yield, fixed income, and structured finance.
Bankers in the capital markets groups also frequently work with members of the industry and product groups. For example, bankers in the mergers and acquisitions product group may help structure and execute an acquisition, and the capital markets group would assist the client in raising capital for the acquisition.
While most large bulge bracket investment banks are structured as outlined above, not all investment banks are the structured this way. The interactions between groups frequently differs between investment banks.
Also, smaller boutique investment banks frequently specialize in one area of investment banking. For example, a boutique healthcare investment bank would only provide investment banking services to clients in the healthcare industry, and thus not need multiple industry groups.
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