Investment Banking & M&A

This desk tries not only to give an overview about Investment Banking but also to train members who wish to join “Canary Wharf” by preparing M&A cases, mock interviews and meetings with investment bankers. Members primarily publish articles about financial markets worldwide, teams cover three main areas: Americas, EMEA and Asia.

We are building a team to create and manage a mock Quant Fund

By participating in the Quant Fund project you can get some Asset Management and Quantitative Finance experience that can play a key role when first approaching the job market.

Investment Banking

Investment banking is a special segment of banking operation that helps individuals or organisations raise capital and provide financial consultancy services to them. They act as intermediaries between security issuers and investors and help new firms to go public.

  • It deals primarily with the creation of capital for other companies, governments, and other entities.

  • Its activities include underwriting new debt and equity securities for all types of corporations, aiding in the sale of securities, and helping to facilitate mergers and acquisitions, reorganizations, and broker trades for both institutions and private investors.

These activities are carried out by investment banks. Investment bankers' duties are expanded. They bring together buyers and sellers via mergers and acquisitions (M&A), or they might raise money in the capital—debt (bond) or equity (stock)—markets when they sell a company to the public in an initial public offering (IPO) or when restructuring existing companies.

The background of investment bankers may vary significantly, but most, understandably, have a solid mathematics foundation. Also, many hold advanced degrees, such as an MBA, with concentrations in finance, math, or accounting. To work as an investment banker, many professionals and employers of these professionals require formal training and the completion of continuing education requirements.

What you need to know about investment banks

Investment banks advise in some of the most complicated aspects of banking, including raising capital by issuing bonds, buying and selling businesses, going from private to public ownership, international deals, proprietary trading and for their own accounts. They can for example, underwrite the issuing of new shares.

Market performance can impact on the trading divisions of the bank, leading them to experience profit or loss; while the advisory divisions of investment banks are paid a fee for their services.

Well known investment banks include JP Morgan, Goldman Sachs, Barclays, Deutsche Bank, Bank of America, Morgan Stanley, UBS and Credit Suisse. Some have specialist expertise in particular sectors, while others serve the whole market.

Investment banks were historically referred to as merchant banks in the UK because they were a key driving force behind both domestic and international trade

Mergers & Acquisitions

The terms mergers and acquisitions are often used interchangeably.

When one company takes over another and establishes itself as the new owner, the purchase is called an acquisition.

On the other hand, a merger describes two firms, of approximately the same size, that join forces to move forward as a single new entity, rather than remain separately owned and operated. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies.

How mergers are structured:

  • Horizontal merger: two companies that are in direct competition and share the same product lines and markets

  • Vertical merger: a customer and company or a supplier and company. Think of an ice cream maker merging with a cone supplier.

  • Congeneric merger: two businesses that serve the same consumer base in different ways, such as a TV manufacturer and a cable company.

  • Market-extension merger: Two companies that sell the same products in different markets.

  • Product-extension merger: Two companies selling different but related products in the same market.

  • Conglomeration: two companies that have no common business areas.

How acquisitions are financed

A company can buy another company with cash, stock, assumption of debt, or a combination of some or all of the three. In smaller deals, it is also common for one company to acquire all of another company's assets. Company X buys all of Company Y's assets for cash, which means that Company Y will have only cash (and debt, if any). Of course, Company Y becomes merely a shell and will eventually liquidate or enter other areas of business.

How do mergers differ from acquisitions

In general, "acquisition" describes a transaction, wherein one firm absorbs another firm via a takeover. The term "merger" is used when the purchasing and target companies mutually combine to form a completely new entity. Because each combination is a unique case with its own peculiarities and reasons for undertaking the transaction, use of these terms tends to overlap.