Investment Banking Services: Comparing Services

Subject: Economics
Pages: 11
Words: 2969
Reading time:
10 min
Study level: Undergraduate

The globalization of the world economy has led to the creation of a very complex structure of which industries and financial institutions are the parts. Every major investment plan either in form of establishing a new unit or for a simple public offering requires the involvement of financial institutions. These institutions help companies or governments and various other agencies to raise more from the market either through issuing or selling securities. Hence this investment banking is a form of banking that is done by different investment banking firms for various corporations. These banks charge fees and commissions from the corporations for their services and on behalf of these corporations; they provide various financial services like public offerings, carrying out mergers and acquisitions and also act as brokers. The corporations are helped in raising funds from capital markets in form of equity, bonds and debt and they are equally helped in providing advisory services in terms of financial transactions for carrying out mergers and acquisitions. Apart from these services, they perform the job of intermediaries while trading for clients. In older days there used to be different banks for commercial services and financial services but the economy has evolved in such a way that in the current market scenario commercial banks are providing similar services and actually leading the queue. Commercial banks and financial institutions like HSBC, Citigroup, etc are the leading commercial banks with interest in investment banking services.

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The intensity of the effect of globalization and associated technological changes can be understood by a growing number of institutions providing similar services and the increasing interest of commercial banks in providing investment services. The simple retail investor who used to deal in a few hundreds or thousands of equity shares can now jump on a public offering just through logging on the website of the institution providing financial service and thereby transactions can take place through a simple online trading account. Hence this simplicity has made corporations go for those investment banking services providers who have got vast reach to both big investors as well as small retail investors. The rise in competitiveness can be understood from the fact that states of the types of services a single financial institution can now provide.

The corporations and government are being offered services for underwriting and distributions of debt and equity offerings in addition to financial advisory services which relates to strategic matters concerning merger and acquisitions, financing real estate projects, and organizational restructuring processes. The expansion in types of services is very much related to the evolution in the banking industry that has been observed in various regulations, deregulations, and globalization of the economy with IT-enabled technological advancements. The current market scenario requires extensive fluidity and dynamicity in financial market and proper understanding of both local as well as international market with intelligent anticipation technique related to current market trends, market changes and finally the impact of the current status in future performance of the same. The success of anticipation is very important because it requires accumulation of resources for serving those opportunities in most efficient manner with various smart solutions and obtaining quality results for the clients through superior performance.

Financial Markets, Banks and types of Services

The globalization has transformed this world economy into a very vast entity and it is far from the one that was in the beginning of 20th century. There are companies from India acquiring European metal firms and also major telecom operator Vodafone investing billions of dollars to acquire Hutchiston’s mobile service (Dennis; steelonthenet.com). Another major example is the merger of Mittal Steel and Arcelor (Equitymaster.com). Then the Public offerings and Bonds come into picture. The intensity of the financial market can be understood just by looking into a major financial newspaper for a week. Financial Times in the week of March 5-9 2007 was abuzz with issue of a number of international bonds each day with total number expanding to 42 out of which 25 were issued in Euro while rest were in Dollars, Yen and other major world currencies.

The Republic of France issued bonds of worth 4 billion euro with maturity in 2040. There are many other examples. But the actual question is how are these non financial entities deal with such a large amount of financial transaction (Financial Times). The answer is that these corporations or governments take the help of the international financial organizations who deal in every major investment processes. But in all these investment or mergers or major financial practices, it’s the investment banks that perform the major role. The corporations seal pact with these investment banks thereby taking the most suitable services. These banks provide services like private equity, mergers and acquisitions, equity underwriting, asset securitization, and investment management. The sheer size of the world economy is a very considerable factor behind the existence of a number of banks providing investment banking services. Some of the major investment banking service providing financial institutions is the Citigroup, UBS, HSBC, Morgan Stanley, Merrill Lynch, Lazard and Goldman Sachs.

Citigroup and HSBC are the two financial firms which were very much a commercial bank in the beginning but later expanded themselves to investment banking services. Beginning with Citigroup, its Investment Banking unit provides a very comprehensive service related to financial advisory and capital raising and have a very broad list of clientele which includes top corporations, financial institutions and governments worldwide. The financial solutions are created very much in accordance with need of the Client and hence a wide range of possible solutions have been strategically devised so that every considerations of the client could be accommodated. They also provide a defined advisory service on various M&A transactions and capital-raising activities including mergers, acquisitions, divestitures, financial restructurings, underwriting and distributing equity, debt, and derivative securities. Citi boasts of a very wide spread global presence and is a foremost global underwriter in combined equity and debt issuance. The state of the are technology usage makes it capable enough to provide every financial product and services with the whole group being organized into different subgroups comprising of industry, product and regional groups and are in close relationship with different representatives of capital market, global relationship banking and sales and trade. The versatility of the Citi expertise and its banker’s in-depth knowledge of both local and global market help in proper assumption of the performance of product and its utility (Citigroup).

HSBC’s client relationship management Organization basically comes under Corporate Banking which has its expertise in multi-disciplinary product specialists through its global businesses which ranges from global transaction banking; global markets; investment banking; to asset management and financing. With presence in almost 82 nations and the office presence in numbers being 10,000, HSBC is one of the most preferred corporate and investment banking service providers with customers being top-tier global corporations and institutions. The bank is recognized as an expert in deriving local knowledge and using the same for making global impact. HSBC has every possible facility to provide solution to its clients’ varied needs through extensive usage of expertise of various multi-disciplinary product specialists with knowledge base stretched from global transaction banking, global markets and investment banking to asset management and financing. Its superior execution and sustainability with expertise in providing solutions to financing requirements of every nature irrespective of the project’s diversity and loan requirement complexity. The clients are issued a spectrum of financing services in forms of instruments and transactions that range from simple debt to much structured and solution-driven transactions. The clients are helped in structuring and launching of financial transactions into either the capital market or the market outside the capital market. Various corporate finances, mergers and acquisitions and associated financing solutions are the main issues where HSBC bankers focuses. HSBC is also an expert of emerging markets expertise and uses its experience in negotiating complex negotiations and cross-country activities (HSBC).

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UBS group provides its clients complete set of services that are necessary for its client for expert advice, innovative solutions, outstanding execution and comprehensive access to the world’s capital markets. They have got solution to satisfy every requirement of the client. Whatever client demand, UBS has capability to provide solutions either in single form or composite form of investment banking, equities, fixed income or foreign exchange. The global strength and industry experience of UBS is very much efficient to meet client’s needs. The UBS provides ample support through the use of market intelligence, insight and global coverage to help the clients to capture opportunities and manage risk. The clients are assured of any solution they need in covering their financial needs. The clients are helped in managing risk and capturing opportunities.

The financial intermediaries and banks are basically more of the clients and partners of smaller banks It provides ample support to several financial institutions to use the network and platform of UBS to act globally despite their limited options. The UBS presents itself as Bank of Banks by providing smaller banks, brokers and client advisors access to its global coverage, market-leading sales and trading operations and superior technology platform. The clients who are basically dealing with smaller financial institutions can now get maximum benefit out this world capital market and this enhanced service from smaller banks helps hem in providing better offering and hence achieve greater efficiency and effectiveness in their personal business. The smaller ones are now given better global reach and finally help them in enhance the quality and range of services and financial products without incurring large cost of development (UBS).

Merrill Lynch’s is the leading providers of sales and trading services through its Global Markets Group. Its services encompass full spectrum of debt and equity products for its institutional investor client that has got worldwide presence. The debt markets expertise and related services are meant to cover various interest rate, credit and asset-based products, liability management, foreign exchange, derivatives and other securities. The Global Leveraged Finance group under the umbrella of Merrill Lynch is supposed to bring together all of the leveraged finance activities for both issuers and investors. The services are meant to include high-yield sales and trading, capital markets, origination and loan syndication. Other sub institutions under the leadership of Merrill Lynch i.e., Global Principal Investments, Secured Financing and Real Estate Group, encompasses the various products of Merrill Lynch which includes firm’s asset-based finance, principal investments, real estate finance, CMBS and ABS, as well as non-credit structured finance activities, including ML Capital. The group and its subordinate organizations normally offer a wide range of risk management solutions to various clients around the world.

Merrill Lunch boasts of a large group of equity markets professionals thereby providing a complete range of services related to equity and equity-linked sales and trading services, including sophisticated portfolio analytics and electronic trading. Merrill Lynch’s Global Investment Banking Group delivers strategic capital raising and merger and acquisition advisory services with very much customized sector expertise. The team for debt and equity origination supports clients in raising funds and diversify capital sources by accessing the domestic, international and private markets. The Global Leveraged Finance group brings together the group’s various financial activities under its leveraged finance activities for both issuers and investors. The leveraging process includes high-yield sales and trading, capital markets, origination and loan syndication. For real asset business and providing financial solution to various Construction companies all around the world, the Global Principal Investments, Secured Financing and Real Estate Group of Merrill Lynch, encompasses the firm’s asset-based finance, principal investments, real estate finance, CMBS and ABS, as well as non-credit structured finance activities, including ML Capital.

Merrill Lynch Global Private Equity group (“MLGPE”) invests in private equity transactions in a number companies with the interests in the range of medium- to long-term capital appreciation. MLGPE strategically makes various investments in companies with high growth/profitability prospects or strong cash flow characteristics and capable and experienced management teams. MLGPE with its partnership based approach opportunistic investment with both management teams and other financial or strategic investors. The intermediaries are provided access to access to all its products and service, which can well suit things like current requirement, goals and target audiences. The solutions that are available range from FX pricing and securities order routing to investment research and corporate finance. Some of its market-leading products and services can be well customized to optimize each link in the value chain thereby understanding the suitability and understanding of the business partner or the client. The famous products of Merrill Lynch have been the result of some of the acclaimed investment banking franchise and independent thought process. The client’s business is first analyzed and hence most of the products of firm have been very much original and also unique in characteristics. The right questions are looked upon and depending on the client’s answer the further course of action is taken into consideration and hence the possibility of any misadventure is minimum (Merrill Lynch).

Lazard and its Financial Advisory business provides advices that are very much in connection with a wide variety of strategic and financial matters that are typically in nature and is always client specific. The long-term business plan of Lazard is through fostering long-term, senior-level relationships with existing and new clients and finally as their independent advisor on various strategic transactions such as mergers, acquisitions, restructurings and other financial matters. Understanding the need of the world economy in 21st century, Lazard has reinvented itself through new set of intellectual capital and now has a group of many senior professionals who are supposed to have strong client relationships and industry expertise. The Lazard specialists are supposed to maintain better coordination with various industry specialty groups on a global basis, and thereby broadening its global presence by adding almost six new regional offices and entering into strategic alliances in new geographies. Understanding the purpose as well as the client’s demand in new world economy Lazard’s Financial Advisory practice today consists of an experienced group of advisors with specialties across a wide range of industries and practice areas, operating, with magnificent increase in quality and frequency of client contact.

The rising possibility of world- wide merger and consolidation of the economy will be sustained through several banking services and Lazard believes in using the same potential increase in its business and increase in range of services and products it offers. Its three main financial practices are the Mergers and Acquisitions, Financial restructuring and Capital raising. Its Mergers and Acquisitions services include general strategic and transaction-specific advice regarding domestic and cross-border mergers and acquisitions, divestitures, privatizations, special committee assignments, takeover defenses, strategic partnerships, joint ventures and specialized real estate advisory services. Lazard has to provide advice to managements and boards of directors, business owners, governments, institutions, investors and other interested parties on a worldwide basis. Lazard through its Financial Restructuring practice has basically specialized in helping companies in financial distress and turbulent business environment so that any possible temporary problem can be sorted out and also the long-term benefits. Lazard’s Financial Advisory provide support in fund raising through its Private Fund Advisory Group which is a new service that raises capital for private equity funds (Lazard).

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Goldman Sachs’ Investment Banking Division has got its expertise in identifying, structuring and executing a diverse range of innovative public and private market transactions for corporations, financial institutions and governments. Transactions include mergers, acquisitions, divestitures, the issuance of equity or debt capital, or a combination of these. Goldman Sachs provides clients with the extremely wide range of opportunities around the world. It claims of various global relationships with complete understanding of local economies, industries and cultures thereby delivering consistently high quality advice and service time and again. Banking professionals advise and assist clients across a number of industries and product groups with a very diversified field ranging from: Industrial, Consumer, Natural Resources, Health Care, Financial Institutions, Real Estate, Special Products, Technology, Media and Telecommunications. In each of these areas, Goldman Sachs provide a range of services designed to meet the specific needs of our clients – including financing, merger and acquisition and other investment banking services (Goldman Sachhs).

Morgan Stanley provides three types of financial products. The domain areas are Mergers and Acquisitions, Global Capital Markets and Securitized Products Group. The Mergers and Acquisitions (M&A) department searches out the best possible solution through innovative and customized help to clients. The M&A team excels in domestic and international transactions including acquisitions, divestitures, mergers, joint ventures, corporate restructurings, recapitalizations, spin-offs, exchange offers, leveraged buyouts and takeover defenses as well as shareholder relations. The extensive experience of Morgan Stanley staff is being applied with global industries, regions and banking products to meet the clients’ short- and long-term strategic objectives. Morgan Stanley’s Global Capital Markets (GCM) group raises capital for its firms through the execution of an IPO, a debt offering or a leveraged buyout. GCM integrates the various expertises of departments like Sales and Trading and in Investment Banking and provides its clients seamless advice and sophisticated solutions. The Securitized Products Group (SPG) engages in a wide array of activities that include structuring, underwriting, and trading collateralized securities across the world. SPG has been believed to make active markets and takes proprietary positions in the full range of asset-backed, residential mortgage-backed, commercial-backed and collateralized debt obligation securities in both the cash and synthetic markets. SPG also contributes in originating commercial mortgage and single-family loans through conduit and loan purchase activities, and advises clients on securitization opportunities (Morgan Stanley).

Refernces

Citigroup (2007) Our businesses. Web.

HSBC (2007) Invetment Banking Servics. Web.

UBS (2007) Invetment Banking Servics. Web.

Lazard (2004) Invetment Banking Servics. Web.

Morgan Stanley(2007) Invetment Banking Servics. Web.

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Goldman Sachs (2007) Invetment Banking Servics. Web.

Merrill Lynch (2007) Invetment Banking Servics. Web.

Equitymaster (2006) Mittal Arcelor Merger. Web.

Dennis, T (2007) Vodafone bags Hutch India. Web.

Steelonthenet.com (2007) Tata Corus Deal. Web.

Financial Times (2007) International Bonds. Web.