If you’re planning to sell your business or hoping to raise capital, you are about to become intimately familiar with the world of investment banking. Investment bankers are experts in money, corporate governance, and markets. Their job is to advise clients— such as governments and corporations—about financial decisions. But unlike your neighborhood personal financial advisor, they offer much more in-depth advice, and are deeply immersed in the world of finance. 

The specific roles an investment banker fills depend on their job within the industry. Some bankers fill several niches, while others focus on just one. In general, you’ll find investment bankers doing the following: 

Raising Capital
Capital raises are a regular part of doing business for many governments and corporations. For example, a government might want to build a new highway or school, or invest in a local airport. A corporation may need to expand abroad and build a factory or invest in a smaller startup. The ability to raise capital is therefore inextricably linked to these entities’ ability to thrive and compete. Investment bankers play a key role in raising capital by arranging financing, helping to assess which type of financing is right, and supporting entities to balance risk and reward. 

Raising capital takes many forms. An investment banker might: 

  • recruit investors 
  • issue bonds 
  • arrange equity financing
  • prepare for a private placement, such as by offering bonds to an institutional investor

Each of these roles is a complex juggling act that may require working with the Securities and Exchange Commission (SEC), jumping through regulatory hurdles, comprehensive due diligence, and more. When you hire an investment banker to undertake a capital raise, they guide you through the entire process to ensure you get the money you need. 

 

Underwriting Deals 
Underwriting is a sub-component of raising capital, though it requires a different set of skills. Investment bankers often help to underwrite deals, including those for which they raise capital. Many underwriters specialize in capital raises. In this role, they manage the risk that is an inevitable component of capital raises. They may, for example, buy securities and then add a markup that generates a profit and cushions the risk they take. In almost all cases, investment bankers who underwrite deals work with other bankers, called a syndicate, to distribute the risk among them.

 

Mergers and Acquisitions
Investment bankers serve as intermediaries and advisors to lower and middle-market mergers and acquisitions transactions, while small companies usually work with brokers instead.

Because they work with larger entities, investment bankers managing mergers and acquisitions offer significant value and a comprehensive suite of services. Many companies hire an investment banker months or even years prior to a sale, to ensure the business is optimally positioned for the most profitable possible transfer. Serving as an advisor and intermediary, investment bankers free owners to focus on running their business. Some roles an investment banker might undertake as an M&A advisor include: 

  • Preparing the business for sale by identifying possible streams of revenue, getting the books in order, and streamlining operations. 
  • Valuing the business and gathering supporting documents that can help convince the buyer of the business’s value. 
  • Mining a contact list to recruit interested buyers. 
  • Preparing marketing materials and a pitchbook that reveal key information about the company without violating trade secrets. 
  • Working with the legal team to weigh various sale options. 
  • Consulting with the business about how deal terms and conditions might affect the cash value of the deal. 
  • Consulting on management and staffing issues. 
  • Overseeing the merger and integration to help both parties manage cultural transitions and other common challenges. 

Investment bankers usually charge a success fee and an upfront retainer. Research consistently shows that they add significant value to a transaction. 


In today’s market, PE and VC are key purchasers. Many companies get offers from these firms, and sometimes the offers come without warning. In this scenario, the investment banker works for the banking firm, not for the owner or the company. So the initial offer might not be in the best interests of the owner, and a more favorable offer with better terms may be possible with the right advisory team in place. 

No matter what type of investment banker you need, it’s important to find a good fit. Like any other employee, interview several options before making a hire. You need someone who is an expert in your specific niche, who can tell you the specific actions they will take to support your company, and who is easy to work with. Personality matters here, since you’ll be spending significant time working with the firm. You don’t have to love every investment banker from the firm, but you need to be able to work with them. So ask lots of questions and then trust your gut.