What Do Investment Banks Do?

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Let’s begin our discussion with a walkthrough of what an Investment Bank does.

The Four Key Divisions of an Investment Bank

1. Investment Banking 
2. Capital Market 
3. Sales and Trading 
4. Research



Within a typical Investment Bank, there are four key divisions:

Investment Banking – work with clients on Mergers & Acquisitions (‘M&A’) and Restructuring advisory as well as Debt and Equity capital raises.

Capital Markets – work with core ‘Investment Banking’ to connect clients with Investors (‘Equity’) and Lenders (‘Debt’).

Sales and Trading – help large (‘Institutional’) Investor clients execute the purchase and sale of securities (e.g. Stocks and Bonds, Derivatives, etc.).

Research – conduct analysis and provide opinions on the attractiveness of individual Stocks (‘Equity Research’) or Debt (‘Credit Research’) securities.

Quick Note: The Capital Markets division is technically within Investment Banking. But, they perform a distinct function (as you see above). Further, the Capital Markets career path is slightly different. As a result, we break Capital Markets out as a distinct division.


How the ‘Core Investment Banking’ Division Operates

The focus of this article is the career path for the ‘core Investment Banking’ division. You can think of the Investment Banking division as being similar to Real Estate Agents.

However, Investment Bankers assist with the Buying and Selling of Businesses (vs Houses).

And Buying and Selling a multi-billion dollar Business entails significantly more complexity than a home purchase.

The Core Services of an Investment Bank

At a high level, the Investment Banking Division offers four core services:

  • M&A – advise clients on the sale (‘Sell-Side M&A’) and purchase (‘Buy-Side M&A’) of companies.
  • Restructuring – help clients work through periods of financial distress.
  • Equity – work with the Capital Markets division to raise Investor capital for clients.
  • Debt – work with the Capital Markets division to raise Lender capital for clients.

For each of the services above, Investment Banks earn a fee.

Banks charge fees based on a percentage of the sale value of a Business or the money raised. 

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