The word "investment bank" is translated from the English phrase "investment bank", but "investment bank" has at least four meanings: first, at the institutional level, it refers to financial enterprises as intermediaries in financial markets; Second, the industry level refers to the entire industry of investment banks; Third, the business level refers to the business operated by investment banks; Fourthly, the discipline level is about the theory and practice of investment banking. At present, there is confusion in the understanding of the term investment bank in domestic academic and practical circles, largely because there is no clear distinction between these four levels. The author thinks that because the four meanings of this English phrase have corresponding Chinese words, we should clearly distinguish the above four meanings, that is, we should use investment bank, investment bank, investment banking business and investment banking business to express these four meanings respectively, instead of simply using the word investment bank.
So what exactly is an investment bank? Simply put, an investment bank refers to a financial institution whose main business is investment banking. However, readers can easily find that this is actually a meaningless circular definition, but it at least gives us a revelation: if we define investment banks, we also define investment banks. Generally speaking, investment banking can be defined from a broad sense to a narrow sense: first, investment banking includes all financial market businesses; Second, investment banking includes all capital market businesses; Third, investment banking business is limited to securities underwriting, trading business and mergers and acquisitions business; Fourth, investment banking only refers to securities underwriting and trading business. At present, the second definition is generally accepted, that is, investment banking includes all capital market businesses. Therefore, investment banks can be defined as: investment banks refer to financial institutions whose main business is capital market business.
According to this definition, not all enterprises engaged in capital market business (or investment banking business) are investment banks, only those enterprises whose main business is capital market business are investment banks. In addition, investment banks are not enterprises that operate all capital market businesses, as long as their main business is capital market business-whether it is one or two.
Of course, this definition is dynamic, because with the continuous development of capital market business, the connotation of investment bank is also developing. As the famous investment banker robert kuhn said: "Investment banking is an organic process-it is constantly changing, developing and evolving, and no book can be accurate and detailed." Therefore, don't mechanically understand the above definition of investment bank. At present, capital market business (or investment banking business) mainly includes securities underwriting, securities trading, mergers and acquisitions, fund management, project financing, venture capital, credit asset securitization and so on.
At this point, we have basically defined what an investment bank is, but we still need to explain the following points: First, perhaps to avoid confusion, some people now use "investment bank" to refer to investment banks at the institutional level in English, but some people still use "investment bank" according to their habits; Secondly, investment banking sometimes refers to securities underwriting and trading. For example, the business carried out by the investment banking department of domestic securities companies refers to securities underwriting and trading business.
Through the above analysis, we can figure out these problems. First, investment banks are not only securities companies, but also the securities industry. Therefore, it is one-sided for investment banks to call securities companies in China; Second, investment banks do not need to operate all investment banking business. A financial institution that operates an investment banking business alone can also be called an investment bank, such as a venture capital fund that specializes in venture capital business. Therefore, it is also wrong to say that "there is no investment bank in China, only CICC is the nearest investment bank".
investment banking
(1) Securities underwriting. Securities underwriting is the most primitive and basic business activity of investment banks. Investment banks have a wide range of underwriting rights, including bonds issued by the central government, local governments and government agencies, stocks and bonds issued by enterprises, securities issued by foreign governments and companies at home and abroad, and securities issued by international financial institutions. In the process of underwriting, investment banks generally have to weigh whether to form an underwriting syndicate and choose the underwriting method according to the underwriting amount and risk. There are four common underwriting methods: the first one: underwriting. This means that the lead underwriter and its underwriting syndicate members agree to buy all the issued securities at the agreed price and then sell them to their customers. At this time, the issuer does not bear the risk, and the risk is passed on to the investment bank.
The second type: bidding acquisition. Usually when investment banks are in strong passive competition. Securities issued in this way are usually high-credit bonds and are welcomed by investors.
The third type: consignment. This is usually because investment banks believe that securities have low credit rating and high underwriting risk. At this time, the investment bank only accepts the entrustment of the issuer to sell securities on its behalf. If all the securities issued within the prescribed time limit plan are not sold, the remaining part shall be returned to the securities issuer, and the issuer shall bear the risk of issuance. The fourth type: sponsorship and promotion. When an issuing company increases its capital and shares, the main target is the existing shareholders, but there is no guarantee that all existing shareholders will subscribe for its securities. In order to prevent it from being difficult to raise the required funds in time, and even lead to the company's share price falling, the issuing company will generally entrust the investment bank to issue new shares to the existing shareholders, thus transferring the risk to the investment bank.
(2) Securities brokerage transactions. Investment banks play a triple role as market makers, brokers and traders in the secondary market. As a market maker, after underwriting securities, investment banks have the obligation to create a secondary market with strong liquidity for the securities and maintain the stability of market prices. As brokers, investment banks trade on behalf of buyers or sellers and on behalf of prices provided by customers. As dealers, investment banks need to buy and sell securities by themselves, because they are entrusted by customers to manage a large number of assets, and they must ensure the preservation and appreciation of these assets. In addition, investment banks also conduct risk-free arbitrage and risk arbitrage in the secondary market.
(3) Private placement of securities. There are two ways to issue securities: public offering and private offering. The former underwriting is actually a public offering. Private placement, also known as private placement, means that issuers do not sell securities to the public, but only to a limited number of institutional investors, such as insurance companies and mutual funds. Private placement is not restricted by public offering laws and regulations, which can not only save issuing time and cost, but also bring higher yield to investment banks and investors than trading securities with the same structure in the open market. Therefore, in recent years, the scale of private placement is still expanding. But at the same time, private placement also has some shortcomings, such as poor liquidity, narrow distribution area, and difficulty in public listing to expand corporate visibility.
(4) mergers and acquisitions. Merger and acquisition has become the most important business component of modern investment banks except securities underwriting and brokerage business. Investment banks can participate in M&A activities of enterprises in various ways, such as: finding M&A goals, providing suggestions for hunter companies and prey companies on price or non-price terms, helping hunter companies to make M&A plans or helping prey companies to make anti-takeover plans against hostile takeovers, and helping to arrange financing and bridge loan. In addition, M&A often includes the issuance of "junk bonds", corporate restructuring and asset restructuring.
5] Project financing. Project financing is a technical means of package financing for a specific economic unit or project planning. The borrower can only rely on the cash flow and income of the economic unit as the source of repayment and the assets of the economic unit as the loan guarantee. Investment banks play a key role in project financing. They will closely link government agencies, financial institutions, investors and project sponsors related to the project, coordinate lawyers, accountants and engineers to jointly conduct the feasibility study of the project, and then organize the financing needed for project investment through issuing bonds, funds, stocks or loans, auctions, mortgages and other forms. The main tasks of investment banks in project financing are: project evaluation, financing scheme design, drafting of relevant legal documents, relevant credit rating, securities price determination and underwriting.
(6) corporate finance. Corporate finance is actually the consultation, planning or operation provided by investment banks as financial consultants or management consultants of customers. It is divided into two categories: the first category is to conduct in-depth research and analysis on a certain industry, a certain market, a certain product or securities according to the requirements of companies, individuals or governments, and provide comprehensive and long-term decision-making analysis data; The second category is to help enterprises make suggestions when they encounter difficulties in operation and put forward contingency measures, such as formulating development strategies, rebuilding financial systems, selling and transferring subsidiaries, etc.
(7) fund management. Fund is an important investment tool, which is organized by fund sponsors, absorbs a large number of investors' scattered funds, and hires experts with specialized knowledge and investment experience to invest and obtain income. Investment banks are closely related to funds. First of all, investment banks can initiate the establishment of funds as fund sponsors; Secondly, investment banks can manage funds as fund managers; Third, investment banks can act as underwriters of funds to help fund issuers sell beneficiary certificates to investors.
Be a financial consultant and investment consultant. The financial consulting business of investment banks is the general name of a series of securities market business planning and consulting business undertaken by investment banks, especially listed companies. Mainly refers to the professional financial advice provided by investment banks in major trading activities such as shareholding system reform, listing, secondary market refinancing, mergers and acquisitions, asset sales, etc. The investment consulting business of investment banks is the link and bridge between the primary market and the secondary market of the securities market and between investors, operators and securities issuers. Traditionally, the scope of investment consulting business is to provide investment advice and management services for investors participating in the secondary market.
(9) Asset securitization. Asset securitization refers to the issuance of securities by investment banks with certain assets of a company as collateral, which is a new financing method completely different from traditional bond financing. A company that converts assets is called an asset securities sponsor. The promoters sort out various financial assets with poor liquidity, such as housing mortgage loans and credit card accounts receivable, and sell them to specific trading institutions, that is, buyers of financial assets (mainly investment banks), and then the specific trading institutions issue asset-backed securities with the purchased financial assets as the guarantee to recover the purchase funds. This series of processes is called asset securitization. The securities of asset securitization are all kinds of debt bonds, the main forms are commercial paper, medium-term bonds, trust certificates, preferred stocks and so on. Buyers and holders of asset securities can get principal and interest when the securities expire. Securities repayment funds come from the cash flow created by the secured assets, that is, the due principal and interest repaid by the debtor of the assets. If the secured assets default and refuse to pay, the repayment of the asset securities is limited to the amount of the securitized assets, and the promoters or purchasers of financial assets have no repayment obligation exceeding the asset limit.
⑽ Financial innovation. According to different characteristics, financial innovation tools, namely derivatives, are generally divided into three categories: futures, options and swaps. There are three strategies to use derivatives, namely arbitrage, increasing income and improving securities investment management. Through the establishment and trading of financial innovation tools, investment banks have further expanded their business space and capital gains. First of all, investment banks, as brokers, buy and sell such financial instruments on behalf of customers and charge commissions; Secondly, investment banks can also get a certain spread income, because investment banks often buy and sell derivatives as counterparties of customers first, and then find another customer to carry out the opposite offset transaction; Third, these financial innovation tools can also help investment banks control risks and avoid losses. Financial innovation has also broken the boundaries between banks and non-banks, commercial banks and investment banks in the original institutions and the traditional market division, which has intensified the competition in the financial market.
⑾ Venture capital. Venture capital, also known as venture capital, refers to the financing of emerging enterprises in the initial stage and expansion period, which is characterized by high risk and high return. Emerging companies generally refer to companies that use new technologies or inventions to produce new products. Such companies have huge market potential and can obtain profits far higher than the average profit, but they are also full of huge risks. Because of the high risk, ordinary investors are often reluctant to get involved, but such companies need the support of funds most, thus providing a broad market space for investment banks. Investment banks participate in venture capital at different levels: first, raise capital for these companies through private placement; Second, some companies with great potential sometimes invest directly and become their shareholders; Third, more investment banks set up "risk funds" or "risk funds" to provide funds for these companies.
The characteristics of investment bank employees are: they should have MBA background in financial engineering or finance, be able to work with high load (investment banks are usually reluctant to recruit too many people because of their high salary, that is, the work tasks and pressures of each staff member are great), and have a good sense of confidentiality (investment bank employees have to make friends with many different interest groups every day and get a lot of internal information). In the United States, investment banks developed separately from commercial banks, which was the result of economic reform during the Great Depression. In Europe, universal banks are jointly established by investment banks and commercial banks. This kind of bank has advantages over a single investment bank in terms of capital customers, and it has gradually become a trend. China's investment banking industry is irregular and depressed.
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Consulting company is a private nursing and health care consulting company for enterprises and decision-making departments, providing professional, forward-looking, global and cross-disciplinary strategic planning and help to customers.
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Of course, many of the above contents are the archway of consulting companies standing at the door of the office, but in actual implementation, some consulting companies will deviate because of their experience, ability and mentality.
The staff of the consulting company are required to have good learning ability. Every project may be a strange field, but you should be familiar with it in a relatively short time and provide feasible suggestions for your customers. Like investment banks, consulting companies have high-quality employees and few employees, but the salary is absolutely rich, which is an industry that job seekers often say. The second industry under the primary industry is a famous multinational manufacturing group. I can't remember all three industries and four industries.