Introduction to Investment Banking

Investment banks sit between companies that need capital and investors that have it. They raise money for clients by issuing stocks and bonds, advise on mergers and acquisitions, and trade securities for institutional clients.

Unlike a commercial bank that takes deposits and lends to consumers, an investment bank charges fees and commissions for advisory and underwriting work. The largest firms — Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America, Citi — are called "bulge bracket." Smaller advisory-only firms like Lazard, Evercore and Centerview are "elite boutiques."

The two core revenue lines on the corporate side are (1) underwriting equity and debt issuances and (2) M&A advisory. Sales & Trading and Asset Management sit on the markets side.

Front office is revenue-generating: IB advisory, S&T, research. Middle office is risk management, compliance, treasury. Back office is operations, IT, settlements.

Analyst → Associate → VP → Director / Senior VP → Managing Director is the standard front-office ladder. Junior bankers build models and pitchbooks; MDs win mandates.

A typical sell-side M&A mandate moves through: pitch → engagement letter → preparation (CIM, teaser, model) → marketing (buyer outreach) → first round bids → management presentations → second round bids → exclusivity → due diligence → signing → closing.

Each step uses specific documents you should know by name: NDA, Teaser, CIM (Confidential Information Memorandum), IOI (Indication of Interest), LOI (Letter of Intent), SPA (Sale and Purchase Agreement).

Industry (or "coverage") groups specialize by sector: TMT, Healthcare, FIG, Industrials, Consumer & Retail, Energy, Real Estate. They own client relationships.

Product groups specialize by transaction type: M&A, ECM (Equity Capital Markets), DCM (Debt Capital Markets), Leveraged Finance, Restructuring. They are deal executors.

On a live deal, coverage and product bankers staff together.