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The Role of Investment Bankers in Going Public

Investment bankers can be individuals or financial institutions that help companies in raising capital when going public. This capital can be raised either through the public by issuing stocks or it can be done through private placement. Investment bankers are also known as dealmakers or brokers.

How investment bankers help companies to go public

Companies may appoint investment bankers when going public. Investment bankers play a very important role and they can assist in more than one way. First, the investment banker can help the company identify various financing options from different sources. They advise the company regarding where it will be most viable to procure funds. They can also help the company in developing the business plans and documents such as the prospectus for raising capital.

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A reverse merger helps to save time since the whole process can be completed within a few weeks. The private company does not have to undergo the normal review of federal and state regulators as this was already completed by the public company. However, the Securities and Exchange Commission requires a disclosure instrument that includes legal disclosures and audited financial statements. The disclosure needs to be filed by the company on form 8-K immediately after the reverse merger.

Look towards them for advice

Companies also look towards the investment banker as a sound advisor. The banker also assists in giving up to date information and advice about the market conditions. The banker can analyse the funding needs of the organization and narrow down the most appropriate sources for raising funds. The banker can also sell a company’s business plan to investors. He is well area of how the industry works and it is this experience that helps him to look at the right sources for raising funds.

Are investor bankers really helpful?

There are some venture capitalists who believe that it is a waste of time to appoint an investment banker. However, this is not totally true. The banker can also help in underwriting the stock of the company and hence his services can sometimes become indispensable. In fact, selecting an excellent investment banker who can lead the underwriting process of a company’s initial public offering is the most crucial component of a successful public offering.

How do investment bankers charge for their services?

Normally the investment banker charges a fixed fee for his services. However, some others also look forward to a success fee, depending on the performance of the company in raising capital. This success fee is normally a percentage of the raised funds. The company should study all the responsibility and payment terms of the investment banker before appointing him. Some companies may also appoint a qualified legal counsel to study the terms.

Apart from raising capital, what are the other roles of an investment banker?

The investment banker can also assist in doing the introduction with the underwriters. He can also assist in the marketing campaign to raise funds. He can advise on the most favorable time to raise funds through issuing stock. Assistance can also be provided in appointing the securities attorneys and then negotiating on their payment terms. The company can properly plan documentation procedures out. Selection of a transfer agent and conducting various types of marketing campaigns can also be undertaken by the investment banker. All shareholder communications can be review by the banker including press releases, financial filings and research reports. He also advises as to when the press release can be introduced for maximum effect.


Disclaimer
This page was created for user generated content, a place for the public to upload articles on various topics related to going public, reverse mergers, public shells, raising capital and other financial matters. These articles are posted as basic information for the public. Various authors have written these articles and as the Tiber Creek Corporation has not verified the authenticity of the content, they make no claims or assume any responsibility for the information therein. The statements and opinions expressed here are those of the authors and/or contributors and not necessarily those of the Tiber Creek Corporation.

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