Investment bankers can be individuals or financial institutions that help companies in raising capital when
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.
Go Public Faster
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
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