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Investment Bankers

Terms:

“Road Show”: 
The colloquial name for the process that a bank and its client company engage in when trying to properly price and gauge the interest of the market for an IPO or other issuing. Typically, a “road show” will consist of corporate management and several bankers visiting key banking clients who have been known to purchase shares of the type being offered by the firm. At the meetings, management will present an overview of the operations of the firm, while the bankers will try to convince the potential buyers of the financial strength and potential for the firm’s growth and success.

Merger Advisory: 
Merger advisory is a service provided by many investment banks that is intended to advise companies about potential merger and acquisition targets for their entire firm or business line. In addition, banks providing merger advisory services will also often include services to help companies finance and complete merger transactions that have already begun.

Overview to Investment Banking

“Investment banking” is a generic title that covers the wide range of services that large banks provide for companies. In a general sense, the actual “investment banking” or “I-banking,” role played by a bank is entirely during the initial offering process. Essentially, the investment bank’s function in an IPO is to find investors who are willing to buy the securities that the company intends to place on the open market.

The investment bank will assist the company in the preparation of a prospectus, including the writing of the prospectus and working with other constituent parties to ensure that the prospectus complies with the law. In addition, the bank will begin contacting its buyer clients to gauge interest in the securities and to identify an appropriate price for the securities. Finally, once the prospectus process is completed, the bank will then perform the role of actually selling the securities to the investors and managing the market for those securities.

Apart from its role in the IPO process, investment banks also serve critical functions in mergers and acquisitions. These roles can include securing loans for the acquiring firm, floating bonds for public purchase, and a variety of other functions. Ultimately, investment banks play an extremely important part in the financing and expansion of a company’s business interests.

The Interaction Between Investment Banks and Attorneys

As the role of an investment bank is to aid in the pricing and distribution of the shares offered in an IPO, it is not surprising that the bank will work closely with attorneys to ensure that the process is complete and that the information disclosed is accurate. First, the bank will work with attorneys to ensure that the rules of the SEC are complied with as the firm begins to prepare its prospectus. To a limited extent, the interests of the bank and the interests of attorneys may conflict as banks are often interested in advertising the firm’s prospects, while attorneys want to ensure that the prospectus does not “condition the market” or make false or misleading claims.

The investment banks also fulfill other functions, such as merger advisory services. In this capacity, the bank will often work to ensure adequate funding for a company’s deals while the attorneys work to draft the requisite contracts and materials to properly ensure that the deal is consummated in a legally binding, and enforceable fashion. 

Ultimately, interaction between banks and attorneys is not as prevalent as that between lawyers and accountants. When banks and attorneys do interact, it is often in situations where the company is actively engaged in a major transaction. In such a case, time may be a very critical factor. As such, the interplay between lawyers and bankers is often fast and furious when it does occur.