Investment banks are an integral part of corporate America and the financial markets, and yet the terms associated with the industry remain foreign to many. The world's largest investment banks are also part of global financial institutions, which in addition to investment banking have other divisions, including brokerage and wealth management, and in some instances, retail banking, where firms collect cash deposits from customers. While the mainstream population might not be well-versed in investment banker vernacular, many people are familiar with the large and small companies that investment banks have helped to make into household names.
Investment banking firms operate in the equity and debt capital markets. The equity capital markets are where stocks are issued in deals such as initial public offerings (IPOs), and secondary offerings. The debt markets are where bonds and other debt instruments, such as mortgage-backed securities, are issued. When a company wants to raise money by issuing equity or debt, it generally hires one or more investment bank to serve as bookrunner and underwrite deals, which involves marketing, pricing and selling the financial securities to investors.
To contact a particular investment banker, you generally need to know to which group that professional belongs. That is because investment bankers generally work as teams that are identified based on services, industry sectors and region. It is also quite common for the underwriting business to be divided between equity capital market services, or ECMS, or debt capital market services, or DCMS, which is the approach taken by financial institution Morgan Stanley. In 2012, the European bank Barclays, which also has a North American division, changed its structure, combining the equity and debt groups into a single overarching category, the "Financial Times" reported in 2012.
Lead-Left Book Runner
A lead-left bookrunner is a highly sought-after position among banks. When a company hires a lead banker for a market transaction, it is giving this bank the responsibility of leading a syndicate -- or group of banks -- throughout the deal. Incidentally, the lead-left bookrunner earned its title because this senior bank is named in the top-left corner of a regulatory document, known as a prospectus. Along with the prestige of earning a lead-left bookrunner spot, a bank increases its exposure and chances for being hired by other corporations.
Not all investment banks perform underwriting services, but most offer advisory services. An advisory investment bank gives advice throughout major corporate deals, such as a mergers and acquisitions, called M&A, or through corporate restructurings and bankruptcies. Generally, large financial institutions, the biggest of which are also referred to as the "bulge bracket" firms, perform both underwriting of financial securities and advisory services. Independent investment banks that do not offer the array of services of financial institutions generally build their practices around advisory work and possibly asset management services.
- Financial Times Lexicon: Lead Left Bookrunner
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