Understanding Merchant Banking
Merchant banking provides capital, facilitates mergers and acquisitions, and provides advisory services to businesses. They have a focus on supporting large corporations, high-net-worth individuals and mid-size businesses.
Merchant banks extend capital to businesses as equity, debt or a mix of both. They also provide advisory services concerning mergers and acquisitions, restructuring, and capital-raising strategies.
Key Objectives of Merchant Banking
Merchant banks offer a wide range of financial services with the primary goal of providing capital and expertise to corporations. The common objectives include:
- Underwriting securities offerings to help corporations raise capital.
- Assisting in capital raising through various routes such as private placements, public offerings, and debt financing.
- Advising on mergers, acquisitions, and other strategic transactions.
- Providing structured finance services, such as project finance or asset-backed securities.
- Offering advisory services to help corporations make informed financial decisions.
Functions of Merchant Banking
Merchant banks play a pivotal role in helping businesses expand. The key functions include:
- Raising capital for companies through equity or debt financing.
- Facilitating mergers and acquisitions.
- Providing strategic advice on capital-raising strategies, business restructuring, and management consulting.
- Securing financing for specific projects.
Benefits of Merchant Banking
Merchant banking offers several advantages to businesses and individuals in need of financial services. Some benefits include:
- Helping invest surplus funds into profitable ventures.
- Assisting in organizing financial activities.
- Ensuring compliance with various regulatory requirements.
- Identifying profitable investment opportunities.
- Evaluating the risk associated with investments.
- Assisting in implementing complex financial transactions.
- Supporting in developing and executing strategic plans.