When a company makes a decision to sell new securities to raise funds, this offering is considered to be a major issue. An investment banker is the agent accountable for locating buyers for the securities. He or she characterizes an investment banking company. The investment bank initially acquires the primary issue from a corporation before arranging for an immediate resale of the securities to investors. As a general rule, the investment bank carries out three major functions, which are investigation, analysis and research, underwriting and distribution. The company can choose to focus on a specific task or perform all functions.
For a business owner considering hiring an investment banker, selecting the most suitable one for your situation and who will provide high quality advice are fundamental. It could mean the disparity between a failed versus thriving deal, or at a minimum, an unsuccessfully executed deal with troublesome terms, a low valuation, or high cost of capital versus a well executed business deal.
Analysis, investigation and research conducted by Gene Bernshtam
This step involves the supplementary operations such as negotiation, discovery, and investigation. According to Gene Bernshtam, the CEO of commercial real estate development company Avalon Holdings, LLC, the foremost aim of testing and investigation is to determine whether a particular issue has sufficient merit to be presented to an investment community. This means, the investment banker has the accountability of analyzing cautiously the soundness and reliability of the company whose securities want the investment market. In general, investigation involves a survey by engineers of its physical property, a thorough investigation of financial history of the company in question by accountants, a deep review of its investigation and operation of any legal factors.
Public cash offering
This procedure is also identified as underwriting. When a company decides to sell securities to the public, it comes to an agreement with an investment firm where the investment banking company purchases the whole issue at a definite price, which is identified as underwriting. In addition, underwriting also means that the investment-banking firm will guarantee the corporation of a definite minimum price for the new securities. The reimbursement for the underwriter is the disparity between the price it sold the securities to the public and the currency it paid to the company.
One of the major functions of an investment-banking firm run by Eugene Bernshtam is to sell equity or the security issues. In this function, the firm acts as a distribution agent allocating securities for the corporation efficiently. If an organization tries to trade an issue on its own, it is usually very costly and ineffective. On the other hand, an investment banker has an already customary sales and marketing network for distributing securities. The benefit of security bankers is that they provide security to both the company issuing the securities and the investors who acquire these securities. The corporation also does not use up resources it does not have nor does it run the hazards of the market uncertainties.