Investment Banking & EuroWest Capital

An “Investment Bank” is a financial institution that assists individuals, and corporations, in raising capital by underwriting and/or acting as the client's agent in the issuance of securities.  An investment bank may also assist companies involved in mergers & acquisitions and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities).

Unlike commercial banks and retail banks, investment banks do not take deposits.

There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e. facilitating transactions, market-making), or the promotion of securities (i.e. underwriting, research, etc.) is the “sell side”, while “buy side” is a term used to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds are the most common types of buy side entities.

An investment bank can also be split into private and public functions with an information barrier which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information.

Investment banking is split into front office, middle office, and back office activities. While large service investment banks offer all lines of business, both sell side and buy side, smaller sell-side investment firms such as “boutique investment banks” and small broker-dealers focus on investment banking and sales/trading/research, respectively.

Investment banks offer services to both corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their securities on the open market, an activity very important to an investment bank's reputation. Therefore, investment bankers play a very important role in issuing new security offerings.

Investment banking has changed over the years, beginning as a partnership form focused on underwriting security issuance (initial public offerings and secondary offerings), brokerage, and mergers & acquisitions and evolving into a "full-service" range including sell-side research, proprietary trading, and investment management. In the modern 21st century, major independent investment banks reflect three product segments: (1) investment banking (fees for M&A advisory services and securities underwriting); (2) asset management (fees for sponsored investment funds), and (3) trading and principal investments (broker-dealer activities including proprietary trading ("dealer" transactions) and brokerage trading ("broker" transactions)).

A “Boutique Investment Bank” is a non-full service investment bank that specializes in some aspect of investment banking, generally corporate finance.  Of those involved in corporate finance, capital raising, mergers & acquisitions, and restructuring and reorganizations are their primary activities. Due to their smaller size, capital raising engagements are usually done on a best-efforts basis.

Boutique investment banks generally work on smaller deals involving middle-market, typically less than a billion dollars in revenues, and usually assist on the sell-side in mergers & acquisitions transactions. In addition, they sometimes specialize in certain industries such as media, health care, manufacturing, technology or energy. Some banks may specialize in certain types of transactions, such as capital raising or mergers & acquisitions, or restructuring and reorganization. Typically, boutique investment banks may have a limited number of offices and may specialize in certain geographic regions, thus the moniker, 'regional investment bank'.

Recently, as the larger investment banks have been hit hard by the recession boutique investment banks are gaining an increasing share of the M&A and advising market.

Large, prestigious boutique firms include: The Blackstone Group, Brown Brothers, Harriman, Piper Jaffray, and William Blair & Company.  Smaller boutiques are commonly not household names, but within their niche may be quite well known. A short list of these include: C. K. Cooper & Company, Dresner Partners, Mesirow Financial, Sperry, Mitchell & Company, and Pegasus Intellectual Capital Solutions.

“EuroWest Capital”, a proud member of the EuroWest Group of Companies, is one of these boutique investment banking firms that advises companies in accessing the capital and financial markets, and helps those companies raise the necessary monies needed for stability and growth.

Despite periods of recovery, in today’s volatile markets, companies may face capital constraints not of their own making. The market instability from the debt crisis, as well as the related volatility of the debt and equity markets, may limit access to capital. In an unpredictable economic environment, it is important that companies be prepared to access the capital and financial markets opportunistically and quickly.  Access to capital to fund expansion and operations is critical to a company’s ability to meet its short- and long-term objectives, and growth. 

Typically, financing is categorized into two fundamental types: “Debt Financing” and “Equity Financing”.

Debt Financing: means borrowing money that is to be repaid over a period of time, usually with interest. Debt financing can be either short-term (full repayment due in less than one year) or long-term (repayment due over more than one year). The lender does not gain an ownership interest in the business and the obligations are limited to repaying the loan. In smaller businesses, personal guarantees are likely to be required on most debt instruments; commercial debt financing thereby becomes synonymous with personal debt financing.

Equity Financing: describes an exchange of money for a share of business ownership. This form of financing allows a company to obtain funds without incurring debt; in other words, without having to repay a specific amount of money at any particular time. The major disadvantage to equity financing is the dilution of ownership interests and the possible loss of control that may accompany a sharing of ownership with additional investors.

In the best of times, these transactions are highly complex, require sophisticated analysis, and often involve complicated structures.  In the context of the current economic environment, the uncertainty and risk around raising capital has increased dramatically. New “wild cards” include evolving capital market regulation, contraction in the credit markets, the effects of significantly increased government borrowing and lending and global recession. Against this backdrop, the consequences of an improperly executed capital raising transaction have increased dramatically. 

“EuroWest’s” capital and financial markets professionals have deep knowledge of international exchanges and regulatory processes and are available to advise clients in the US and principal capital markets around the world. “EuroWest” can advise clients on their capital and financial market transactions and help them understand the requirements of auditors, investors and regulators.  Furthermore, “EuroWest” specializes in the structuring of both debt and equity financing vehicles, and instruments, and in accessing the capital needed for established, as well as for, new, and emerging companies.