Investment Banking 101 Unit 6 Exam Solved 100%

Investment Banks - Answer Raise debt and equity securities (IPOs, bond issues) Originate, underwrite, and place securities Give advice about M&A or restructuring Primary market Securities Firms - Answer Brokerage services or market making Secondary market What is a key difference between securities firms/investment banks and other financial institutions? - Answer They don't transform securities, they serve as brokers or intermediaries 8 Key activities of Investment Banks - Answer 1. Venture Capital 2. Investment Banking 3. M&A 4. Market Making 5. Trading 6. Investing 7. Cash Management 8. Research and Advisory, Escrow services In which market does venture capital occur? - Answer Primary Venture Capital - Answer Professionally managed pool of funds used to finance new and often high-risk firms Angel Venture Capitalists - Answer Wealthy individuals who make investments in the very early life of a firm Invest small amounts in my firms (spray and pray) Shark Tank Summarize VC deal funnel - Answer 101 investments considered 28 meet management 10 reviewed 5 due diligence 1.7 term sheets offered 1 investment (4x every year) What do VC investors look for? - Answer High returns and easy exit in the form of being bought out, acquired, or through an IPO How do VC investors make money? - Answer Upon exit Differences between VC and Private Equity - Answer 1. PE is broader than VC 2. VC funds focus on new business, while PE focus on established business 3. VC funds focus on scientists and entrepreneurs In what market is investment banking done? - Answer Primary Who are the top underwriters? - Answer JP Morgan, Citigroup, Bank of America, Barclays, GS Which investment bank is more involved with issuing debt? - Answer JP Morgan Which investment bank is more involved with municipal bonds? - Answer Merrill Lynch Which investment bank is more involved with IPOs? - Answer Morgan Stanley