Investment Banks, which are the arm of a financial institution or a bank, offer merger and acquisition advisory services and help in raising funds via underwriting services for small, large corporations and MEs (medium enterprises). The businesses can spend the new capital to establish a new division and to support future growth operations.
Investment banking vs IB (Investment Bank)
A lot of people get confused between the Investment Banking Division of a financial institution or bank and investment banking. The services offered by full-service investment banks (IB) are asset management (AM), equity research (ER), retail banking, commercial banking, sales and trading (S&T), M&A, and underwriting. The investment banking division (IBD) only offers M&A advisory services and underwriting to assist the businesses mobilize capital for expansion, starting a new business, or working capital needs.
The lender assesses property details, debt, assets, and income to finalize and approve a loan. It is known as the underwriting process. A financial expert at Joseph Stone Capital is tasked with this job to know your finances and what is the risk involved in granting a loan. In this process, employment details, history, the size of the funds you have requested, your assets, and credit history are checked thoroughly and also checks how you will pay back the funds. They will send an agent to your working location to check with the employer or send a letter asking for your financial details like salary, loans already availed, etc. If you live in a different location, they will send a person from their local branch or use third-party services to check the property details like capturing photos and assessing its value before deciding to grant a loan.
The investment banks also engage approved valuers like assessment engineers to evaluate your property or services before granting a large loan. It reduces the risk to an investment banker and allows collecting the dues from the borrowers’ predefined intervals without default.
You should provide details about your finances honestly to get the loan quickly. If you are yearning to avail a home loan to buy a new home, Joseph Stone Capital will assist you with all necessary documentation. They will also inform you how and where to get a home loan at reduced interest rates for your dream house.
Understanding Merger and Acquisition (M&A activities)
Consolidating the assets of various entities through financial transactions such as acquisitions, mergers, buying assets, management acquisitions, and tender offers is called M&A Mergers and Acquisitions).
If a company makes an offer and pays and takes over all of the assets including the management of the business, it is called an acquisition. The acquiring business establishes ownership of the purchased entity and conducts business operations under its control.
When a new company is created by joining the forces of both companies, it is called a merger. It involves utilizing the domain expertise, marketing skills, and funds of both companies for the new entity to carry out the business and prosper. The equity holders of both the companies will receive equity shares of the new entity based on the value of each merging company. Combining finances, expertise, and business opportunities will help the new entity to achieve success and generate rich dividends for the stakeholders.
Abandoning the old corporate structure and combining the core businesses into a new entity with the approval of both companies investors is called consolidation. A lot of consolidation happens during a pandemic situation like COVID-19.
Acquisition via tender offers
In this process, the acquiring firm bypasses the management of the proposed business by making a tender offer to the shareholders at a higher price compared to the trading price to take over and establish management control. The P&E ratio of the target company is usually considered when bidding. The target company can reject a purchase bid if the purchase price offered is lower than its actual value. The companies can also purchase assets of another company, which is declared bankrupt, after obtaining the approval of shareholders. Investment baking experts of Joseph Stone Capital would help mergers and acquisitions happen quickly by providing necessary valuation and documentation services.