What is an investment bank?

While there is no precise definition of an investment bank, generally speaking, an investment bank is an institution that advises and raises money for companies, governments and wealthy individuals.  The large investment banks (“bulge bracket”) that most of us are familiar with (e.g. Goldman Sachs, Morgan Stanley, Merrill Lynch, etc.) do many other things besides traditional “investment banking.”  For example, they have departments that sell and trade various securities (Sales and Trading/Capital Markets), provide research to institutions and individuals about such securities (Sell-Side Research), manage the investments of institutions (Asset Management), advise and manage the money of wealthy individuals, their families and estates (Private Client Services/Private Banking/Private Wealth Management), trade the bank’s own money (Proprietary Trading), and others.

On this site, when we speak about investment banking, we are speaking of the division within the investment bank that specifically advises companies (and occasionally governments) on (1) transactions, such as a merger, acquisition or leveraged buyout, and (2) capital raisings such as an initial public offering (IPOs) or debt issuance.