hupkorea

Hi creamgethamoney,

Corporate finance and investment banking are two fairly different fields, even though both might involve raising capital for a company.

Corporate finance often refers to the financing arm of a company (any company- apple, general mills, abercrombie, you name it). In corporate finance, companies get the money they need for their new product line, factory, investment project, etc by borrowing from banks. Corporate finance depts also make strategic decisions, as to when to acquire certain assets and pay off liabilities to maximize operational benefits. Simply put, think of corporate finance as budget management or the company's treasury dept.

Investment Banking is completely different. The goal of I-banking is to raise a massive amount of capital by taking a company public (IPOs) or stock/bond offerings. Instead of borrowing money from one bank, the company can potentially raise billions of dollars by offering a fraction of the company's ownership or issuing bonds to the general public (alternatively, a private company may choose to borrow a large amount of capital from wealthy individuals and institutional investors - this is called private placement, another function of I-bank).

As you mentioned, M&A advisory is also a key activity of I-banking. I-banks use sophisticated models to set a company's stock/bond prices. This work comes in handy when a company tries to buy another company (because unlike everyday items like pens and DVDs, there is no set market price for a company. I-bank works as an agent and appraiser in a sense).

many I-banks DO have divisions that does portfolio management and private wealth management, but they are not really I-banking functions. It is actually closer to buy-side work.


Institutional Sales & Trading, another division found in all bulge bracket banks, is a whole different animal. If you'd like to know more, shoot me questions!