creamgethamoney

Hi,

I'm confused as to whether corporate finance and investment banking are the same thing. I thought CF was more working for a F500 on raising capital, and the career path was about climbing the corporate ladder and getting into higher level functions within the company. Banking, I thought was more like Portfolio Management and working with high net worth individuals on managing wealth, making deals, helping with M&A, etc. However, it seems like a lot of sites talk about the two as if they are the same, or so related that they are virtually the same thing, so can anybody help me out with this?

Also, if what I described is not corporate finance, what would the career path I described as corporate finance actually be called?

thanks

creamgethamoney

bump bump 10. Come on, so many people have viewed this, but not ONE person can answer a VERY simple question?

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!