Roles & Responsibility of Investment Bankers in M&A

Dashmeet Kaur
| Updated: Apr 14, 2020 | Category: SEBI Advisory

M&A is an efficient strategy that helps a business to grow and expand by forming synergies through resource optimization & asset consolidation.  With a rapid increase in competition, companies are more inclined towards globalization and engage in M&A activities. Several companies seek the assistance of investment bankers to streamline the process of Merger and Acquisition. The role of investment bankers in M&A is beyond assessment. Bankers guide companies about prospective buyers and sellers based on extensive valuation. This write-up will highlight the need for an investment banker to commence the procedure of Merger and Acquisition successfully.

Services Offered by An Investment Banker

An investment banker is a financial intermediary who bridges the gap between the user and the provider of capital. Investment bankers assist institutions, governments, companies with raising capital and executing transactions of Mergers and Acquisitions.

Such an individual regulates the price of financial transactions & ensures to optimize the price. The “best price” must neither be the highest for sellers, nor the lowest for the buyers. Hence, the chief role of investment bankers in M&A is to create a fair value for both companies involved in the transaction.

Investment Bankers provide an array of services which are as follows:

  • Corporate Finance
  • Research
  • Asset Management
  • Merger and Acquisition
  • Syndication of Equity & Fixed Income
  • Restructuring
  • Custodian Services 
  • Trading

An insight into the role of Investment Banker in M&A

Investment banker act as a prominent advisor in the M&A process. Enabling end to end assistance from approaching the target company to making negotiations, investment bankers are significant benefactors. They also help in drafting the confidential agreement, commence due diligence, assess valuation, do structuring, render financing, and managing the M&A deals until the (PMI) Post-Merger Integration.

During acquisition, a company acquires the target company which is offered for sale. In such a situation, an investment banker conducts valuation to determine the price which one company is willing to pay to another. Here are the functions of investment bankers in Merger and Acquisition:

  • The investment bankers guide those companies which intend to carry acquisition. They assist the acquirer in determining the value of the company being acquired, i.e. Target Company. Also, it helps them to create the structure of the offer in the most favourable manner.
  • If the client of the investment bankers is a target company, then they assist in determining a reasonable value for the company and consults about the favourable/unfavourable structures of the sale.
  • Thus, an investment banker builds a win-win situation for both the acquirer and Target Company.
  • Investment bankers are responsible for advising the companies in regards to financial economies, industry trends, market dynamics, deal structuring and pricing of business.
  • From the viewpoint of a seller company, an investment banker does extensive market research to connect with prospective buyers. Moreover, they are also responsible for the negotiation and evaluation of offer to seal the deal.

Schemes to gain profit for Investment Bankers

Investment Bankers ease the procedure of M&A for buyers and sellers, but what do they get in return? Here are some activities through which an investment banker can gain profit:

  • Organizing a deal of Merger & Acquisition: For instance, a steel manufacturer wants to merge with one of its suppliers like iron or coal mining firm, so the investment banker can help steel manufactures to acquire its supplier.
  • Develop Defence Mechanism: SMEs often reach out to investment bankers to take adequate protection from being the target of big companies.
  • Establish a Fair Value: Investment bankers can gain ample sum of revenue by establishing a fair value for the parties involved in M&A.
  • Arbitrage Operations: In terms of investment banking, it refers to the activities of buying and selling of securities in different markets at variant prices and taking risk-free return.

Why are Investment Bankers essential for the M&A of SMEs?

Unlike listed or large companies, small and medium scale enterprises do not have access to required information. The shareholders and management team of SMEs are often uncertain about their company’s worth which further complicates M&A transactions. Therefore, in order to increase the value of their company and make M&A a successful venture, the SME owners need to seek the guidance of an investment banker. The role of an investment bank is of substantial importance in M&A deals specifically for SMEs and Private Companies.

In the case of Private Companies, it is difficult to reckon and justify the value since there is no existence of their daily stock price. Thus, it incurs the need to hire a competent investment banker in addition to the accountants & corporate lawyers. Thereby, the investment banker will identify and quantify the value of a Private Company that can be achievable through Merger and Acquisition.

Investment Banking- a perfect gateway to raise funds

Now that we have understood the role of investment bankers in M&A, let’s take a glance at ways it facilitates finances:

  • In general, the primary source of finance in a Merger transaction is the excess cash available with the acquiring company. However, another source of funds is required when the acquiring company do not have such excess cash. 
  •  It is under such circumstances the corporate finance comes into the picture. Many investment bankers render the service of corporate finance, which entails the activities of helping customers to raise funds in markets for the smooth deployment of Mergers and Acquisitions.
  • The services include coordinating with bidders, subscribing investors to issue security or negotiate with a Merger target. The bank generates a pitch book containing financial information to the market to find potential M&A clients. Further, if the bank succeeds, it arranges a deal for the same.
  • Product coverage groups of investments banking focus on financial products such as public finance, asset finance, Mergers and Acquisitions, leveraged finance, structured finance & leasing, restructuring, equity, high-grade debt, and collaboration with industry groups to meet the specialized needs of the clients.


This document accentuates the role of investment bankers in providing M&A advisory services. They play a dual part of lenders and advisors to the Acquirers and Target Companies.

If you need any further assistance in the process of Merger and Acquisition, look no further than Swarit Advisors. We have a big team of professionals who are the masters of the legal domain. Our team has catered several customers for the optimal use of M&A.


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