Investment banks provide advisory services for complex financial transactions and services that raise capital for corporations or governments. Services include debt financing and issuing equity, for example through an initial public offering (IPO) and facilitating mergers and acquisitions (M&A) for companies.

Investment banks also advise clients on sales of securities and stock placement, along with being the broker for corporate clients, sovereign entities, or high-net-worth individuals. Some investment banks provide restructuring advice to company management teams during times of distress, this can involve facilitating divestitures.

Regular divisions inside investment banks include industry coverage groups and product groups. Industry coverage groups are set up to include separate sector groups inside the bank, for example, a technology group will have extensive knowledge of that specific industry and sub-sectors. These groups develop relationships with organisations inside different sectors to provide various services such as financing in the form of equity or debt issuances, or M&A advisory services. On the other hand, product groups focus on specific financial products, for example, M&A, corporate restructurings, IPOs, and various types of financing. In some investment banks, there may be product groups that specialize in asset financing, leasing, leveraged financing, and public financing.

In the investment banking industry, firms are commonly classified into three categories: bulge bracket banks, middle-market banks and boutique banks. Within boutique banks, there are elite boutique banks and regional boutique banks. Elite boutique banks generally have more in common with bulge bracket banks than with regional boutiques. The classification of investment banks is principally supported on size; however, size may be a relative term during this context and could refer to the size of the bank’s number of employees or offices, or the average size of M&A deals handled by the bank.

Regional Boutique Banks

This type of investment bank is the smallest, in terms of average deal and firm size. Regional boutiques generally have very few employees, usually from 5 – 50. Regional boutiques tend not to offer all the services that are offered by bulge bracket investment banks due to their small size. They may also simply specialise in a single area, such as M&A in a particular market sector.

As implied, these banks have offices or operations in a specific region of the country. The bank’s offices may even be limited to a single city. For example an investment bank with a single office and fewer than 50 employees that only handles M&A deals for technology industry companies. Regional boutiques more commonly serve smaller firms and organisations but in some instances have clients that include major corporations headquartered in their areas. Regional boutiques are also unlikely to be involved in working with governments other than on a local or state basis. These firms handle smaller M&A deals, in the range of $50 million to $100 million or less. [1]

Elite Boutique Banks

Elite boutique investment banks are very different from regional boutiques and resemble more closely to bulge bracket banks in terms of deal value which usually extends over $1 billion, although they may handle some smaller deals as well. Elite boutiques commonly have a sizable nationwide and international presence, operating in many offices in multiple countries. However, they usually have less of a global presence than a major investment bank such as JP Morgan or Citi. [2]

Elite boutiques do not provide all investment banking services and may limit their operations to handling only M&A-related issues, similar to a regional boutique. However, they are more likely to offer restructuring or asset management services.

Most elite boutique banks begin as regional boutiques and then overtime work up to elite status through successfully completing multiple larger deals for more prestigious clients. Elite boutiques like Qatalyst Partners achieved rapid advancement in status largely due to the founder’s reputation in the investment banking sector. Other examples of established elite boutique investment banks are Lazard and Evercore.

Middle-Market Banks

Middle-market investment banks vary in size between smaller regional investment banks and the bulge bracket investment banks. Middle-market banks generally work on deals ranging from about $50 million up to $500 million or more. Middle markets are usually also in the middle ground as far as geographic presence, having a substantially larger presence than regional boutiques but fall short of the global multinational nature of bulge bracket banks. [3]

Middle-market firms usually provide the full range of investment banking services that bulge bracket banks provide, including equity and debt capital market services, a full complement of financing and asset management services, M&A, and in some cases, restructuring deals as well. Some middle-market banks specialise in offering services to a particular industry or sector like regional boutiques do. Some examples of middle-market firms are HSBC and Houlihan Lokey.

Bulge Bracket Banks

These types of investment banks are international firms with massive reputations such as Goldman Sachs, JP Morgan, and Morgan Stanley. The bulge bracket investment banks are the largest in terms of the number of offices and employees, deal size and deal volume as they complete work for the largest corporate clients. Bulge bracket investment banks regularly work on multibillion-dollar M&A deals, although, depending on the overall state of the economy, for example, during a recession or for a particular client, a bulge bracket bank may sometimes work on deals valued lower than $1 billion. [4]

Bulge bracket investment banks provide their clients with the full range of investment banking services, including trading, all types of financing, asset management services, equity research and issuance, and M&A services. Most bulge bracket banks also have commercial and retail banking divisions and generate additional revenue by cross-selling financial products.

However, boutique firms have become more popular than bulge bracket firms especially in M&A services since the financial crisis. This is due to the more tailored advice provided by boutiques as well as them having no conflict of interest.

Working in Investment Banking

If you are interested in working in investment banking, you should think specifically about what type of work you want to do before deciding to apply to a particular investment bank. You should note that boutique banks do not offer all the services that the middle-market and bulge bracket firms offer. For example, if you are interested primarily in working in trading, only the larger firms are likely to offer that opportunity due to their full range of services. However, if you are interested in working on M&A deals, smaller banks usually provide a quicker and more progressive career path to directly managing such deals.

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