Author
Home > Business > What is the Difference Between Investment and Merchant Banking?

Guilherme Mazui

•3 minutes to read

What is the Difference Between Investment and Merchant Banking?

🆚 Go to Comparative Table 🆚

The main difference between investment and merchant banking lies in their primary functions and services. Here are the key differences:

Investment Banking:

  • Focuses on underwriting and issuing securities.
  • Provides advice on mergers and acquisitions.
  • Primarily works with large companies, institutions, and corporations.
  • Offers a wide range of services, including banking, advisory services, and fund management.

Merchant Banking:

  • Specializes in providing advice and financing for mergers and acquisitions.
  • Focuses on international finance and trade-related activities.
  • Often targets high-net-worth individuals and small corporations.
  • Offers fee-oriented services, such as custodial, advisory, and banking services.

In summary, investment banks primarily focus on raising capital and providing advice on financial transactions, while merchant banks concentrate on providing financial services to companies, including underwriting, issuing securities, corporate finance, and managing assets.

On this page
  • What is the Difference Between Investment and Merchant Banking?
  • Comparative Table: Investment vs Merchant Banking

    • Comparative Table: Investment vs Merchant Banking

    Here is a table highlighting the differences between investment banking and merchant banking:

    Feature Investment Banking Merchant Banking
    Scope of Activities Primarily focuses on investment banking activities such as underwriting, trading, mergers and acquisitions, and capital raising Has a broader scope of activities compared to investment banks, including project promotion, corporate counseling, loan syndication, and advisory services
    Client Relationships Clients include institutional investors, governments, and corporations Serves high-net-worth individuals (HNWIs) and multinational corporations
    Risk Exposure Exposure to market risk and credit risk Exposure to market risk, credit risk, and operational risk
    Fee Structure Fee-based revenue model Fee-based revenue model, also generates revenue from trading activities and other financial services
    Global Presence Generally operates globally with a wide network May have international presence and connections
    Ownership Structure Often publicly traded companies or subsidiaries of larger financial institutions Can have different ownership structures, ranging from privately held companies to subsidiaries of financial institutions or conglomerates

    In summary, investment banks primarily focus on investment banking activities and serve institutional investors, governments, and corporations, while merchant banks have a broader scope of activities and serve high-net-worth individuals and multinational corporations. Additionally, investment banks generally operate globally, while merchant banks may have a more limited international presence.

    Read more:

    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.