Merchant banks found its origin in the early periods in the country of Italy by the Italian merchants. The main function of the merchant banking services include providing financial advice and services to corporate as well as individuals. These banks act as a sort of intermediary between capital issuers and the buyers of the securities. These securities are issued by different companies in the stock markets to raise funds.
The Necessity of Merchant Banking Services
The economy of the country is often afflicted with different unpredictable conditions like inflation, unemployment, stagnation and so forth. The need to sustain a steady growth is necessary for corporations and individuals which is possible only with a long term strategy and financial options. The merchant banking services provide solutions and financial options.
These banks provide advisor services to clients based on a particular fee. They also provide other financial services to mergers and clients. It is the only financial institute that invests its capital in the clients' company. It acts as an intermediary between those who possess capital and those who need capital.
To help their clients with a number of financial options, the merchant banking services operate in a number of countries all over the world. In this manner the clients have the opportunity to survey the different financial options to ensure better growth.
Functions of the Merchant Banking Services
These banks have a number of functions and some of the most important among them include:
- Raise funds: one of the main functions of this banker includes helping the clients' company to raise funds from the markets. The banks help to manage equity offerings and debt. This function further includes underwriting support, pricing and marketing of the issue, stock exchange listing, allotment and refund, offer document registration and so forth.
- Offer advisory services: these banks also offer advisory services to its clients for a proposed fee.
- Security distribution: the functions of these banking services also include distribution of different types of securities like fixed deposits, equity shares, mutual fund products, commercial paper and debt instruments.
- Aid in projects: these banks also provide aid in the projects undertaken by the clients by helping them to visualise the concept of the project. The feasibility of the project is also analysed by these banks. The clients are also given support to prepare project reports.
- Overall financial reconstruction: the merchant banking services provide better financial options and solutions to the clients. They help the clients to raise funds through cheaper resources. With the aid of other financial institutions, these banks also help to revive the sick units of the clients' companies.
- Offer advice on management of risks: another important function performed by these banks includes providing timely advice on risk management. The merchant banker provides advice on different strategies adopted by the clients.
Today the merchant banking services provide a number of other services like loan syndication, credit acceptance, counselling of mergers and acquisitions, management of portfolio and so forth. They also assist companies with short term liquidity funds. In a nutshell, these banking services are indispensable as they support individuals and corporate to expand their business ventures.