Merchant Banking?

Question

Tell me the exact definition of Merchant Banking and also the role of a Merchant Banker?

Answer 1

A merchant banker is a financial intermediary, who sells services of banker, to businesses to organise their finance.
A banker is one who accepts money for the purpose of lending. He has the power to issue cheques to his customers to draw money from their running accounts.
A merchant banker utilises the services of banking for his client and thus sells the service of banking. Of course, bank services are not the only one a merchant banker of today's age targets. He targets a varied section of investors, including investment bank and mutual funds, or any other investing entities.
A merchant banker is more a consultant of financial planning for business entities.

Answer 2

Merchant Banking Means services provided by the Bank in performing the Trading Function.

Role of Merchant Bankers:
1.Underwritting the Shares & Gurantee Services
2. Lead Manager
3.Issue Manager
4.Factor Services
5.Consultancy Services

Answer 3

source: Emco Hanover Group

CAPITAL ASSISTANCE

In providing financial assistance, merchant banks offer a full understanding of all facets of the capital markets. This includes all types of debt and equity financing available from both the domestic and international markets. A merchant banker, cognizant of capital costs, looks for the best sources of capital, including its restrictions and dollar limitations.

It should be understood that interest rates are not the only definition of capital costs. Restrictions on availability, prepayment terms, and operating effectiveness can often outweigh what might appear to be inexpensive capital with low interest rates. Too often, capital includes costs which force an entrepreneur or a business to undertake undesirable actions. In the short-run, some actions might be necessary, but often in the long-run are detrimental. The traditional merchant banker understands these capital limitations and can structure a transaction which is beneficial to all sides of the table -- not just the capital source.

He also knows how to substitute one type of capital for another, sometimes utilizing internal sources from asset repositioning or cash creation from improvements in working capital. He understands fully the risk versus return elements necessary to complete the capital procurement process.

Answer 4

A bank that deals mostly in (but is not limited to) international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public.

Notes:
Their knowledge in international finances make merchant banks specialists in dealing with multinational corporations.

Answer 5

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