Question

In an IPO an underwriter or investment banker may guarantee an amount of proceeds to the issuer of stock.

Does a similar function exist for M&A's?

Answer 1

The investment bankers execute many financial services like capital creation, investment advisory, underwriting etc. They also facilitate company’s initial public offering (IPO) and merger and acquisition deals.

Through initial public offering (IPO); company can raise capital by offering its equity shares through an IPO in the open market and can raise long term capital from the investors who are willing to invest in the company. Underwriter or investment bankers facilitate the company (issuer of stock) in issuance of IPO.

Yes, in an IPO an underwriter or investment banker may guarantee an amount of proceeds to the issuer of stock under firm commitment underwriting. Under a firm commitment underwriting; underwriters agree to buy the securities from the corporation at a discount price and resell them to other security dealers and to the public so they bear a lot of risk and issuer gets a guarantee on the amount of proceeds.

No, similar function does not exist for merger and acquisition (M&A's) deals as there is no firm commitment underwriting. The most common reason behind a merger and acquisition is that it helps the companies to unite their business activities for efficient functioning and costs reduction in mutual benefit.