Question

a. Discuss how the core business activities of investment banks and commercial banks are similar and different.

b. Investment banks often act on behalf of companies involved in a merger and acquisition. Why would a client company use the services of an investment bank in this situation?

Answer 1

1. Core business of investment bank and commercial banks are different because commercial banks are acting as an intermediary between savers and borrowers whereas investment bank is engaged in the various other kinds of business like investment in funds, or doing mergers and acquisitions and acting as underwriters.

investment banks are subject to the regulation of securities and exchange commission whereas commercial banks are subject to the regulations of Federal Reserve.

both bank has similarity in their operations because commercial banks are always working for the protection of the interest of the savers and borrowers whereas investment banks are working for the maximization of the rate of return of investors

1.b.investment banks always are known for doing a lot of mergers and acquisitions because they have required experiences related to mergers and acquisitions and they are doing the valuation at which the companies to be merged so the interest of stakeholders of both the companies are protected, and client company would be choosing to do a merger and acquisition through these investment banks because they think that they will be gaining pricing advantagesadvantages because these companies are always having an expertise in management of mergers and acquisitions