What are the ways of business innovation in commercial banks? Comparative analysis with China and the United States

Investment banks are non-bank financial institutions mainly engaged in securities issuance, underwriting, trading, corporate restructuring, mergers and acquisitions, investment analysis, venture capital, project financing and other businesses, is the main financial intermediary in the capital market.

Investment banks are the products of the development of securities and joint-stock company system to a specific stage, and are the important subjects of the developed securities market and mature financial system, playing an important role in the modern socio-economic development of communicating the supply and demand of funds, constructing the securities market, promoting the mergers and acquisitions of enterprises, facilitating the formation of industrial concentration and economies of scale, optimizing the allocation of resources, and other important roles.

As the development of investment banking industry is changing day by day, the definition of investment banking also seems to be very difficult. Investment bank is the title of the United States and continental Europe, the United Kingdom called merchant banks, in Japan refers to securities companies. There are four main international definitions of investment banking:

The first: any financial institution that operates Wall Street financial business can be called an investment bank.

The second: only financial institutions that operate some or all of the capital market business are investment banks.

The third: financial institutions that engage in securities underwriting and corporate mergers and acquisitions are referred to as investment banks.

The fourth: only financial institutions that underwrite securities in the primary market and trade securities in the secondary market are referred to as investment banks.

Investment banking is a concept corresponding to the commercial banks, is the modern financial industry to adapt to the modern economic development of the formation of an emerging industry. It distinguishes itself from other related industries by the following distinctive features: first, it belongs to the financial services industry, which is a mark of distinction between the general consulting and intermediary services; second, it mainly serves the capital market, which is a mark of distinction between the commercial banks; and third, it is an intellectually intensive industry, which is a mark of distinction between the other specialized financial services institutions.

Edit the origin and development of investment banking

In the United States, investment banks often have two sources: one is decomposed by commercial banks, typical examples such as Morgan Stanley; the second is the development of securities brokers, typical examples such as Merrill Lynch. The separation of investment banks and commercial banks in the United States occurred in 1929 after the crash, when the federal government believes that investment banking has a high risk, prohibiting commercial banks from using depositors' funds to participate in the investment banking business, the results of a large number of comprehensive banks were forced to break down into commercial banks and investment banks, of which the most typical example is the decomposition of JPMorgan Bank to engage in the investment banking business of Morgan Stanley, as well as engaging in the commercial banking business of Morgan Chase. The most typical example is the breakup of JP Morgan into Morgan Stanley, which is engaged in investment banking, and JP Morgan, which is engaged in commercial banking. However, in Europe, the governments of various countries have not promulgated such restrictions, investment banking business is generally done by commercial banks, so the formation of a number of so-called "Universal Bank" (Universal Bank) or Merchant Bank (Merchant Bank), such as Deutsche Bank, ABN AMRO Bank, UBS, Credit Suisse and so on, Swiss Bank, Credit Suisse and so on. Facts have proved that commercial banks and investment banks by the same financial institutions, in Europe not only did not cause a financial crisis, but to a certain extent to strengthen the efficiency of financing, reduce the risk of the financial system.

Investment banking is very profitable. Taking the most common stock issuance business as an example, investment banks generally have to take 5%-10% commission, which means that if a client issues 10 billion US dollars worth of stocks, the investment bank will have to eat 500 million to 1 billion US dollars. Bond issuance business is relatively less profitable, but also less risky. In addition, mergers and acquisitions and bankruptcy liquidation is the main profit growth point of investment banks in recent years, in recent years, Europe and the United States occurred in a large merger, often behind the investment banks to push the wave.

After the 1990s, the pattern of the world's investment banks gradually changed. On the one hand, the merger trend swept the U.S. financial sector, the emergence of Citigroup, JP Morgan Chase (that is, JP Morgan), Bank of America and other large financial groups, they all want to enter the lucrative field of investment banking; on the other hand, the Wall Street investment banks and securities analysts business is too close, many investors and the media believe that the investment banks hired analysts are difficult to ensure the independence of the investment bank, thus creating doubts about investment banks business ethics. However, if the investment banking and securities analysis businesses are really completely separated, the investment banking business will become a source of no water, and the securities analysis business will lose its lucrative commission, making it difficult for both to survive. In contrast, commercial banks have an inherent advantage in operating investment banking business, as they can make use of their deposit and loan networks with major enterprises to secure many customers, and do not have to rely on securities analysis and consulting to attract customers as traditional investment banks do. Commercial banks have more adequate capital and better reputation, what they mainly lack is business experience in the field of investment banking.

Types of Investment Banks

There are four main types of investment banks in the world today:

1) Independent specialized investment banks. This form of investment banks in the world widely exist, the United States of America's Goldman Sachs, Merrill Lynch, Lehman Brothers, Morgan Stanley, the first Boston company, Japan's Nomura Securities, Daiwa Securities, Nikko Securities, Yamanashi Securities, the United Kingdom's Huabao, Treasure Source, etc. belong to such a type, and, they have their own specialization in the direction of professionalism.

(2) Investment banks owned by commercial banks (merchant banks). This form of investment banking is mainly commercial banks on the existing investment banks through mergers, acquisitions, equity participation or the establishment of their own subsidiaries in the form of merchant banking and investment banking business. This form of investment banking in Britain, Germany and other countries is very typical.

(3) omnipotent banks directly operating investment banking business. This type of investment bank is mainly in continental Europe, they are engaged in investment banking business at the same time also engaged in general commercial banking business.

(4) Finance companies organized by some large multinational corporations.

Editing the business of investment banking

After the development of the last one hundred years, modern investment banking has broken through the traditional business framework of securities issuance and underwriting, securities trading brokerage, securities private issuance, etc., and corporate mergers and acquisitions, project financing, venture capital, corporate finance, investment consulting, asset and fund management, securitization of assets and financial innovation, etc., have become the core business composition of the investment bank. The core business of investment banking is composed of.

1) Securities underwriting. Securities underwriting is the most fundamental and basic business activity of investment banks. The terms of reference of investment bank underwriting is very wide, including the central government, local governments, government agencies issued bonds, stocks and bonds issued by enterprises, foreign governments and companies in their own countries and the world issued securities, securities issued by international financial institutions and so on. Investment banks generally weigh whether to form an underwriting syndicate and select an underwriting method according to the amount of underwriting and the amount of risk in the underwriting process. There are four usual underwriting methods:

The first one: underwriting. This means that the lead underwriter and its syndicate members agree to buy all of the securities in the offering at an agreed-upon price and then sell them to their clients. At this point the issuer takes no risk, and the risk is shifted to the investment bank.

The second type: tender offtake. It is usually done when the investment bank is in a situation where there is more passive competition. The securities used in this type of issuance are usually higher-credit bonds that are quite popular with investors.

The third type: underwriting. This is usually formed because the investment bank considers the security to have a low credit rating and high underwriting risk. This is when the investment bank only accepts the issuer's commission to act as an agent for the sale of the securities, and if not all of the securities issued within the stipulated term plan are sold, the remaining portion will be returned to the issuer of the securities, and the risk of issuance will be borne by the issuer itself.

The fourth type: sponsorship marketing. When the issuer of the company's capital increase, its main target is the existing shareholders, but not to ensure that existing shareholders are subscribed to its securities, in order to prevent difficulties in raising the required funds in a timely manner, and even cause the company's stock price decline, the issuer generally have to entrust investment banks to handle the existing shareholders to issue new shares, thereby transferring the risk to the investment banks.

(2) Securities brokerage transactions. Investment banks play a triple role in the secondary market as market makers, brokers and traders. As a market maker, after the conclusion of the underwriting of the securities, the investment bank is obliged to create a more liquid secondary market for the securities, and to maintain the stability of the market price. As broker-dealers, investment banks act as agents on behalf of buyers or sellers, trading at the price proposed by the client. As dealers, investment banks have the need to buy and sell securities on their own account, due to the fact that investment banks are entrusted by their clients with the management of a large number of assets, and must ensure the preservation and appreciation of the value of these assets. In addition, investment banks engage in activities such as risk-free arbitrage and risk arbitrage in the secondary market.

(3) Private Placement Issuance of Securities. The issuance of securities is divided into two types of public and private issuance, the front of the securities underwriting is actually a public issuance. Private offering, also known as private offering, is that the issuer does not sell the securities to the public, but only to a limited number of institutional investors, such as insurance companies, **** with the fund. Private offerings are not subject to the rules and regulations of public offerings, and in addition to saving issuance time and issuance costs, they can bring higher yields to investment banks and investors than trading the same structured securities on the open market, so the scale of private offerings has continued to expand in recent years. But at the same time, the private placement issue also has the disadvantages of poor liquidity, narrow issuance surface, it is difficult to public listing to expand the visibility of the enterprise.

(4) Mergers and acquisitions. Mergers and acquisitions have become the most important part of the business of modern investment banks in addition to securities underwriting and brokerage business. Investment banks can participate in a variety of ways in corporate mergers and acquisitions, such as: looking for mergers and acquisitions of the object, to the hunter and the prey company to provide advice on the purchase and sale price or non-price terms, to help the hunter company to develop mergers and acquisitions or to help the prey company against the malicious takeover of the development of anti-acquisition program, to help arrange capital financing and bridge loans. In addition, mergers and acquisitions often include the issuance of "junk bonds", corporate restructuring and reorganization of asset structure and other activities.

(5) Project finance. Project financing is a specific economic unit or project planning and arranging a package of technical means of financing, the borrower can rely only on the economic unit of the cash flow and income as a source of repayment, and the economic unit's assets as a guarantee for borrowing. Investment banks play a very key role in project financing, it will be closely linked with the project-related government agencies, financial institutions, investors and project sponsors, coordinating lawyers, accountants, engineers, etc. together to carry out project feasibility studies, and then through the issuance of bonds, funds, stocks, or borrowing, auctions, mortgages, and other forms of organization of the project investment funds needed to finance. The main work of investment banks in project financing is: project evaluation, financing program design, drafting of relevant legal documents, relevant credit ratings, securities price determination and underwriting.

(6) Corporate finance. Corporate finance is actually an investment bank as the customer's financial adviser or business management consultant and provide advice, planning or operation. It is divided into two categories: the first is based on the company, individual, or government requirements, an industry, a market, a product or securities for in-depth research and analysis, to provide a more comprehensive, long-term decision-making analysis of information; the second category is in the business operation encountered difficulties, to help enterprises to plan, put forward contingency measures, such as the formulation of the development strategy, the reconstruction of the financial system, the sale of subsidiaries and other transfers.

(7) Fund management. Fund is an important investment tool, which is organized by the fund sponsor, absorbing a large number of investors' scattered funds, and hiring experts with specialized knowledge and investment experience to invest and achieve returns. Investment banks have close links with funds. Firstly, investment banks can act as fund promoters to initiate and establish funds; secondly, investment banks can act as fund managers to manage funds; thirdly, investment banks can act as fund underwriters to help fund issuers to offer beneficiary certificates to investors.

(8) Financial advisory and investment counseling. The financial advisory business of investment banks is a general term for a series of securities market business planning and consulting business undertaken by investment banks for companies, especially listed companies. It mainly refers to the professional financial advice provided by the investment bank in the company's shareholding reform, listing, re-financing in the secondary market as well as the occurrence of mergers and acquisitions, the sale of assets and other major trading activities. The investment advisory business of investment banks is the link and bridge between the primary and secondary markets, and between investors, operators and issuers of securities in the securities market. Customarily, the scope of the investment advisory business is often positioned in the secondary market investors to provide investment advice and management services.

(9) asset securitization. Asset securitization refers to the investment bank through a company's certain assets as a guarantee for the issuance of securities, is a very different from the traditional bond financing a new type of financing. The company that carries out the transformation of assets is called the sponsor of asset securities. The originator will hold a variety of illiquid financial assets, such as home mortgages, credit card receivables, etc., classified into a group of asset portfolio, sold to a specific trading organization, that is, the buyer of the financial assets (mainly investment banks), and then the specific trading organization to buy the financial assets as a guarantee to issue asset-backed securities, used to recover the funds for the purchase. This series of processes is known as asset securitization. The securities of asset securitization, i.e. asset securities, are various types of debt instruments, mainly in the form of commercial paper, medium-term bonds, trust certificates and preferred shares. Purchasers and holders of asset securities are repaid the principal and interest on maturity of the securities. The repayment of securities is financed by the cash flows created by the collateral assets, i.e., the repayment of principal and interest due by the asset debtor. If the encumbered asset defaults and refuses to pay, the repayment of the asset security is also limited to the amount of the securitized asset, and the originator or purchaser of the financial asset has no obligation to repay beyond the limit of that asset.

(10) Financial innovation. Depending on their characteristics, financial innovation instruments, i.e. derivatives, are generally divided into three categories: futures, options, and swaps. There are three strategies for using derivatives, namely, arbitrage, return enhancement, and improved investment management of marketable securities. Through the establishment and trading of financial innovation tools, investment banks further expand the business space and capital gains of investment banks. Firstly, investment banks act as brokers to buy and sell such financial instruments on behalf of their clients and collect commissions; secondly, investment banks can also earn a certain amount of income from spreads, as they often first act as a counterparty to their clients to buy and sell derivatives, and then look for another client to make the opposite offsetting transaction; thirdly, these financial innovation tools can also help investment banks to carry out risk control and protect themselves from losses. Financial innovation also breaks down the boundaries and traditional market divisions between banks and non-banks, commercial banks and investment banks in the original institutions, and intensifies competition in the financial market.

(11) Venture capital. Venture capital, also known as entrepreneurial investment, refers to the emerging companies in the start-up period and the expansion of the capital financing, characterized by high risk and high returns. Emerging companies generally refers to the use of new technologies or new inventions, the production of new products, has a great market potential, can obtain profits much higher than the average profit, but is full of great risk. Because of the high risk, ordinary investors are often reluctant to get involved, but these companies are most in need of financial support, thus providing a broad market space for investment banks. Investment banks are involved in venture capital at different levels: first, they use private placement to raise capital for these companies; second, they sometimes invest directly in certain companies with great potential and become their shareholders; third, more investment banks set up "venture funds" or "venture funds" to provide capital to these companies; and third, more investment banks set up "venture funds" or "venture funds" to provide capital to these companies. Third, more investment banks set up "venture funds" or "start-up funds" to provide these companies with a source of capital.

Edit the organizational structure of investment banks

Generally speaking, the organizational structure adopted by an investment bank is closely related to its internal formation and business ideas. There are three main forms of organizational structure of modern investment banks.

1) Partnership. Partner company refers to two or more partners own the company and share the company's profits, the partners that is the owner of the company or the form of organization of shareholders. Its main features are: partners *** enjoy business income, and operating losses *** with unlimited liability; it can be all partners *** with the participation of business, can also be operated by some of the partners, the other partners only contribute to the profits and losses; the size of the composition of the partners can be large or small.

(2) Hybrid corporation. A hybrid company is usually a larger capital or company formed by the merger of capitals or companies that are not closely related functionally. After the 1960s, in the development of large companies to diversify their production and operations, investment banks are acquired or jointly merged into hybrid companies are important. The main motive of these mergers and acquisitions are to expand the scale of the parent company's business, and in the process, investment banks gradually began to change from the partnership system to a modern corporate system.

(3) Modern corporate system. The modern corporate system gives the company an independent personality, and its establishment is to enterprise legal person property rights as the core and important symbol. Legal person property right is the enterprise legal person of all enterprise property including investment and investment value-added rights. The existence of corporate property rights shows that the rights of the corporate body are no longer manifested as the rights of individuals. The modern corporate system enables investment banks to gain advantages over the traditional partnership system in terms of capital raising, financial risk control, and modernization of business management.

Edit the origin and evolution of investment banking

Modern sense of investment banking in Europe and the United States, mainly by the eighteenth and nineteenth centuries, the evolution of many financial institutions selling government bonds and discount corporate notes. The early development of investment banks was mainly due to the following four factors.

(1) the increasingly active trade activities. Accompanied by the expansion of the scope and amount of trade, the objective requirements of financing credit, so some of the credibility of the outstanding businessmen will use their accumulated wealth to become a large number of merchant bankers, specializing in financing and bill acceptance discounting business, which is the fundamental reason for the emergence of investment banks.

(2) the rise and development of the securities industry. The rapid development of the securities industry and securities trading is the catalyst for the rapid development of the investment banking industry, which provides a wide world of development. Investment banks, as securities underwriters and securities brokers have gradually established their core position in the securities market.

(3) The climax of infrastructure construction. The rapid development of the capitalist economy to transportation, energy and other infrastructure has caused enormous pressure, in order to alleviate this contradiction, the eighteenth and nineteenth centuries in Europe and the United States set off the climax of the infrastructure construction, the process of the huge demand for capital makes the investment banks in the financing and financing process has been rapid development.

(4) The development of the joint-stock company system. The emergence and development of the shareholding system not only brought about a profound revolution in the Western economic system, but also enabled the establishment of the role of investment banks as capital intermediaries between enterprises and the public.

In the early part of the 20th century, the continued prosperity of the Western economy brought about a surge in the securities industry, turning the bustling transactions in the securities market into a frenzy of monetary speculation. Commercial banks with their strong financial strength frequently involved in the securities market, and even involved in securities speculation; at the same time, the governments of various countries on the securities industry lack of effective laws and regulatory agencies to regulate its development, these are for the 1929-1933 economic crisis laid the root of the trouble.

The economic crisis directly led to the collapse of a large number of investment banks, the securities industry is extremely depressed. This made governments realize that the blind expansion of bank credit and the direct or indirect involvement of commercial banks in the risky stock market were major hazards to economic security. 1933, the United States and the United Kingdom and other countries to separate investment banking and commercial banking business, and separate management, and from then on, a new and independent investment banking industry in the depression of the economic crisis rose.

After nearly three decades of adjustment after the economic crisis, the investment banking industry once again ushered in rapid development. Since the seventies, innovations in financial derivatives such as mortgage bonds, packaged financial management services, leveraged buyouts (LBOs), futures, options, swaps, and securitization of assets have made the financial industry, and the securities industry in particular, one of the fastest-changing, most revolutionary, and challenging industries. Such innovations on the other hand also reflect that investment banks, commercial banks, insurance companies, trust and investment companies, etc. are bypassing the constraints of the separate management system and encroaching on each other's business, and the trend of mixing investment and commercial banks and their globalization has become very strong.

Editing the development trend of investment banking

In the past two decades, under the trend of globalization of the international economy and the increasingly fierce market competition, the investment banking industry has completely jumped out of the traditional securities underwriting and securities brokers in a narrow business framework, and among the internationalization, diversification, specialization and centralization of financial services, and strive to open up a wide range of market space. These changes are constantly changing investment banks and investment banking industry, and have had a profound impact on the world economy and financial system, and has formed a distinct and strong development trend.

1) Diversification of investment banking. Since the sixties and seventies, the western developed countries began to gradually relax the financial control, allowing different financial institutions in the business of appropriate cross, for the diversification of investment banking business to create the conditions for the development. In the 1980s, with the increasingly fierce market competition and the continuous development and improvement of financial innovation tools, the formation of this trend has been further strengthened. Nowadays, investment banks have completely jumped out of the traditional securities underwriting and securities brokerage narrow business framework, forming a securities underwriting and brokerage, private issuance, mergers and acquisitions, project financing, corporate finance, fund management, investment consulting, asset securitization, venture capital and other diversified business structure.

(2) The internationalization trend of investment banking. The globalization of investment banking business has profound reasons, one of which is that the speed of economic development of countries around the world, the speed of development of the securities market varies, so that investment banks have to be used as a new field of competition and profit growth, which is the inherent requirements of the expansion of investment banks to the outside world. Secondly, the improvement of the international financial environment and financial conditions has objectively prepared the conditions for investment banks to realize global operation. As early as before the sixties, investment banks used to cooperate with foreign agent banks to help domestic companies to promote securities overseas or to enter foreign markets as investor intermediaries. In the 1970s, in order to compete more effectively in the international market, major investment banks established their own branches overseas. After the eighties, with the integration of the world economy, capital market and the rapid development of the information and communication industry, the former distance limitations can no longer be a barrier for financial institutions, business globalization has become an important issue of whether investment banks can occupy the high ground in the fierce market competition.

(3) The trend of investment banking specialization. Specialized division of labor is the inevitable requirements of socialized mass production, in the process of diversification of the entire financial system, the specialization of the investment banking business has become inevitable, the major investment banks in the diversification of business development, but also their own strengths. For example, Merrill Lynch in infrastructure financing and securities management, Goldman Sachs to research capabilities and underwriting known, Salomon Brothers to commercial paper issuance and mergers and acquisitions of companies, the first Boston in the organization of syndicates and arrangements for private placements in the lead.

(4) The trend toward centralization of investment banking. In the 1950s and 1960s, with the post-war economic and financial recovery and growth, competition and cooperation among major consortia led to increasing concentration of financial capital, and investment banks were no exception. In recent years, the concentration of the investment banking industry has been intensified by competition for business from commercial banks, insurance companies and other financial institutions, such as the transportation and sale of revenue bonds and the syndication of Eurodollars. In this situation, the major investment banking industry has been expanding its scale through mergers and acquisitions, reorganizations, and IPOs. For example, the merger of Merrill Lynch and White & Wild, and the acquisition of Warburg in the UK by Swiss Bank Corporation. Large-scale mergers and acquisitions have made the business of investment banks highly concentrated, in 1987, the 25 larger investment banks in the United States, of which the largest 3, 5, 10 companies accounted for 41.82%, 64.98%, 87.96% of the percentage of the market securities offerings, respectively.

Edit paragraph investment banking in China

China's investment banking business is to meet the needs of securities issuance and trading continues to develop. In terms of China's practice, investment banking was initially done by commercial banks, which were not only the main issuers of financial instruments but also the financial institutions in charge of the largest volume of financial assets. In the mid-to-late 1980s, with the opening up of the securities circulation market in China, the securities business of the original commercial banks was gradually separated, and a large number of securities firms were set up in various regions, forming a system of intermediaries in the securities market mainly consisting of securities firms. In the following ten years or so, securities firms gradually became the main body of China's investment banking business. However, in addition to professional securities companies, there are a large number of broader business scope of the trust and investment companies, financial investment companies, property rights trading and brokerage institutions, asset management companies, financial consulting firms engaged in other investment banking business.

China's investment banks can be divided into three types: the first is national, the second is regional, and the third is private. National investment banks are subdivided into two types: one is the securities company with the background of the banking system; the other is the trust and investment company with the background of the State Council directly under the State Council or the ministries and commissions of the State Council. Regional investment banks are mainly specialized securities companies and trust companies at the provincial and municipal levels. The above two types of investment banks rely on the state in the securities business franchise in China's investment banking industry occupies the main position. The third type of private investment banks are mainly some investment management companies, financial consulting companies and asset management companies, etc., the vast majority of them are from the past to provide customers with management consulting and investment advisory services developed, and has a certain degree of capital strength, in the enterprise mergers and acquisitions, project financing and financial innovation has a strong flexibility, is gradually becoming China's investment banking field of another backbone of the force.

China's modern investment banking business from the development of only less than fifteen years, there are such as too small, narrow business scope, lack of high-quality professionals, excessive competition and other such and such a problem. However, China's investment banking industry is facing the largest market demand ever, with the rapid development and deepening of China's economic system reform, the social and economic life of the demand for investment and financing will become increasingly strong, state-owned large and medium-sized enterprises in the conversion of business mechanism and private enterprises to seek future development, etc., will rely more and more on the role of the capital market, all of these will lay a solid foundation for the long-term development of China's investment banking industry. The company's investment banking industry will lay a solid foundation for the long-term development of China's investment banking industry.

Investment banking: is the industry of operating capital, its main role is to provide the users and suppliers of funds in the hands of the endowment of resources to provide configuration and combination of intermediary services, so as to provide both sides of the resources **** enjoy the benefits created. (It is the combination and operation of the ownership, operation and use of capital)

Significance: the market intermediary role of investment banking is a full expression of the market economy.

Along with the derivation of financial products, the scope of investment banking business has a tendency to enlarge, especially the large investment banks dispersed from the small investment banking institutions. It has always been at the center of the market in developed countries.

Main products: financial competence (based on financial analysis of the economy and business)

Financial advice (including appropriate levels of interest rates, subscription prices and expectations of investor demand)

Main revenues: commissions

Effective use of funds is at the core of the thinking of investment banks

History of investment banking:

1. 14th century Italian merchants invented the "banker's acceptance"

2. 18th century London, England, became an international financial center, and investment bankers arose

3. Competition in the manufacturing industry prompted a group of accepting firms and merchants specializing in taking on the financial risk of overseas trade and export business, also known as merchant Bank

4. Government bonds and railroad bonds emerged during the American Civil War as the origin of the American investment bank. (The Glass*Steagall Act of 1933 led to a strict separation of commercial and investment banking)

5. After World War II investment banks remained dominant in the areas of capital raising and corporate investment, but were no longer pure underwriters of securities

Five mergers and acquisitions:

I.1860s to 1970s, mainly horizontal mergers and acquisitions on the basis of scale operations

II.1920s to 1930s, mainly integration of the main industry and related industries of the product chain, the formation of raw materials procurement machinery processing and manufacturing, marketing and sales and other process operations integrated system, i.e., vertical mergers and acquisitions

III.1950s mixed and cross-industry mergers and acquisitions

IV.1980s prevalence of leveraged buyouts, junk bonds for the finance corporate M&A

v.The mid-1990s rapidly promoted and popularized the use of new technologies with its venture capital investments and publicized financing

Business models: breakaway (China and the United States), all-inclusive (Germany, Switzerland, and the Netherlands)

Four definitions:

i. Any bank or financial institution that conducts Wall Street business (banking, underwriting, trading) (broadly defined)

II. A bank or financial institution that conducts some or all of its capital markets business (securities underwriting, fund management, corporate capital raising, mergers and acquisitions, project finance, venture capital, corporate finance, financial consulting, excluding the sale of securities to retail investors, real estate intermediation and mortgages to consumers, and insurance products) (optimal)

three. Includes only certain capital markets businesses, i.e., securities underwriting, mergers and acquisitions (narrow)

IV. Engage in underwriting securities in the primary market and trading securities in the secondary market (out of fashion)

(Large investment banks can use the second one, while small investment banks are limited to underwriting and issuing securities related to capital markets, corporate finance, mergers and acquisitions)

American investment banking - investment banks or securities firms - separate business

Classification: country and traditional practices

British investment banking - merchant banking - money market deposits and loans and securities underwriting

German investment banking - general banking - no specialized investment banking

Size and business capabilities: international level mega investment banks, national, regional investment banks, specialized investment banks

Independent investment banks and investment banks controlled by commercial banks (Goldman Sachs, Merrill Lynch, financial and operational independence Morgan*Stanley, First Boston, Nomura Japan, Nikko, Warburg)

Integrated investment banks and finance companies of large multinationals

Functions: financial intermediation, creating securities market liquidity, optimize resource allocation, promote industrial concentration, financial innovation, promote the integration of industry and finance and cultivate entrepreneurs

Business classifications: traditional - securities issuance underwriting, securities brokerage, market making and securities private placement

Modern- Mergers & Acquisitions, Project Financing, Venture Capital, Financial Advisors

Other - Investment Advisors, Investment Consulting, Asset Securitization