What is merchant banking

Merchant banking

The term merchant banking or merchant bank comes from the English and encompasses the entire area of ​​financial advice from a bank to its corporate customers. It ranges from credit, advice and financing for company acquisitions to help with company mergers. In the Anglo-American countries, this task is carried out by specialized banks, so-called investment banks. In Germany, both special banks and universal banks are active in this business.

Merchand banking is often equated with the term merchand & acquisition. This is a special form of investment banking, in which the credit institutions contribute to the purchase and sale of companies or parts of companies Mergers as well as advising and supporting investments in other companies.

In contrast to the pure lending business in conventional corporate business, the banks also offer a comprehensive advisory service here. The bank accompanies the customer in every phase of the acquisition or sale of a company. In addition to the usual interest and fees for the capital provided, the customer must also pay for the service, which takes place in the form of advice and analysis. The bank provides the company in question with a team of highly qualified specialists. In many cases, this type of advice enables the company in question to carry out such complicated and risky transactions.

Merchand banking has become known in recent years for two types of transactions, the Leveraged buyout and the Management buy-out.

In the Anglo-American countries, the merchand business is mostly carried out by specialist banks, so-called investment or merchand banks. These banks do not do business with private customers and do not participate in payment transactions. As a rule, they are internationally oriented and many are also active in forex and futures trading. In Germany, the merchandising business is carried out by both international specialist banks and universal banks. Traditionally, British and American banks have had the largest share of this business. Since the 1980s, however, German credit institutions have also made greater efforts in this interesting and profitable area.