Investment Banking

Question 1

Three Step process in IPOs

Answer 1

1. Origination
2. Underwriting
3. Distribution

Question 2

Define Origination

Answer 2

Analyse feasibility of the project, determine amount to raise, decide on type of financing, design securities characteristics

Question 3

Define Underwriting

Answer 3

Investment banks bear price risk. Guarantees to buy securities at a fixed price. The risk is that the securities could be sold at a lower price than what the bank agrees to pay.

Question 4

Define Distribution

Answer 4

Selling securities at the highest possible price as fast as possible

Question 5

Elements of M&A (4)

Answer 5

1. Identifying candidates,
2. pricing deals,
3. advising deals,
4. obtaining funds to finance the negotiation

Question 6

Three factors Venture Capital must have

Answer 6

1. Substantial control over management decisions
2. Some protection against downside risk
3. A share in capital appreciation

Question 7

Four types of venture capital financing and brief description of each

Answer 7

Seed Financing: Capital provided at the idea stage
Start-Up Financing: Capital provided for product development and marketing
First-Stage Financing: Capital provided to initiate manufacturing and sales
Second-Stage Financing: Capital provided for expansion of a company already selling