Investment banking: what it is and how it works

An investment bank is a financial institution specialized in advising corporations, governments, and institutions on capital-raising activities and the execution of complex financial and corporate transactions.

Its core activities include equity and debt issuance, mergers and acquisitions (M&A), financial restructuring, and strategic advisory in corporate transactions. Through these services, investment banks facilitate access to capital markets and play a key role in structuring and executing transactions between issuers and investors.

Investment banking plays a significant role in the functioning of financial markets and in enabling business development, allowing companies and institutions to secure financing and carry out transactions linked to their growth, transformation, and international expansion.

How does an investment bank operate?

Investment banks are involved in multiple stages of financial and corporate transactions, from initial analysis through to execution in the capital markets.

For example, when a company requires funding to expand operations, pursue an acquisition, or develop new projects, an investment bank may structure an equity or debt issuance to raise capital from institutional investors.

Similarly, these institutions are active in mergers and acquisitions, providing financial analysis, valuation services, deal structuring, and coordination of negotiation and execution processes.

Beyond facilitating access to financing, investment banks also operate across financial markets through services such as intermediation, risk management, and the design of tailored financial solutions adapted to the specific needs of each client and industry.

Key functions of an investment bank

Investment banking activities cover a broad range of specialized financial services:

Mergers and acquisitions (M&A) advisory: Support in buying, selling, or combining companies, including financial analysis, valuation, and transaction structuring.

Capital raising: Structuring debt and equity issuances, such as bonds, capital increases, or initial public offerings (IPOs), to facilitate access to funding in the markets.

Securities underwriting and placement: Distribution of securities to institutional or qualified investors and, in some cases, underwriting part of the issuance.

Corporate finance and syndicated lending: Structuring and arranging financing solutions tailored to corporate and institutional needs, including corporate and syndicated loan transactions.

Structured and project finance: Design and execution of financing solutions linked to infrastructure, energy, sustainable transition, and other strategic sectors.

Leveraged finance: Structuring financing solutions for corporates and private equity funds using leveraged instruments such as loans or debt issuances.

Debt Capital Markets (DCM): Advisory and execution of debt market transactions, including refinancing, corporate bond issuance, and other funding structures.

Equity Capital Markets (ECM): Advisory on equity capital markets transactions, such as IPOs, capital increases, or convertible instruments.

Financial risk management: Use of financial instruments to manage exposure to market variables such as interest rates, foreign exchange, or commodities.

At BBVA CIB, our Corporate & Investment Banking platform, we provide investment banking and capital markets solutions tailored to the needs of corporates, investors, and institutions. Through our sector expertise, global capabilities, and experience in financing and capital markets, we integrate innovation and sustainability as key drivers to support our clients’ growth and transformation in an ever-evolving financial environment.