CL King

Uncovering Hidden Investment Opportunities Since 1972

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Investment Banking and Private Equity

Private equity and investment banking both are terms commonly used in the world of business. But these big terms tend to confuse commerce students who are just beginning to learn about the various aspects of business. So what exactly is the difference between these two?


Let's start with the basics. To put it simply, investment banking is an advisory service offered by investment banks to assist companies/businesses in raising capital. Companies choose the best of investment banks to seek advice on matters of mergers and acquisitions, and restructuring. An investment bank also supports its clients by facilitating the capital-raising process. A private equity fund on the other hand, is a pool of capital collected from a variety of wealthy investors/organisations. The capital from the fund is directly invested in other businesses. Investment bankers are advisers and private equity firms are investors. That's the most basic yet major point of difference between the two.


The major roles of a PE associate are as follows:


1) Raising funds

While the complicated process of raising funds is handled by the most experienced PE professionals, the associates can be asked to assist in the process. They can contribute by putting together facts and figures regarding the fund's past performance, past investors etc.


2) Investment opportunities

PE associates play a crucial role as they are always on the lookout for investment opportunities. Based on various financial models, such associates identify key reasons for investing the capital of the fund in a particular company.


3) Managing investments

Those associates with prior management consulting experience may be allowed to help in increasing the operating efficiency of portfolio companies. But how involved these associates will be depends on the strategy of the fund.


4) Exiting

Private equity firms usually invest in a business with an objective of exiting at a later stage. Exit strategy too needs an in-depth understanding and analysis of various factors.


The work life of investment bankers and private equity associates differ greatly from each other. The life of an investment banker is hectic with no fixed work timings. Also investment bankers should be capable enough to work well even with little direction. PE associates do not have such a hectic work life but then they do not enjoy the same level of monetary benefits as investment bankers do.


For more information consult with the experts at CL King & Associates
CL King has worked as a Co-Manager for Bond Offering, Subordinated Notes Offering, Notes Offering and many more for the reputed firms such as Citigroup, Walmart, AT&T’s etc.
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