Non Bank Financial Institutions

We will discuss about.

Investment banks Merchant banks Life insurance offices General insurance offices Superannuation funds Finance companies Permanent building societies Credit cooperatives Cash management trusts Public unit trusts Export finance and insurance corporations

Investment Banks & Merchant Banks

Investment Banks & Merchant Banks

Specialist providers of financial and advisory services to corporate and government clients. Merchant Banks- UK Investment Banks-USA

Sources & Uses of Funds, Off Balance Sheet Business

These institutions dont have depositor base. Their liabilities are predominantly short term and are typically raised through the issue of securities into the money market. These banks are not required to comply with the minimum capital adequacy requirements applied to commercial banks. Offshore funding by:
By subsidiary operations of international banks Globalization foreign exchange markets

 Assets in the form of loans to corporations and governments. Primarialy concerned with wholesale finance.

Off Balance Sheet Business

Off-balance sheet (OBS), or Incognito Leverage, usually means an asset or debt or financing activity not on the company's balance sheet. Some companies may have significant amounts of off-balance sheet assets and liabilities. For example, financial institutions often offer asset management or brokerage services to their clients. The assets in question (often securities) usually belong to the individual clients directly or in trust, while the company may provide management, depository or other services to the client. The company itself has no direct claim to the assets, and usually has some basic fiduciary duties with respect to the client. Financial institutions may report off-balance sheet items in their accounting statements formally, and may also refer to "assets under management," a figure that may include on and off-balance sheet items.

Off balance Sheet businesses

Foreign Exchange dealing Underwriting Placement of new issues with institutional investors and individuals Advice to corporate clients Advising on corporate mergers and acquisitions Project finance and structured finance undertakings Advising on raising of equity and long term debt. Risk management strategies Advising on derivative contracts Venture capital advising

Mergers and Acquisitions

One company takes control over another A significant fee generating service provided by investment banks. Horizontal takeover occurs when the target company conducts the same type of business as the takeover company. Vertical takeover occurs when the takeover company acquires another company that normally operates within a related business chain. Conglomerate takeover occurs when the takeover company diversifies its business activities by acquiring another company that operates in business area unrelated to the existing business of takeover company. Hostile takeover is one in which the actions of the takeover company are actively resisted by the board of directors of target company. Investment banks actively seek out, anayze and evaluate potential takeover opportunities for clients, then approach the clients.

Synergy
The value of merged entity should be greater than the sum of two original entities on a stand alone basis. Synergy may be achievable from
Economies of scale Financial advantages Competitive growth opportunities Business diversification

 In advising a corporate client on a merger and acquisition opportunity, an investment bank must consider the economic, legal, accounting and taxation implications of the proposals often across a number of jurisdictions. Range of issues that an investment bank take into consideration in dealing the M&A.
Analysis of target company Establishment of contacts Transaction structures Valuation of company Negotiation Due Diligence Nature of takeover Communication with the market Project management and integration