What is investment banking?
By Michael Song · Wharton MBA · ex-Greenhill · investment banking interview coach
6 min read · updated July 2, 2026
Investment banking is, at its core, a financial advisory business. Companies, governments, and investors hire banks to help them raise money and to buy, sell, or restructure businesses. The bank is the expert intermediary in the room, the one who has done the deal a hundred times before and gets paid to make sure it goes well.
If you strip away the jargon, an investment bank does three things: it raises capital, it advises on transactions, and it provides judgment about what something is worth and how a deal should be structured.
Why companies pay for it
A company sells software, or makes engines, or runs hospitals. It does not employ a standing team of people who know how to sell a $4bn division to a strategic acquirer, or how to price a debut bond offering across hundreds of institutional investors. That expertise is episodic and expensive to keep in-house, so they rent it.
The product a bank sells is judgment under uncertainty plus access to capital. Anyone can run the numbers; clients pay for the bankers who know which number matters, what buyers will actually pay, and who to call to get the deal done.
How a bank is organized
Most banks split the work two ways, and you'll be asked which you're interested in:
- Coverage (industry) groups own the client relationship for a sector: technology, healthcare, financial institutions, and so on. They know the companies, the management teams, and the strategic landscape.
- Product groups are deal specialists. M&A advises companies on buying and selling other companies, equity capital markets (ECM) raises money by selling stock, and debt capital markets (DCM) raises it by issuing bonds. Restructuring and leveraged finance round out the group. They bring the technical execution.
On a live deal, a coverage banker and a product banker staff the same engagement together: one brings the relationship, the other brings the mechanics.
The bank as a whole sits on the sell-side: it advises companies and sells securities to investors. The buy-side, the private equity firms and hedge funds and asset managers, is who ends up owning those securities. Knowing which side of the table you're on matters, and it's a question you'll get asked.
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Frequently asked
- What does an investment banker actually do?
- An investment banker is a financial advisor to companies. They help clients raise money by selling stock or bonds, and they advise on buying, selling, and merging businesses. The bank is the expert intermediary who runs the process and is paid a fee when the deal closes.
- What is the difference between investment banking and commercial banking?
- A commercial bank takes deposits and makes loans. An investment bank does not take deposits. It advises companies on raising capital and on mergers and acquisitions, earning fees for that advice rather than interest on loans. The two businesses were legally separated for decades and still run very differently.
- What does an investment banking analyst do all day?
- The analyst is the engine of the deal team. They build the financial models, assemble the pitch books, run the data, and manage the process behind the scenes. It is long hours of detailed, accurate work that every other part of the deal depends on.