Today, a variety of businesses revolve around the concept of investments. These businesses are based on certain financial services, which are involved in buying or creating an asset with the expectation of capital appreciation and growth.
Investment Banking and Private Equity Real estate in India are two of the most commonly used financial services these days. Investment banking is related with companies and institutional investors to manage high dollar trade, and mergers and acquisitions. On the contrary, a private equity involves investment of equity in a company by some external parties who wish participate in its operation and uplift its value. Although both investment banking and private equity tend to raise capital for investment purposes, they do so in quite different ways.
Here’s a list of some of the differences between investment banking and private equity, which highlight the structural as well as functional bases of these investment vehicles.
• Process: In investment banking, the bankers look for potential businesses and then go into the capital markets to find ways to raise the money. On the other hand, private equity firms first collect the high net worth funds by combining the assets of multiple investors and then go on looking for investments in other businesses.
• Seller vs. buyer: Considering the big picture, the investment bankers and private equity associates work on sell-side and buy-side respectively. The investment bankers basically sell business interest to investors and their primary clients are private companies and corporations. The real estate associates however purchase business interest on the behalf of investors who’ve already put up money.
• Helpers: A company solicits the help of an investment bank when it wants to go public or is working through a mergers and acquisition deal. On the other hand, the Best Private Equity buys controlling interests in other business and helps in management decisions.
• Analysis: In investment banking, the analysis sometimes may be abstract and vague since fund-raising is a secondary step. However, private equity associates have their own capital in line, and therefore, the analysts dig deeper to find critical information.
• Work culture/ Lifestyle: Investment banking tends to be more than a 9 hour job- sometimes the bankers work for as long as 14 hours straight. Private equity generally is work-life balanced job involving a relaxed environment and comfortable lifestyle.
It would be unfair to comment on which profession out of these two is better because ultimately, it depends on the type of work one desires.