I read a lot about how the larger BB banks are able to win mandates because they have balance sheet capabilities (as opposed to the EBs that focus exclusively on advisory). Can someone explain the role a bank's balance sheet plays in investment banking and why that's an advantage?
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It’s because they have a lot of cash that can lended to companies looking to raise capital thru debt financing + in addition to any advisory the coverage team at BB will provide
In short, it is the ability to lend money. BB's and other large balance sheet banks can offer general corporate purpose loans (revolvers/CP backstop, term debt) or debt financing for acquisitions (e.g., a bridge). It is generally low cost capital and/or provides peace of mind that liquidity is available. BB banks provide this access to their balance sheet as another way to support relationships and drive IB business (DCM, ECM, M&A).
They offer related products which may or may not be necessary (i.e. deal specific) - FX/rate hedging, guarantees (LCs, bonds, margin collateral). This in addition to the obvious breadth of the debt stack - term loans, revolvers, bonds etc. Advisory only gets you so far in terms of execution. The elephant in the room is cash itself, which for the past 15 (40?) years has been an afterthought.
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