ECM vs. DCM - Specialties of IB?

That_Aston's picture
Rank: Gorilla | 604

If there is anyone here, can you elaborate on these specialties of IB? I haven't really gotten any thorough explanations of the functions which DCM carries out within an Investment Bank. I have a somewhat better understanding of ECM which is why I currently have a greater interest in it.

Also, what kind of overlap is there between the two; Do they collaborate within the same unit/desk? Or am I mistaken and there is heavy overlap outside of a capital raising event such as an IPO?

Thanks guys in advance!

Investment Banking and Capital Markets

Equity Capital Markets and Debt Capital Markets are two groups that help their clients raise funds via the capital market. As a refresher, the capital market is the financial system that is used to raise capital by dealing shares, bonds, and other long-term investments. Consequently, each group focuses on its specific method of fundraising, i.e. debt and equity. Next, we'll take a look at some of the more nuanced differences between each group.

Equity Capital Markets

The function of this group is practically in the name. The group is focused on raising equity for clients through the capital markets. Generally, this group can be staffed on IPO'S, private investment in public equity deals (PIPE deals) etc.The ECM group may receive specialized support from an ECM division. This supporting group can provide data on IPO's in X industry, capital raised per product, and volatility of the overall markets. This information is then presented in the pitch book. Additionally, ECM groups are involved in both pitching and pricing. Certified user @MBAApply worked in equity capital markets as an analyst. Here's his description of a junior bankers role within the group.


In plain English, at the beginning of a potential deal, at the junior levels you're basically like a resource for the bankers. You keep track of all equity deals (both IPOs and follow-on offerings) globally, and you compile this info for the bankers to use in their pitchbooks. Oftentimes, you are also responsible for putting together league tables (ranking the banks and essentially trying to find ways to make your bank look like it's #1).

ECM also acts as a conduit for pricing the issue (i.e. they decide in collaboration with the bankers, clients and equity sales what the price range will be which gets put in the prospectus, and then when the deal is ready to go, what the actual price per share will be - which ultimately is a compromise between what the salespeople think they can sell it for, and what the client wants).

ECM also helps put together the term sheet for the deal (price range, number of shares, greenshoe option, etc.).

Debt Capital Markets

DCM groups may have more exposure to a wider base of clients. That is because debt can be raised for corporations, agencies, and sovereigns. Consequently, there is the potential for seeing a greater a volume of deals within this group. However, this is subject to market type. User @spilinmy, an investment banking associate, worked for a bond syndicate and here is his description of the duties as an analyst.

Spilinmy - Investment Banking Analyst:

As an analyst, you'd generally be doing the same thing in either department - pitches, presentations, market commentaries, modeling, etc...all while learning about the specific product. You'd be building quite a general foundation in the early I wouldn't worry too much about being "shelved" into a specific product - within the first 3 yrs I would imagine it's quite easy to transfer between products. for example, I was in bonds for about 18 months and was asked to transfer to loans for the last 12 (they needed the staff). took a while to catch up on product nuances, but I use most of the same basic skillset I developed in the first rotation.

Each group has its nuances but both are different from standard coverage groups. Additionally, the consensus is that both groups are less model intensive than leveraged finance or mergers and acquisitions.

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