I've tried to research the difference between those two. Some sources say they are the same while others define them differently. Does anyone know the difference between them? Thank you!
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The term "Merchant Bank" is interpreted differently in the US and the UK.
Typically, United Kingdom: "merchant bank" = "investment bank" United States: "merchant bank" = "private equity investment group"
I think the discrepancy has its origins in UK trade/expedition history, but I could be wrong.
It's the old school way of describing Investment Banking, however it is also commonly associated with PE. It was originally designed as a way for Italian farmers to be financed during the middle ages and has expanded to encompasing most functions of banking, from rasing funds to underwriting to PE. The aincent bankers would hold desposits, make loans, finance trips and undertake most functions of banking. The key thing to note about aincent Merchant Banking was that the rate charged was extremely high, prohibiting both Islamic and Christian practicioners against this due to Usary prohibitions, leaving the Jews to enter into this area just about completely unapposed due to no restrictions on Usary.
Nowadays, as I said, it covers just about all of the IBD activity, however it's most commonly associated with PE, M&A and advisory roles. I'm not sure as to why they focus primarily on these areas, but that is the trend with more modern Merchant Banks.
If you do take a look at some of the "Classic Merchant Banks", such as S.G. Warburg and Warburg Pincus (and by extention, M.M. Warburg and Co.), Barings and N. M. Rothschild & Sons, they focus, or focused as the case may be for S.G Warburg, Warburg Pincus and Barings, on all aspects of banking while maintaining their Merchant Banking name.
If someone wants to add more info, please go ahead. I hope this does serve as a most basic primer though.
merchant banks act as an investor in the transactions they bank
Thank you all for your answers!
Great reply Frieds, thanks.
Merchant Banking vs Investment Banking (Originally Posted: 06/26/2012)
I know that there are similar but I need to choose between IB or Merchant Banking Opportunities, is there any difference in hours, pay, exit opportunities? Is Merchant Banking considered as a shorter way to PE or VC?
Thank You in advance!
Merchant banking would be more appealing to PE firms, because you would presumably obtain principal investing experience in addition to advisory. Firms define merchant banking differently, however, so you will have to be more specific in what they do.
MB is pretty specialized and more directly related to PE. I move to PE?VC would be easier from MB. as VBB said MB can mean different things. you can work for an MB that does both advisory and PE work or you can work for an MB that does just the investing part.
i worked at a MB and there was pretty much no modeling and FT people got horrible pay (and bonuses per deal closed)
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