Just wanted to get clarification on what exactly the difference is between a real estate merchant bank and a real estate private equity firm. Essentially, is it that the merchant bank lends money in addition to making equity investments? Also, do merchant banks invest in opportunistic real estate assets to the same degree that REPE funds do or are they more focused on core/value-added?
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Just checking here, are you from England?
I.E. does "Merchant Bank" = "Investment Bank" to you?
Nope, proud citizen of the US of A.
I honestly have no clue what a merchant bank is after all these years.
Merchant banking is simply the private equity arm of an investment bank. Any investment bank that makes principal investments in companies, on its own behalf, is in the business of merchant banking.
Private equity firms are separate from an investment bank; merchant banks are under the roof of an investment bank.
So, my guess is the main difference is that Merchant banks aren't principal investors... whereas PE shops are running their own money (yes they raise that money from others, but it is discretionary capital-- or lets work under that assumption) Merchant banks find a deal and then find capital partners for that specific transaction.
In more practical terms if you go to work for a PE shop at a pre-MD level you'll spend 90-100% of your time on non-fundraising activities (diligence, deal sourcing, reporting, etc), whereas I would assume it would be the inverse for folks at Merchant Banks (but I work for the former, so this is an educated guess).
Hope that helps a bit.
Merchant banks are utilizing their own money as well. The investment bank will put in some capital from its balance sheet into the merchant bank's private equity fund to make investments.
It's pretty hard to tell the difference. At Goldman, there's a Merchant Banking division, and they have a real estate investing team within that. Then there is a real estate fund within their asset management division. Then finally there is a stand-alone division called realty services, which does some real estate investing but also does some administrative BS work.
Don't assume anything with "Private Equity" in the title is prestigious. Real estate merchant banking at a BB is a better job than most PE firms (obviously not Blackstone, KKR, et al.)
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