What role do investment banks play in mergers and acquisitions?

• A. They solely provide financing for transactions
• B. They offer advisory services and facilitate transactions
• C. They conduct market research related to mergers
• D. They create new financial products

Answer: (B)

Investment banks play a crucial role in mergers and acquisitions by offering advisory services and facilitating transactions. When companies consider merging with or acquiring another company, investment banks provide expert guidance throughout the complex process. This includes performing valuation analysis to determine fair prices, advising on the structure of the deal, negotiating terms, and helping to identify potential buyers or sellers.

Investment banks also assist in due diligence, ensuring that all financial and legal aspects of the target company are thoroughly examined. This comprehensive advisory role is vital, as mergers and acquisitions involve significant financial commitments and strategic consideration. By leveraging their expertise and networks, investment banks enhance the likelihood of a successful transaction, making them indispensable partners in the M&A process.

While financing is an important aspect of M&A deals, it is not the sole role of investment banks and does not capture the breadth of their advisory functions. Additionally, conducting market research and creating new financial products may be relevant to investment banks' broader activities, but they do not specifically define their role in mergers and acquisitions.