Investment Banks vs. Merchant Banks: What's the Difference?

Investment banks and merchant banks are often grouped together, but they tend to serve different clients and focus on different deal types. The article describes investment banks as intermediaries for large, complex transactions, working with governments, other financial institutions, hedge funds, pension funds, and major companies. They raise capital through debt or equity offerings sold via IPOs and typically underwrite and sell securities in large blocks. It notes merchant banks generally serve high-net-worth individuals and multinational corporations, emphasizing international financing, trade finance support, underwriting, letters of credit, and advisory work. The comparison highlights that investment banks focus heavily on IPOs and large equity offerings, while merchant banks may offer creative financing like bridge and mezzanine deals, and sometimes take meaningful ownership stakes.