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Merchant banking is- a financial intermediation that matches entities that need capital

and those that have capital. Hence they facilitate the flow of capital in the market.
Changing role of a merchant banker
In the past…
The role of the merchant banker was to arrange the necessary capital and ensure that
the transaction would be implemented i.e. a financial intermediary facilitating the flow of
capital among the concerned parties.
A merchant banker plays multiple roles which include those of an entrepreneur, a
management advisor, an investment banker, and a transaction broker.
This shows that the breadth and depth of a merchant bankers activity has changed over
the years.
Services offered: The wide gamut of services offered by a merchant banker include:
Issue management- this forms the ‘Bread and Butter’ operations for most merchant
bankers. The main area of service involves:
• Instrument designing
• Pricing of the issue
• Registration process for the issue of shares
• Underwriting of the issue
• Marketing efforts
• Final allotment to investors
• Listing details on stock exchanges

Corporate advisory services

Merchant bankers offer customised solutions to solve the financial problems of their
clients. Advice is sought in areas of financial structuring (as shown in the Modern
Manufacturing case above). Merchant bankers study the working capital practices that
exist within the company and suggest alternative policies. They also advise the
company on rehabilitation and turnaround strategies, which would help companies to
recover from their current position. They also provide advice on appropriate risk
management strategies like hedging strategies.
Project advisory services
Merchant bankers help clients to conceptualise the project idea, to carry out feasibility
studies to find out the viability of the project, and also to appraise their project.
Loan syndication
These financial intermediaries arrange loans, for their clients, by analysing their cash
flow pattern, so that the terms of borrowing meet the clients cash requirements. They
also offer assistance in loan documentation procedures.
Restructuring strategies
Merchant bankers assist the management of the client company to successfully
restructure various activities, which include mergers and accquisitions, divestitures,
management buyouts, joint venture among others.
To help companies achieve the objectives of these restructuring strategies, the
merchant banker participates in different activities at various stages which include
understanding the objectives behind the strategy (objectives could be either to obtain
financial, marketing, or production benefits), and help in searching for the right partner
in the strategic decision and financial valuation of the proposal.

The merchant banker plays a vital role in channelizing the financial surplus of the
society into productive investment avenues. Hence before selecting a merchant banker,
one must decide what are the services for which he is being approached. Selecting the
right intermediary who has the necessary skills to meet the requirements of the client
will ensure success.