The origins of Merchant Banking date back to the 13th Century, where traders of commodities acted as Bankers to the Kings of European States, they financed the Continental Wars and costal trades, as well as lending their names to lesser known traders by accepting bills through which they guaranteed that the holder of the bill would receive full payment.
MERCHANT BANKING SERVICES:
- Long term funds to projects or companies
- Long-term sources or funds are required to create production facilities through purchases of fixed assets such as plant, machinery, land, building, furniture, etc. Investments in these assets represent that part of firm`s capital which is blocked on a permanent or fixed basis and is called fixed capital.
The long-term sources of finance are:
- i. Ownership securities
- 1. Equity shares
- 2. Preference Shares
- ii. Creditor-ship securities
- 1. Debentures or Bonds
- iii. Loan financing
- iv. Internal financing
- v. Public deposits
- Project counseling and loan syndication, project appraisals and arrangements of working capital
- Dividing the capital structure
- Portfolio management
- Corporate advisory and issue management
TERRASTONE FINANCE SERVICES–MERCHANT BANKING:
The classic Merchant Bank has long been defined as a “European FinancialInstitution” that engages in Investment Banking, Counseling, Advising and in Mergers and Acquisitions.
The American variant is NOT a Banking Entity; in fact, America does NOT have “Merchant Banks” but rather entities like Terrastone Finance Services who are engaged in the activity of Merchant Banking.
Merchant Banking is the process of acting as PRINCIPAL and/or Agent in Project Financing, Mergers or Acquisitions, and/or Advising Clients in the “Structuring” of the funding needed for their Project, and/or assisting them in their Negotiations for the realization of a Project. In the 1980’s Merchant Banking became identified for the most part with leverage-buy-out transactions and related Junk Bond Financing, and some major Investment Banks and Leverage-Buy-Out Firms dominated the activity of the Mega Transactions (generally in excess of USD $500 million).
Inevitably, the Merchant Banking Model exemplified by the “Major Players” became emulated, though on a smaller scale, and Experienced Bankers who started their own activities and formed “Boutique Merchant Banking Groups” based on their Extensive Experience and impressive Network of Contacts.
In fact, a “Good” Merchant Banker has come to be understood as one who combines Experience and Contacts, whether those be Professional or Political, and the combination of those Contacts with the Merchant Group’s OWN CAPITAL and creativity in structuring deals is THE most formidable force on the Market to give the Client/Promoter of any given Project access to the money needed to Realize a Project.
In committing its own Funds, Terrastone Finance Services does not act as a Broker but rather as Principal – one who, together with its Contacts, has the ability to bring to the table the funds needed to realize almost any given type of Project.