Lead Bank

Categories: Banking

See: Underwriter.

Most companies are brought public via an IPO, under the auspices of more than just one investment bank. The process is a team sport, and there is no "I" in IPO. Um...

The economics reflect different levels of risk and responsibility. In very rough, normal deal terms, the lead underwriter keeps about half of the economics, and the other two or three co-managers split the rest.

So why is it such a big deal to be the lead bank in an underwriting? (An underwriting isn't only an IPO; it can also be a secondary offering, either to raise new capital or to place the shares in a block of already existing shareholders hungry to buy that convertible red Porsche.)

Much more lucrative to the banking system, insiders investing in expensive management fee hedge funds generate enormous profits to the bank. The same goes for advisory services for mergers and acquisitions. The lead bank is typically in the cat bird's seat to win most or all of that business, as they will have had the excuse of spending the most time with company management along the way.

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