How long does it take for an investment banker underwriting process?

Alfonso Llanes, studied at Florida International University

Answered just now

In the world of underwriting companies and governments hire investment bankers to help them raise money from private third parties or from the financial market.

The Issuer is known as the “Client” and the investment banker the “Underwriter. “ The underwriter must assess the value and risk of the issuer, as well as the market conditions at the time of issuance.

Some of the factors to be reviewed by underwriter include:

· What is the issuer’s business profile?

· Does this business generate positive cash flows?

· How will the capital be invested?

· What is the creditworthiness of the business?

· Is the profile of the management team strong?

· What are the business assets?

· Will a second round of raising capital be needed?

Market assessment:

· Is the sector of the market favorable or not?

· Is the equity or debt being offered standard or unconventional?

· Can the market take in the offering size proposed?

· Can the offering be sold in international markets?

Once these factors and issues are considered and resolved, the underwriter next determine the price range for equity or debt being offered. If the issuer agrees with all the terms and conditions of the underwriter they can then proceed to sign a letter of intent.

If a firm commitment is reached the investment banker must buy and sell the entire offering in a best tender method where the underwriter does their best to sell the equity or debt. In exchange for this commitment, the Issuer agrees to pay the investment bank a fee. Many a time, the issuer will hire multiple underwriters to spread the risk of getting the money wanted and also to access a broader market base.

Due Diligence by the underwriter

The Underwriters must meet with the business management team and review the issuer's accounting information to ensure that all material facts are presented clearly in the issuer’s offering document or “Prospectus”.​ The offering and all related filings are sent to the pertinent officials. The regulators may have questions or comments that the investment bank and issuer must respond to as part of the procedure to incorporate. Once the governmental agency approves the offering, the marketing process can begin. ​​

During the marketing phase both the issuer and the underwriters meet with potential investors and present the prospectus in order to generate interest in the securities being offered known in the industry as a “roadshow” because they travel from place to place, presenting the offering and introducing the issuer. As Interested begin to accumulate the underwriters inform the prospects how much of the offering they would need to purchase and the price levels at which their orders are valid. There is no set time line to complete all transactions as it will depend mostly on the demand and interest of the investors for the investment product being offered.