Business Development & Investment Banking – An Interdisciplinary Link

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Author & Contributor

Chris Bargmann

World-renowned magazine Forbes tried inadvertently provide a clear definition of what is “Business Development”. And had its struggles in doing so: Is it Sales? Is it Partnerships? Is it pure street Hustling? The magazine goes even further and puts the question “what is business development” on the same step with the crucial question in physics asking, “What exactly is the universe?”[1] Literature is far from providing one clear and agreed definition in order to answer this question. However, when searching for a definition, one might very frequently come across keywords like “Sales”, “Marketing”, “Business Planning”, “Growth”, “Corporate Development” and “Innovation Management”.

So where is the link to Investment Banking?

Investment Banking can generally be split into two parts: The trading part (not subject of this article) and the advisory arm. The latter is concerned with both advisory on Initial Public Offerings (IPOs) and Mergers & Acquisitions (M&A)[2]. Within the M&A practice, Investment Banks are concerned with early-stage deal origination as well as deal execution, valuation and sometimes even post-merger integration. That is exactly where the link between Investment Banking and Business Development can be made. When asking shareholders of companies of any size, most of them might respond that the company’s future growth is what they are most curious about. If we put the “Corporate Development” and “Growth” aspects of the broader Business Development definition into the spotlight, we can find an interesting similarity to Investment Banking: Businesses of any size are always on the lookout for growth opportunities. This growth can be achieved organically (i.e. increasing sales only through a company’s own capabilities) or inorganically (through acquisitions). A company of any size and in any industry thus has to ask itself the question: “Build or Buy?”[3] Both strategies have their pros and cons, however, companies are likely to combine both strategies at one point in time, developing some ways for growth on their own and acquiring companies that provide complementary services or geographic reach that would be hard for companies to develop on their own. Assuming that, companies are likely to be involved in M&A activity sooner or later as the business matures. Many of the largest companies have internal M&A departments within their Corporate Development practice that are concerned with identifying inorganic growth opportunities and even executing smaller deals on their own. In fact, one of the most attractive exit options from Investment Banking is entering into the “Inhouse M&A“ departments of large corporations. Given that there is no predestined career path for Business Development, some of us are likely to find some of their future colleagues to have an Investment Banking background. So, make your Accounting and Corporate Finance homework and get out there and get to know some Bankers. Business Development and Investment Banking are not as far away from each other as one might think.

[1] Forbes: http://www.forbes.com/sites/scottpollack/2012/03/21/what-exactly-is-business-development/

[1] University of Oxford: http://gates.comm.virginia.edu/wjw9a/Papers/JACF%20Morrison%20Wilhelm%20Final%20version.pdf

[1] EY: http://www.forbes.com/sites/ey/2014/01/14/organic-vs-inorganic-which-way-to-grow/

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