Bought Deal


DEFINITION of 'Bought Deal'

In investment banking, a securities offering where an investment bank commits to buy the entire offering from the client company. A bought deal eliminates the financing risk for the company, which is able to ensure that it raises the intended amount of funds from the securities offering; however, the client firm will likely get a lower price by taking this approach.


A bought deal is more risky for the investment bank, because it must then try to sell the securities to other investors. The investment bank takes all of the risk that the securities may not be able to be sold, or more commonly, that they may lose value before they can be sold, resulting in a net loss. To offset this risk, the investment bank often negotiates a significant discount when buying the offering from the client. If the deal is large, an investment bank may team up with other banks and form a syndicate so that each firm bears only a portion of the risk.

  1. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  2. Best Endeavors

    A term commonly found in commercial contracts, that places upon ...
  3. Backstop Purchaser

    An entity that agrees to purchase all the remaining, unsubscribed ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Best Efforts

    An agreement in which an underwriter promises to make a full-fledged ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
Related Articles
  1. Investing Basics

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  2. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  3. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  4. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  5. Professionals

    The Best Financial Modeling Courses for Investment Bankers

    Obtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking.
  6. Professionals

    Credit Risk Analyst: Job Description and Average Salary

    Learn what credit risk analysts do every day and how much money they make on average, and identify the skills and education needed for this career.
  7. Economics

    The Difference Between Finance And Economics

    Finance and economics are often taught as separate subjects, but they are interrelated disciplines that influence one another in many ways.
  8. Professionals

    A Day in the Life of an Investment Banker

    Take a look at a day in the life of an investment banker, one of the most sought-after and stressful jobs in the financial sector.
  9. Professionals

    Top 3 Misconceptions About Financial Analysts

    Learn misconceptions about financial analysts, such as they exclusively study the stock market, they are the same as financial advisors and they are all rich.
  10. Fundamental Analysis

    Investment Banks: Not a Good Bet Right Now?

    Investment banks might appear safe to investors at the moment, but they're probably more dangerous than advertised.
  1. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Full Answer >>
  2. Do financial advisors have to find their own clients?

    Nearly all financial advisors, particularly when new to the field, have to find their own clients. An employer may provide ... Read Full Answer >>
  3. Do financial advisors get drug tested?

    Financial advisors are not drug tested by any federal or state regulatory body. This means you may receive your Series 6, ... Read Full Answer >>
  4. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  5. Do financial advisors have to be licensed?

    Financial advisors must possess various securities licenses in order to sell investment products. The specific products an ... Read Full Answer >>
  6. Do financial advisors need to meet quotas?

    Most financial advisors are required to meet quotas, particularly if they work for firms that pay base salaries or draws ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center