What Is a Banque D'Affaires?

A banque d'affaires is a type of French financial institution (FI) that resembles a merchant bank, business bank, or corporate investment firm. A banque d'affaires is not a deposit bank or credit institution serving the general public. Instead, it is more akin to a financial advisory firm for corporate and organizational clients. Circulating money is the main purpose of a banque d'affaires.

Key Takeaways

  • A banque d'affaires is a type of French financial institution (FI) that provides services similar to those offered by a merchant bank.
  • Banques d'affaires typically specialize in providing financing and advisory services to corporate and organizational clients.
  • They operate as intermediaries in corporate financial operations, such as initial public offerings (IPOs), capital increases, corporate takeovers and acquisitions, and debt management.

Understanding a Banque D'Affaires

Banques d'affaires typically offer two core services: providing financing for organizations and advising corporations on the best course of action in certain financial matters.

Lending

Banque d'affaires offer lending services to businesses, although not always in the same way as other FIs. After issuing a loan, the banque d'affaires will often sell off the debt to a third party, enabling it to make a quick profit and free up funds to lend more money—assuming, of course, that investors want a piece of the action.

In other words, the banque d'affaires regularly takes on the role of an intermediary. They match the needs of businesses requiring a cash infusion with investors, broker a deal between the two parties, and then move on to the next business transaction

Banques d'affaires operate as intermediaries in corporate financial operations.

On occasion, a banques d'affaires may also choose to conduct structured-finance activities with its own resources. In such cases, the bank would approve a loan with the intention of holding onto that debt and managing the asset until the borrower pays back the balance in full.

Advising

Banques d'affaires usually operate in an advisory capacity as well, helping companies to find the best way to raise capital, go public through an initial public offering (IPO), make acquisitions, manage their debt, and pursue other corporate strategies. In exchange for these services, and expertise on the potential return of projects, the banques d'affaires are paid a commission.

History of the Banques D'Affaires

Banques d'affaires were born out of the specialization of banks, a French policy that was ratified in the post-war reforms of 1945. Under these reforms, banques d'affaires could no longer hold their own short-term capital. Instead, they were only allowed to handle and manage stakes in new and existing businesses as well as provide long-term loans to organizations and corporate clients.

Banque D'Affaires vs. Banques D’Investissement

Some other types of French banks, such as banques d'investissement, may perform similar activities to a banques d'affaires. The biggest differentiator between the two is often time frames.

Banques d'investissement, best described as French investment banks (IB), tend to work on shorter-term operations, while banques d'affaires mainly specialize in long-term financing and investment projects. A banque d'affaires may help to facilitate a years-long corporate merger. Extensive analysis and negotiation are typically required, and the banque d'affaires will earn a substantial commission for its trouble.

Special Considerations

Banques d'affaires generally have no conflict of interest with credit or financing institutions, they and may even work closely with banques d'investissement or banques commerciales, French retail banks, in order to meet the needs of a client.

For example, a corporate client looking to finance an acquisition by issuing securities might have to work with a banque d'investissement in order to issue the securities and a banque d'affaires, some of which exist as a specialized department of a banque commerciale, in order to handle the acquisition.