DEFINITION of Banque D'Affaires
A banque d’affaires is a type of French financial institution that resembles a merchant bank, business bank or corporate investment firm. It is not a deposit bank or a credit institution; it is instead more akin to a financial advisory firm for corporate and organizational clients. Banques d'affaires typically specialize in providing financing for organizations and advising corporations on the best course of action in certain financial matters. They operate as financial intermediaries in corporate financial operations, such as initial public offerings (IPOs), capital increases, corporate takeovers, and acquisitions and debt management. Circulating money is the main purpose of a banque d’affaires.
BREAKING DOWN Banque D'Affaires
Banques d'affaires may conduct structured-finance activities with their own resources. Interestingly, banques d'affaires do not tend to hold onto assets for prolonged periods of time, because the assets tend to be sold off to investors for a subsequent profit. Therefore, the banque d’affaires is exposed to the risk that the market may not be conducive to the offering.
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 postwar reforms of 1945. Under these reforms, banques d’affaires could no longer hold their own short-term capital, but instead could only handle and manage stakes in new and existing businesses, and provide long-term loans to organizations and corporate clients.
Specialization of Banques d’Affaires
Some other types of French banks, such as banques d’investissement, may perform similar activities. However, banques d’investissement work on shorter-term operations, while banques d’affaires specialize in long-term financing and investment projects. For example, 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.
Banques d’affaires generally have no conflict of interest with credit or financing institutions, and may even work closely with banques d’investissement or banques commerciales in order to meet the needs of a client. For example, a corporate client looking to finance an acquisition by issuing securities may have to work with a banque d’investissement in order to issue the securities, and a banque d’affaires in order to handle the acquisition. Some banques d’affaires may exist as a specialized department of a banque commerciale, or retail bank.