What Is a Banque D'Affaires?
A banque d'affaires is a French financial institution that specializes in arranging financing and providing financial advice to corporate clients. It is similar to a business bank or corporate investment firm in the U.S.
Like those institutions, it is not a deposit bank or a lender serving the general public.
- A banque d'affaires is a French financial institution (FI) that arranges financing and provides financial advice to corporations and other organizations.
- They are involved as intermediaries in business deals such as initial public offerings (IPOs), takeovers, and acquisitions.
- A banque commerciale is a retail bank that serves the public.
Understanding a Banque D'Affaires
Banques d'affaires typically offer two core services: they arrange financing for businesses and other organizations and they advise corporations on financial matters.
Banque d'affaires arrange financing for businesses, although not always in the same way as other financial institutions. 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 takes on the role of an intermediary. The bank matches a business requiring financing with a qualified lender seeking an investment. The bank brokers a deal between the two parties and then moves on to the next business transaction.
Banques d'affaires operate as intermediaries in corporate financial operations.
On occasion, a banques d'affaires may choose to undertake structured-finance activities with its own resources. In such cases, the bank would approve a loan with the intention of holding onto the debt and managing the asset until the borrower pays back the balance in full.
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 in their modern form were created during a wave of government reform of the French banking industry that followed the economic devastation of the Great Depression and World War II.
Under these reforms, a banque d'affaire could no longer hold its own short-term capital. Instead, they were only allowed to handle and manage stakes in new and existing businesses and 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 banques d'affaires. The biggest differentiator is often the time frame of the projects they undertake.
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.
Banques d'affaires generally have no conflict of interest with credit or financing institutions. They may even work closely with banques d'investissement or banques commerciales, which are the French retail banks, in order to meet the needs of a client.
For example, a corporate client seeking to finance an acquisition by issuing securities might work with a banque d'investissement to issue the securities and a banque d'affaires to handle the acquisition.