Loading the player...

What is 'Syndicate'

A syndicate is a temporary professional financial services alliance formed for the purpose of handling a large transaction that would be hard or impossible for the entities involved to handle individually. Syndication allows companies to pool their resources and share risks. There are several different types of syndicates, including underwriting syndicates, banking syndicates and insurance syndicates.


An example of an underwriting syndicate is a group of investment banks that work together to issue new stock to the public. The bank that takes the lead in this endeavor is called the syndicate manager. Thirty days after the sale is complete, or if the securities cannot be sold at the offering price, the syndicate breaks up. Some other types of syndicates represent a joint effort, but are not temporary.

When a syndicate is set up, the amount of risk taken on by each syndicate member can vary, along with the potential earnings available to that member. In an investment banking syndicate, for example, an undivided account means that each underwriter in the syndicate is responsible for selling its allotted amount of stock and any excess shares not sold by the syndicate as a whole. An individual member may have to sell far more securities than it was allotted. Other syndicates limit the amount of risk for each member.

Examples of Syndicates

Companies may form a syndicate for a specific business venture that carries a high level of risk, but also an attractive potential rate of return. In many cases, these businesses operate in the same industry and form a separate entity to apply their expertise to a product or service. Two drug companies, for example, may combine research and marketing knowledge to create a syndicate and develop a new drug. A large real estate project may be developed using a syndicate formed by several real estate companies.

Factoring in Insurance Risk

Syndicates are often used in the insurance industry to spread insurance risk among several firms. Insurance underwriters evaluate the risk of insuring a specific person or a particular asset and use that evaluation to price an insurance policy.

In the corporate health insurance field, for example, an underwriter may evaluate the potential health risks of a company's employees. The underwriter’s actuary would then use statistics to assess the risk of illness for each employee in the company’s workforce. If the potential risk of providing health insurance is too great for a single insurance firm, that company may form a syndicate to share the insurance risk.

Combining Expertise Through a Syndicate

Some projects are so large that no single company has all of the expertise needed to efficiently complete the project. This is often the case with large construction projects, such as a stadium, highway or railroad project. In situations like these, companies may form a syndicate that allows each firm to apply its specific area of expertise to the project.

  1. Breaking The Syndicate

    The dissolution of a group of investment bankers that created ...
  2. Paid Syndication

    Web syndication is the promotion or inclusion of content on a ...
  3. Web Syndication

    A term that refers to a marketing strategy for websites. Web ...
  4. Shared National Credit Program

    The national credit program was created in 1977 to provide an ...
  5. Lloyd's Of London

    Lloyd's of London is a British insurance market where members ...
  6. Underwriting Spread

    An underwriting spread is the difference between what underwriters ...
Related Articles
  1. Managing Wealth

    How To Join An Angel Investor Group

    If you’re new to angel investing, it often helps to join a group that can partner up on deals and spread out the due diligence work.
  2. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  3. Insights

    Energy Fuels Announces $10M Bought Deal Offering (UUUU)

    Energy Fuels will use the proceeds to fund various projects, including shaft sinking and evaluation at its high-grade Canyon mine project in Arizona.
  4. Investing

    Methods of Handling Risk: A Quick Guide

    Discover the five methods to manage pure risk, and learn how they can be implemented to mitigate risk with health and life insurance.
  5. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  6. Insurance

    Can I Get Life Insurance?

    Find out what you can do to get the coverage you need for the right price.
  7. Insurance

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  8. Insurance

    What Prequalification and Underwriting Do

    Learn now prequalification and underwriting can help you buy the policy that best meets your needs.
  1. How does an underwriter syndicate work together on an initial public offering (IPO)?

    Learn how underwriting syndicates work together when helping a company undertake an initial public offering, and learn about ... Read Answer >>
  2. Who generally structures a syndicated loan?

    Learn what syndicated loans are, including how they are structured and administrated, usual payment terms and costs associated ... Read Answer >>
  3. What is considered a reasonable interest rate for a syndicated loan?

    Discover how syndicated loans work, why they are beneficial for businesses, and what is considered a reasonable interest ... Read Answer >>
  4. What is the difference between loan syndication and a consortium?

    Learn about consortiums and loan syndications, two types of multiple banking arrangements designed to finance transactions ... Read Answer >>
  5. What are the typical repayment terms for a syndicated loan?

    Learn more about syndicated loans and how they are structured, specifically including the typical repayment terms for a syndicated ... Read Answer >>
  6. How can I buy shares in the primary market?

    Find out how to purchase shares in the primary market, which requires requesting a company prospectus and applying for an ... Read Answer >>
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center