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A merchant bank is a financial institution that performs underwriting, loan services, financial advising and fund raising services to large corporations and high net worth individuals. Merchant banks do not provide regular banking services, such as offering checking accounts to the general public. In fact, merchant banks don’t take deposits.

A vast majority of merchant banking activity involves international transactions.  For instance, if ABC Company were seeking to buy a company in another country, they would hire a merchant bank to advise them as to the best way to structure the transaction. The merchant bank might also help ABC by financing the transaction through underwriting or some type of syndicated loan arrangement.

Merchant banks are very much like investment banks, but because of their specialty in international transactions, their emphasis is on providing services to multinational corporations and high net worth individuals that do business in more than one country.

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