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What is the difference between equity and debt capital markets?





When you go ahead with investment banking, you will notice that there are numerous industry and product groups, which you can focus on. By focusing on them, you will be able to have the opportunity to proceed with your investments and receive the best returns that are coming on your way. This is where you will come across the need to understand the differences that exist in between the equity and debt capital markets. When you have a clear understanding about the differences that exist in between the two, you will be able to receive much-needed assistance with getting work done.

What are Equity Capital Markets?

The Equity Capital Markets are crossing sales and trading along with investment banking. When you become a member of the Equity Capital Markets, you will have to spend most of your time by providing advice to the clients on how they will be able to go ahead with raising equity capital. In here, the process of raising equity refers to the fact when a company goes ahead to cell a specific amount of ownership of the company for cash.

It is possible for you to go ahead and break equity capital market group into three different subgroups as well. Here’s an overview of them.

Equity origination

This group would pitch the companies that focus on raising capital as well as on financing deals. IPOs can be considered as a perfect example to prove the above-mentioned fact.


The Syndicate team would work along with the banks with the objective of executive deals. This is required as most of the equity deals are associated with multiple banks. Hence, the Syndicate team is playing a major role behind the overall functionality.

Convertible bonds

Convertible bonds are related to the issuance of debt. This would eventually convert into equity when the stock price of a company reaches a specific level. Hence, the group would work along with other companies in order to raise capital via convertible bonds.

When you become an analyst in the Equity Capital Markets group, you will be provided the opportunity to engage with numerous activities. One such task would be the creation of market slides for a specific industry group, where you focus on pitching the business of a client. On the other hand, you will also have to work on the slides that are based upon the previous clients that you hired with the objective of raising capital.

As an analyst, you will be able to show the slides to all the potential clients out there as a way to showcase the specific way on how the bank assisted them with raising capital as required. You will have the freedom to do this without allowing too much of ownership as well. On the other hand, it is possible for you to go ahead with executing shareholder analysis, which will provide the current shareholder information as well as the specific percentage where the shareholders are retaining their ownership in a company. This would usually entail financial modeling up to a certain extent.

Another important thing that you should keep in mind when you work for the Equity Capital Markets is that you will have to make deals. Initial Public Offering, which is also known as IPO is a perfect example to prove the above-mentioned fact. On the other hand, you will also be able to proceed with follow-on offerings as well. This would happen when your company is public, and you want to proceed with raising additional equity capital. A similar deal would be the secondary offering, where the company would not proceed with generating additional capital, but where the investors are selling the shares that they own to the other investors.

What are Debt Capital Markets?

You now have a strong understanding on what Equity Capital Markets are. While keeping that in mind, you should take a look at the Debt Capital Markets as well.  The Debt Capital Markets is a mix between sales and trading, along with investment banking. However, it would be the only similarity that you can discover within the two as well. The debt capital markets would be raising funds through trading debt securities. These securities would include government bonds as well as corporate bonds. When a company goes ahead to raise debt, it would borrow funds and then pay interest on the funds. This would be different from equity as there is no reduction in ownership.

If you are working as an analyst in the Debt Capital Markets, you will have to focus on few main responsibilities. For example, you will be held responsible for executing debt issuances for the clients. On the other hand, you will also have to bear the responsibility of pitching debt issuance to the clients. You should be in a position to go ahead and answer their questions. Moreover, you should update the market slides for the other groups. Another important responsibility that you should be mindful about is creating case studies based on the recent deals.

For the very first task, most of the work is made with creating memos, which the sales teams will be able to use. This would provide calculations to the teams along with analysis, which is required to sell the offerings to all the investors who are keen to get their hands on them.

Final words

The Debt Capital Markets are associated with a less financial modeling when compared to the equity capital markets. You can call this as a higher volume business when compared to the equity capital markets. That’s because the global capital market is large when compared to the global equity markets. Due to the same reason, the Debt Capital Markets group will usually need to work in a fast-paced environment, where they will have to get things done rapidly. On the other hand, it is associated with a high risk when compared to the equity capital markets team as well.

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