Big financial deals often make the news—whether it’s a billion-dollar merger, a company going public, or a government raising funds through bond sales. But what the public sees as a quick announcement is actually the result of months of hard work, planning, and careful execution. Behind every headline is a structured process that starts long before any deal is made official.
This guide explains how investment banks manage the full deal lifecycle, showing what really happens from the very first idea all the way to the final closing.
Where Do Deals Start?
Every deal begins with an idea. Investment bankers spend months, sometimes years, following market developments, studying industries, and meeting with executives. Senior bankers like Managing Directors and Directors constantly look for opportunities where their clients could benefit from a financial transaction. These opportunities might include selling part of the business, buying a competitor, raising new capital, or going public on a stock exchange.
Once an opportunity is spotted, the bank prepares a pitch. This is a formal presentation designed to show the client why the bank believes the deal makes sense. The pitch includes a detailed view of the market, estimates of the company’s value, examples of similar deals, and possible strategies to execute the transaction. Junior bankers do much of the research and financial modeling, while senior bankers focus on building trust and persuading the client that the bank is the right partner.
Pitching is risky for banks. Most ideas pitched never move forward. Sometimes the client isn’t ready. Sometimes they choose another bank. This makes pitching a competitive and ongoing effort. Banks stay active in front of clients because when the right moment comes, they want to be the first call.
How Does the Bank Secure the Client’s Mandate?
When a client decides to move forward with a deal, they formally hire the bank by signing what is called an engagement letter. This agreement spells out what the bank will do, what fees will be paid, and what rules both sides must follow, including confidentiality. From that moment on, the bank moves from pitching ideas to working on a real transaction.
The bank assembles a dedicated team. This usually includes senior bankers who manage the client relationship, mid-level bankers who organize the project, and junior bankers who handle the analysis and paperwork. Behind the scenes, the bank’s legal, compliance, and risk teams get involved to check for conflicts of interest or regulatory issues that could block the deal.
At this stage, the bank begins preparing to take the deal to market. Whether it’s finding buyers, investors, or preparing legal documents, the clock starts ticking. Every step from here has real deadlines, and the pressure starts to build.
What Happens During the Preparation Phase?
With the deal officially in motion, the bank moves into the preparation phase. This is where all the detailed work happens. For mergers and acquisitions, the bank collects and reviews financial data, builds detailed models to value the business, and prepares what is called a Confidential Information Memorandum. This document tells potential buyers everything they need to know about the company, from its financial performance to its growth prospects.
In the case of an IPO or bond offering, the preparation involves working with lawyers and auditors to draft legal documents that explain the company’s business, risks, and financial condition. This includes preparing regulatory filings and getting ready for investor presentations.
Internally, the bank runs its own checks to make sure everything is legally compliant and ready to present to the market. The team sets a timeline, divides responsibilities, and begins getting ready to speak with potential investors or buyers.
How Do Banks Market the Deal?
Once the preparation work is done, the bank starts presenting the opportunity to the market. In an M&A deal, this means contacting a carefully selected list of potential buyers. These buyers are first sent a short summary of the opportunity. If they show interest, they sign confidentiality agreements and receive full access to the detailed materials. The bank manages this outreach very carefully, arranging meetings between the company and serious buyers, answering questions, and collecting early offers.
For IPOs and bond deals, this stage involves taking the company on a roadshow. Company executives and bankers meet with investors in different cities, presenting the investment case and answering questions. The goal is to build demand and understand how much investors are willing to pay and how much they want to invest.
Throughout this process, the bank keeps the client updated. They advise on which buyers or investors are serious, whether market conditions are favorable, and how to adjust the strategy based on the responses they are receiving.
How Are the Deal Terms Set?
When enough interest has been gathered, the negotiation phase begins. In an M&A deal, this starts with receiving non-binding offers that outline the price, deal structure, and key terms. The bank works with the client to compare these offers, not just by the numbers, but by the likelihood of closing the deal successfully and the overall strategic fit.
Once a preferred buyer is chosen, the bank helps negotiate the details, leading to a term sheet that outlines the basic agreement. For IPOs or bond deals, this is the stage where the bank works with the client to set the final price and size of the offering, based on the investor demand collected during the roadshow.
This phase requires careful balance. The bank’s job is to push for the best possible terms for the client without scaring off the other party. Legal teams also start drafting the full contracts based on the agreed terms, making sure every detail is captured in writing.
What Happens in Due Diligence and Final Documentation?
Before any deal is signed, both sides perform final due diligence. This is where buyers dig deep into the company’s legal, financial, and operational details to confirm everything is as described. In M&A, this process can involve reviewing legal contracts, tax records, customer agreements, and even cybersecurity practices.
For IPOs and bond offerings, the underwriters and lawyers conduct a full review of the company’s disclosures to make sure there are no hidden risks. This protects investors and ensures the deal meets legal and regulatory standards.
At the same time, the final contracts are being written and negotiated. These include all the legal terms, such as warranties, conditions for closing, and responsibilities of both sides. The bank manages this process, coordinating with lawyers, clients, and other advisors to keep the deal moving forward.
How Is the Deal Closed?
The final two steps are signing and closing. Signing happens when all parties agree on the final terms and sign the documents. For M&A deals, this is when the deal is officially announced, but money doesn’t move yet. Closing happens later, once all conditions—such as regulatory approvals or shareholder votes—are met.
For capital markets deals, signing and closing often happen on the same day. Once the price is set, investors transfer funds to the company, and the securities are delivered to investors. The company officially becomes publicly listed, or the bonds are issued and traded in the market.
Closing is when the bank earns its fees, and the client reaches its goal, whether that’s raising capital, buying a competitor, or selling part of their business. Behind the scenes, the bank wraps up its work, prepares closing reports, and often starts discussing the client’s next strategic move.
Bottom Line
Deals may seem simple when announced in the news, but they are the result of months of intense work across multiple teams. From the first meeting with a client to the final signature, investment bankers manage a complex process that requires expertise in strategy, analysis, negotiation, and risk management.
Understanding how deals really happen helps explain why companies rely on investment banks for their biggest financial decisions. Every deal is more than a transaction—it’s a story of planning, teamwork, and execution that takes place long before the public ever hears about it.