Interactive Brokers Group, Inc. Business Reports

Demand is driven by economic activity that results in company mergers, acquisitions, or public financing. The profitability of an investment bank depends on its ability to accurately assess both the value of a business transaction and the readiness of the market to buy the attendant debt or equity. Big firms have an advantage because large customer transactions require firms with substantial financial resources. Small investment banks can compete by participating in syndications and operating in regional markets or specialized industries. Although labor-intensive, the industry produces very high value: average annual revenue per employee at large firms is over $1 million. The global financial crisis of 2008-2009 dramatically altered the landscape of the investment banking industry. The demise of firms such as Lehman Brothers and Bear Stearns and the late 2000s recession have likely ushered in a new era in which the creation of innovative but risky financial instruments may take a backseat to more conservative investment strategies. The new environment also means more industry oversight by the federal government, which had to step in and bail out dozens of financial services firms with billions of dollars of taxpayers' money.