• A merchant bank provides venture capital"Pot of Gold" is Copyrighted by Flickr user: tao_zhyn (Jeremy Schultz) under the Creative Commons Attribution license.
  
  

Function

• A merchant bank provides venture capital to start-up companies, young companies looking to expand, and groups involved in taking publicly traded companies private.
  
  

History

• Wealthy individuals alone or in groups formed private banks for the purpose of investing in the global trade of goods, particularly from Asia and India. Hong Kong & Shanghai Bank and Rothschild are still-familiar names that grew powerful through financing the China and India trade back in the days of clipper ships.
  
  

Merchant Banking Today

• Merchant banking is now mostly known as private equity investing. Goldman Sachs, Morgan Stanley and Bank of America all have divisions engaged in merchant banking. Allen & Co., Dominick & Dominick, and Brown Brothers Harriman are private banks that engage in private equity investing on behalf of their clients and their own portfolios.
  
  

Types

• Investment banking houses, public banks and private banks all perform merchant banking functions. On a smaller scale, venture capital firms and angel investor groups also function as modern-day merchant banks.
  
  

Significance

• Private equity is vital to the development of new industries such as the Internet, nano-technology, cleantech, greentech and biotech.