ECM and DCM are specialized areas within investment banking focused on helping companies raise capital in the financial markets. They stand for:
- ECM: Equity Capital Markets
- DCM: Debt Capital Markets
Equity Capital Markets (ECM)
ECM bankers advise companies on raising capital through the issuance of equity (stock). This can involve:
- Initial Public Offerings (IPOs): Taking a private company public by offering shares to the public for the first time.
- Follow-On Offerings: Issuing new shares of stock by a company that is already publicly traded.
- Rights Issues: Offering existing shareholders the right to purchase additional shares, usually at a discounted price.
- Convertible Securities: Issuing securities (bonds or preferred stock) that can be converted into common stock.
- Share Repurchase Programs: Advising companies on buying back their own shares from the market.
Essentially, ECM helps companies raise money by selling a piece of themselves (equity) to investors.
Debt Capital Markets (DCM)
DCM bankers advise companies on raising capital through the issuance of debt (bonds). This involves:
- Investment Grade Debt Offerings: Issuing bonds for companies with strong credit ratings.
- High-Yield Debt Offerings: Issuing bonds for companies with weaker credit ratings (also known as "junk bonds").
- Syndicated Loans: Arranging large loans from a group of lenders.
- Private Placements: Selling debt securities directly to a limited number of investors.
DCM helps companies borrow money from investors, with the promise to repay the principal along with interest over a specified period. Unlike ECM, DCM does not dilute existing ownership.
In short, ECM deals with stocks and DCM deals with bonds. Capital markets bankers, therefore, specialize in helping companies raise money through public markets via either stocks (ECM) or bonds (DCM).
