Many business graduates are well aware that public corporations have been sold shares since at least the British East India Company in the 1600s and debt instruments such as bonds existed during the Renaissance, if not before. However, we will consider US and European investment banking firms beginning in the late 1800s from which a straight line can be drawn to today's firms.

​

Early 20th Century

This era saw the rise of several investment banks that remain well known today including Goldman Sachs, J.P. Morgan and Morgan Stanley. Goldman Sachs played a key role in the securities underwriting business at this time, stemming from its leadership in securities trading. Goldman debuted the commercial paper market, a critical market for the day-to-day access to liquidity for corporations, and led initial public offerings of companies including Sears. The Glass-Steagall Act of 1933 was important piece of legislation that regulated investment banks after the market crash of 1929, and it also created the separate banks of J.P. Morgan and Morgan Stanley as we know them today. Both originate from the legendary financier John Pierpont Morgan, but Glass-Steagall separated investment and commercial banks, resulting in the investment bank Morgan Stanley and commercial bank J.P. Morgan. However, the legislation was repealed in 1999 and J.P. Morgan eventually entered the investment banking industry again.​

​

1950s to 1970s

The growth of the post-war era resulted in booming capital markets and increased appetite for mergers and acquisitions globally. Large conglomerates such as ITT were in vogue during this time, and these multinational corporations engaged the likes of Goldman Sachs, Morgan Stanley and Lazard Freres amongst others in advising on major merger activity.

​

1980s

The 80s were a golden time for investment banking due to a significant economic recovery coming out of the 70s and a financial innovation that changed markets -- non-investment grade bonds (sometimes known as junk bonds) and leveraged loans. Michael Milken of Drexel Burham popularized these securities which enabled corporations and emerging private equity firms to raise significant pools of capital to pursue major acquisitions. The result was leveraged buyouts such as KKR's acquisition of RJR Nabisco as chronicled in Barbarians at the Gate.

​

1990s to Present

The mid-90s to early 2000s featured the rise of the information technology industry, and with it, the beginning of technology-focused groups within investment banks. Morgan Stanley was a leading underwriter of technology IPOs during this period, including leading the IPOs of Netscape (1995) and Google (2004). However, the subsequent dotcom bust and September 11th reduced enthusiasm for the industry for several years afterward.

​

The financial crisis of 2008 was not directly tied to the M&A or capital markets functions of investment banks, but the complete implosion of mortgage backed securities brought scrutiny to stakeholders such as the credit agencies, and ultimately took down three previously leading investment banks, Lehman Brothers (bankruptcy with assets acquired by Barclays), Bear Stearns (bankruptcy) and Merill Lynch (sold under distress to Bank of America). Increased regulation across the global banking industry post-2008 led European banks such as UBS and Deutsche Bank to reduce their footprint and to the demise of Credit Suisse after it faced multiple crises in 2021. Today the large US investment banks plus Barclays, and a number of boutiques lead the global investment banking league tables.