What is typically the purpose of a valuation in investment banking?

The purpose of a valuation in investment banking primarily revolves around determining the economic value of a business or asset. In this context, preparing pitch books and client presentations is instrumental because these documents typically convey the valuation results to potential investors or clients. By showcasing the valuation in pitch books, investment bankers can present the strengths, weaknesses, and overall value proposition of the company to attract attention and secure financial backing, mergers, or acquisitions.

Valuation is critical in various scenarios, including mergers and acquisitions, initial public offerings, and fundraising efforts. A well-prepared pitch book that includes detailed valuations can significantly increase the chances of successful transactions.

While assessing legal compliance, calculating tax obligations, and analyzing market trends are important functions that may intersect with valuation, they are not the primary purposes of valuations within investment banking. Legal assessments typically focus on regulatory and compliance issues, tax calculations are concerned with financial liabilities to the government, and market trend analyses aim to understand broader economic conditions rather than an individual company's worth.