An oil industry equipment manufacturer is struggling with crippling debt. Faced with certain bankruptcy, they decide to hire a boutique investment banking firm. Their hopes are wielded to the firm’s special situations investing expertise. But what exactly is that expertise, what is special situations investment banking?

What is Special Situations Investment Banking?

Special situations investment banking are event-driven corporate actions in which investment bankers provide funding and advisory services to companies looking to capitalize on or successfully navigate an adverse corporate event.

Merger and acquisitions (M & A), spin-offs, and distressed debt investing are a few unique and complex, event-driven corporate actions. These situations are event-driven because they are initiated by corporate decisions (actions) and not reactionary responses to market trends.

What follows is an overview of investment banking’s participation in special situations investing and added context to the answer to; what is special situations investment banking?

Merger and Acquisition (M & A)

Investment bankers advise firms on contemplated, in-process and post mergers and acquisitions. They consult buy-side acquirers on potential target firms, financing structure, and post integration. On the sell side, bankers focus on finding buyers, negotiating terms, and may extend funding for companies looking to sell all or a portion of the firm.


What are special situations investment banking? Spin-offs are a prime example. A spin-off is a corporate divestiture of a division of a parent company into a standalone separate entity. Special situations bankers advise firms on transaction structure, new common share issuance, regulatory and legal hurdles, and post-divestiture parent and spin-off valuation.

Distressed Debt Restructuring

Financially distressed companies undergoing bankruptcy and high debt challenges employ investment bankers to explore strategic options, restructure debt through creditor negotiations, liquidate assets, and raise desperation capital.

Litigation Advisory

Corporations experiencing regulatory investigations and legal proceedings hire investment bankers to provide navigation assistance. They address the legal liabilities by assessing the fiscal and legal impact, negotiating settlements, and structuring financing for mandated judgment obligations.

Special Situations Financing

Raising capital is an important facility special situations investment bankers provide. They specialize in capital raises through mezzanine (bridge) financing, private placements, initial public offerings (IPO), distressed debt offerings, and asset-based financing.

What is considered a Special Situation in Investment Banking?

A special situation in investment banking is a corporate-initiated event, an event-driven occurrence, that is the catalyst for investors to take specific actions related to the securities, debt and/or assets of the event firm. Investment banking special situations events include, but are not limited to the following:

  • Merger and Acquisitions (M & A)
  • Spin-offs
  • Tender Offers – Tender offers occur when a company offers to buy their existing shares for current shareholders at a designated price.
  • Distress Debt Restructuring
  • Capital Structure Restructuring – Equity and debt issuances, recallable bond purchases, and share buybacks precipitate special situations.
  • Shareholder Activism
  • Litigation Advisory
  • Special Situations Financing

What is special situations investment banking? They are the event-driven actions of corporations that require the corporate finance, capital raising, and regulatory and legal expertise of investment bankers to maximize value and mitigate losses.

Read next: What is the Due Diligence Process in Investment?

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *