A group of investment banks or broker-dealers working together to sell a new securities offering is a common practice in the financial industry. This collaborative arrangement allows institutions to share the risk of underwriting a large offering, and to distribute the securities to a wider investor base. This approach ensures that the issuer, the entity offering the securities, receives the capital it seeks while mitigating the potential for significant losses by any single underwriter. As an example, a corporation seeking to raise capital through an initial public offering (IPO) might engage multiple firms to collectively handle the process of purchasing the shares from the issuer and reselling them to the public.
This approach is critical for offerings that exceed the capital or risk appetite of a single firm. Benefits include expanded distribution channels, diversified expertise, and reduced exposure to potential losses. Historically, this methodology has been instrumental in facilitating the growth of companies and economies by enabling access to substantial capital markets that would otherwise be inaccessible.
