Merchant banking is a form of financial services that combines investment banking with private equity — providing not just capital and advisory services but active involvement in building companies. Unlike traditional investment banks that earn fees for advice and transactions, merchant banks often invest their own capital alongside clients and participate in the upside of the businesses they help build. Martin Sumichrast has spent his career in merchant banking, from founding Global Capital Partners in 1993 to his current work at American Capital Partners and Hawkeye Systems.
What merchant banking is and how it differs from advisory or PE
The merchant banking model is distinguished by the depth of involvement and alignment of interests. Where a traditional investment bank earns a transaction fee regardless of the outcome, a merchant bank that invests its own capital is directly exposed to the results. This alignment of incentives changes the nature of the relationship: the merchant banker is a partner in outcome, not just a service provider. This model works best when the merchant bank brings not just capital but genuine operational and strategic expertise that helps the company create value.
Key considerations
Merchant banking activities typically span capital raising, mergers and acquisitions advisory, restructuring, and direct private equity investment. The services are often integrated: a merchant bank might help a company raise growth capital, advise on a strategic acquisition, and provide ongoing board and strategic advisory services — all while maintaining a direct investment in the company's equity. This comprehensive involvement allows merchant bankers to develop deep expertise in the companies and industries they work with, which in turn makes their advice and networks more valuable.
What this means in practice
Martin's merchant banking career has involved exactly this kind of integrated engagement. At Global Capital Partners, the firm combined investment banking services with principal investing, allowing it to be a more comprehensive partner to the companies and investors it served. At American Capital Partners and Hawkeye Systems, he continues to apply this model — bringing capital, advisory expertise, and operational involvement together to help businesses grow and create value. The merchant banking approach is particularly well-suited to companies at inflection points, where the combination of capital, expertise, and network access can make a decisive difference.