Fundamentally, merchant corporations are financial institutions. They engage in business loans as well as underwriting. They mostly cater to large enterprises and individuals of high net worth. They perform a combination of consultancy and banking services. They provide consultancy on matters pertaining the finances, marketing, management, and law. Such consultancy services assist starting of businesses, raise finance, modernise, expand or restructure a business, revival of sick units as well as provide assistance to companies in registering, buying and selling shares. They do not perform the functions of depositories or retail lender institutions. They are, instead, intermediaries. They also often assist international transactions that involve multinational corporations.
For example, if ABC, a multinational corporation intends to take over a smaller company, MNO, it will approach a merchant bank for advice on the acquisition and might also make use of the merchant bank in the financing aspect of the acquisition, in the form of underwriting or loans.