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Bought Deal Underwriting

Updated on March 18, 2023

Bought Deal Underwriting or Bought out Deal Underwriting means assessment and fixation of price for the bought deal offering. An investment bank or a group of investment banks underwrite all new offerings. In a bought deal, this entity buys the entire offering, later to be sold at the market price. The underwriting is done as per normal practice followed for any issue. However, the offering is bought by the investment bank at a discount, which essentially helps both the parties, the investment bank and the issuer. The entire issue, if too big, can be underwritten by a group of investment banks or large underwriting institutions.

Benefits of Bought Deal Underwriting

Some benefits of Bought Deal Underwriting for the underwriter are:
a) The assessment is stringent and realistic
b) The terms of underwriting a Bought Deal Underwriting are clearly pre-defined and agreed upon
c) Bought Deal Underwriting saves time, effort and cost for all parties involved