The sale of a company is typically a once in a lifetime event for most business owners, so they usually do not have existing relationships or prior experience working with investment bankers. Business owners are typically advised to meet with more than one investment banker to help determine the best fit. We have highlighted 6 considerations that should be taken into account when selecting an investment banker:
1. Demonstrated history of success
A demonstrated history of success in investment banking should be pre-requisite table stakes. The experience that is formed by advising different clients on numerous transactions over many years is fundamental to an investment banker’s ability to oversee all elements of the deal process and anticipate the twists and turns that will invariably occur along the way.
2. Focus on the individual(s) who will lead the transaction
Consider not only the investment banking firm, but more specifically the senior professional(s) who will be both market-facing and leading the transaction on a day-to-day basis. Firms don’t advise clients, individuals do. Be wary of situations where senior professionals might focus on winning new clients but hand over the actual transaction responsibilities to junior and less experienced professionals.
3. Industry focus
Investment bankers who have obtained a depth of experience in specific industries are able to provide a differentiated value proposition for their clients. This can include knowledge of industry valuation parameters, relationships with strategic buyers and other industry participants, and an understanding of how best to position companies in that sector for sale. While not every industry or niche will warrant dedicated coverage, an investment banker should be able to describe the types of transactions they have led that will be most relevant to the company and industry at hand.
4. Transaction size
Middle-market investment banking is loosely defined but generally represents transactions with values in the $20-$250 million range. Bulge-bracket investment banking firms are typically focused on much larger transactions, whereas business brokers are typically focused on working with much smaller companies. Bigger is not necessarily better. Consider the level of focus and senior-level attention that will be allocated to a specific transaction.
5. Global experience
While not every transaction has international elements, investment bankers who have demonstrated global experience are better able to navigate the additional complexities which may arise in a cross-border deal, including potentially different accounting standards, cultural implications and regulatory requirements.
6. Cultural fit
An advisory relationship that is based on transparency and trust is critical to the success of an investment banker’s role in a sale process. A sale process may last 6-9 months, during which time company shareholders, management teams and investment bankers will be spending significant time together. Cultural fit is important. Investment bankers should not only be highly experienced, but should exhibit an entrepreneurial spirit, passion for the deal and be willing to roll up their sleeves every day to drive transaction value for the shareholders.