The right investment banker won't be at all like the guys you see in the movies. Here's what to look for.
Movies and media have painted a pretty grim picture of investment bankers. Images of Michael Douglas in Wall Street, shouting, “Greed is good!” do not enhance the public’s perception of financiers. The almost constant feeding frenzy by network news focused on Wall Street bankers hasn’t helped, either.
However, most investment bankers who sell businesses are not in the same business as those who deal in securities, commodities and the daily activities of Wall Street. Some investment bankers specialize in selling or acquiring businesses, and are highly skilled specialists who help business owners maximize the value of their companies during a sale.
What are the characteristics you should look for in an investment banker when you are ready to sell, recapitalize or possibly acquire a business? Here are five important things to look for when hiring an investment banker:
Experience As in any industry, experience is important. Selling or acquiring businesses or raising capital is not a simple process. It takes time to establish a network of contacts, learn how to properly work with buyers and sellers, execute a deal, and maximize values. Here are a few questions to ask of your banker-to-be:
· How many deals have you successfully closed?
· What was the value of those deals?
· Have you managed a deal from inception to closing?
· Have you ever owned a business yourself?
· How long have you been an investment banker?
Support Team An experienced banker can do a lot by themselves. However, it takes a strong, professional team to create a dynamic marketing program that maximizes the value of your company and delivers world-class results. Your banker should be part of a team that includes market research, marketing, public relations, financial analysis, legal and pricing. Plus, working with a larger, established firm provides your banker access to other experienced bankers who can provide additional assistance if needed.
Chemistry Hiring an investment banker or firm to sell your business or manage a major financial deal for your company is not unlike getting married. Personal chemistry is important. Your bankers should understand both your personal and financial goals, and you should be comfortable listening to their advice and guidance. This is one of the most important decisions you will ever make in your business life. Make sure you have the right fit from the start.
Trust You are putting your life’s work into the hands of the investment banker you select. Mutual trust is critical. The banker must trust that you will be open, honest and forthright about your goals, your company and its operations. You must be able to trust your banker to wisely manage and protect your interest and to provide you with counsel and advice.
Tenacity Major financial deals are not completed overnight. There will always be issues to be addressed along the way. Some will be simple, some complex and demanding. You want an investment banker by your side who understands your goals, is focused on achieving them, and refuses to give up. They should always have a backup plan, and be willing to do whatever it takes to successfully close the deal.
Investment bankers work in a high risk, high reward industry. Many do not get paid until the deal closes. They are dedicated professionals who, unlike those portrayed in the movies, are not driven by greed, but by the simple desire to assist business owners and help them realize their dreams.
If you are thinking about selling your business, make sure you look for an experienced investment banker you can trust, who has a proven support team, the tenacity to get the deal done--and also someone you enjoy working with. It will make your journey through the process easier and ultimately more profitable.
DAVID MAHMOOD created and sold seven different businesses before founding Allegiance Capital in 1998, which provides mergers and acquisitions financial services to middle market business owners. @MiddleMktMandA