A good investment banker is more than just a deal-maker; they can also provide important insights about your business and industry.
If you've grown your company independently, at some point you're likely to consider selling part or all of the business to cash in on its value or provide new funding for growth. Investment bankers can be helpful as you weigh your options and can have a meaningful impact on the outcome. So selecting the right investment banker is critical. Here are four tips for finding the right banker--and then getting the most out of the relationship.
Find a Banker Who Truly Represents You
Bankers generally aim to develop longer-term relationships built on trust. Evaluate whether you would want this individual representing you and your business in future conversations. Take time to review any materials that reflect their current views. They will likely have an off-the-shelf analysis based on the market and competitive landscape in your industry that they can share. Check references for bankers you are considering hiring. Have past clients had positive experiences?
Bankers typically work for contingent fees, which means no deal, no fee. Therefore, it is critical to build a relationship in which you can trust your banker to ensure that when push comes to shove, they will look out for your interests.
Prepare a Formal Pitch
When you first meet with a banker, plan a formal presentation to make a good first impression. Prepare a succinct sales pitch that discusses the business plan and growth prospects for your company.
Bankers will want to see your confidence in the company's direction and ability to execute. They may even ask about your personal long-term intentions and the details of any hidden "warts" about the business upfront. Solicit their feedback to improve how you talk about your business initiatives. This will give you some insight into how your banker would work with you to understand your business and your objectives.
Leverage Their Network
Investment bankers are generally well connected. They can help with introductions to other professionals in your industry. For the banker, this is an opportunity to connect two potential clients.
Banks often hold events and conferences for industry professionals; these are great venues to meet key influencers. Through their relationships with industry professionals, bankers often have tabs on which ones are looking to make a move. If you're looking for a seasoned executive, they may have a sense of who could be a good fit.
Ask for Perspective and Insights
Investment banks have a wealth of information resources. Ask for information on industry trends, current market activity, and views on past transactions, including multiples, outcomes, and key success factors.
Bankers normally keep in touch with former clients to stay abreast of current issues and how past mergers have unfolded, and they are often willing and able to share their views. As you weigh your options for strategic moves or creative ways to structure a deal, ask them about what has worked for previous clients and how market share and other metrics have panned out, particularly for deals in your industry.
Bankers can also provide insight on which strategic acquisition targets, acquirers, partnerships, and capital financings will make the most sense given the current industry landscape and appetite. A trusted banker who is willing to share a candid and seasoned perspective is obviously more valuable than a banker who takes a salesman's approach to advisory.
Investment bankers have many resources and connections, which they are generally willing to share with you as your relationship grows. Keeping in mind your personal long-term vision, continue adding to your Rolodex of advisor relationships while you build your business. Making and maintaining connections with several bankers will help you to find the best fit for your needs when it's time to make a deal.
KARL STARK AND BILL STEWART are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark