Investment bankers provide services such as capital raising, merger and acquisition advice, and financial restructuring, which are necessary when selling a company. When working with an investment banker, it may be beneficial to use a deal room.
A deal room is a secure online platform designed for storing and sharing confidential documents and information related to a transaction or deal. Here are things to look for when hiring an investment banker:
Industry Knowledge
Before hiring an investment banker, it helps to gauge their experience to determine if they are a good fit. A banker who is knowledgeable about your specific industry will be best suited for securing what your company is worth.
A knowledgeable investment banker should be able to provide insight into the latest trends and developments in the industry. They also need to be able to advise you on the best ways to capitalize on those opportunities.
Bankers who have previously worked with people in your sector have access to a larger pool of potential buyers and investors. When a well-networked investment banker represents you, they give you more credibility. Buyers are more likely to make a deal with you if they have direct references from your investment banker.
Market Intelligence
Your investment banker needs to understand the current market conditions well. They need to provide you with up-to-date information about the market. They also need to help you anticipate future changes that may affect your business.
An investment banker who understands the market may already know how companies with a similar value to yours are fairing in the market. They can leverage this knowledge to sell your company at the best market price.
An investment banker with good market intelligence can advise you on the best ways to position your company for success in the current market and in the future. Their market knowledge can also help them identify and avoid potential risks. They can help you find ways to navigate the competitive landscape.
Good Support Team
Because selling a company is a complex process, investment bankers always work with a team. When vetting investment bankers, it helps to know other members of their team that shall handle your company sale.
The larger the investment bank you hire is, the less likely it is that the senior investment banker may handle your sale. This should not be an issue if the team members are qualified and experienced.
Always inquire about the credentials of the support staff that will work on your sale. Know what role the senior investment banker will play in the sale and how they work with their team.
You may spend significant time with your investment banker and their team discussing strategies for your sale. By developing a good rapport with the team, you will be able to better articulate your concerns and trust your investment banker.
Favorable Fee Structure
Most investment bankers charge an upfront fee and a success fee once they close a deal. Others charge a monthly retainer to show the company owner’s commitment to selling the company.
If an investment banker charges a high retainer, they may not have enough incentive to close the deal. You want to hire an investment banker who charges a reasonable retainer or upfront fee. The success fee is a percentage of your company’s enterprise value at the deal’s close.
Compare the percentage charged by different investment bankers to get a favorable rate. Before you agree on anything, have a lawyer examine your investment banker’s engagement letter for clauses that may increase your fees. Your investment banker’s fees also need not stray too far from the current market rates.
Trustworthiness
One of the easiest ways to tell whether or not an investment banker is a good fit is if you can trust them. The sale of your company is a sensitive matter, and you want an investment banker who is reliable and honest.
When looking for an investment banker, research the banks they work with to know their reputation. Ask for references when you interview prospective investment bankers. Follow up on individual references if you want to learn more about their experience with the investment bank.
Your investment banker may also interact with your advisors until you close a deal on your company. Your team should also trust the banker you hire. Involve your advisors when looking for prospective investment bankers.
Take your time assessing various investment bankers. If the banker works with a team, meet every person on the team to verify that you can trust them also. If you do your due diligence during the hiring process, you can work with a team you are confident in.
Deal Rooms and Investment Banking
Choosing the best investment banker requires a careful assessment of potential candidates. Avoid rushing through the process, as you may miss out on important details that may cost you later. Use a deal room to streamline the process of reviewing and negotiating deals.
