Prospective buyers often ask experts whether they should engage an investment banker. An investment bakers can almost always support the sale—but only if the advisor’s role is well-defined and you choose the right advisor.
An investment banker is someone you use, not someone you hire. So you must be willing to partner with this person to maximize their value.
Why Use an Investment Banker?
So if you have to work with an investment banker, rather than outsource all duties to them, why hire an investment banker in the first place? Isn’t is just more work?
When you hire an investment banker, you are paying for experience and expertise. Most owners have never before sold a business—or at best, have sold just one or two companies. An advisor may have overseen dozens, or even hundreds, of company sales. They level the playing field, ensuring that your inexperience can’t be used against you.
Benefits of Using an Investment Banker
An investment banker confers numerous benefits on the sale process:
- They open the door to businesses that you might not discover on your own.
- They can deliver bad news to the seller. A good relationship with the seller is key to a successful transaction since a sale is as much an emotional undertaking as it is a financial one. Delivering news on your behalf can help preserve a good relationship with the seller.
- They help you manage the incredible stack of paperwork that is part and parcel of a sale. You’ll need help coordinating paperwork, as well as chasing paper and understanding what may be missing.
- They save you time so that you can focus on the sale rather than getting distracted by minutiae.
How to Find an Investment Banker
While an investment banker can confer immense value, they’re also the source of many complaints. It’s not enough to just hire the first random advisor you find. You need to find the right advisor and get a clear understanding of the investment banker’s job duties.
An investment banker cannot:
- Help you buy the right business.
- Help you afford the business.
- Conduct due diligence on your behalf.
They can help with all of these things, but the final say is up to you.
So how do you choose one? Some questions to ask when interviewing potential investment bankers include:
- How much experience do you have with businesses in my niche of a similar size?
- Can I talk to references?
- How many transactions have you overseen?
- Have you ever owned or sold your own business?
- How many clients are you currently working with?
- How many agents are in your office?
- How is the fee structured?
- Do you specialize in a specific type or size of business?
You Must Sell Your Investment Banker
While an investment banker is a professional you hire, your presentation to the investment banker is just as important, if not more so. Investment bankers only want to work with buyers that have the capacity to successfully buy another entity.
So make sure you can answer key questions about financing, industry experience, and other factors that may be relevant. If the advisor senses you’re merely flirting with buying a business, they may decline your offer.