Selling your business can be a complex and time-consuming process. Hiring an investment bank to help manage the transaction may alleviate some of the burden on you and your management team and increase the likelihood of a successful outcome. Before engaging an investment bank, however, it is important to understand the services that they offer and know what questions to ask in order to ensure that you hire the right investment bank for your company.
What Does an Investment Bank Bring to the Table?
Investment banks offer business owners a number of key benefits, including:
- Experience. The bank's knowledge of the market and experience with selling businesses can help you obtain the best price and deal terms for your company and feel confident in your decision.
- Resources. The additional resources provided by the bank can shoulder some of the heavy lifting of the sale process, allowing your management team to focus on their day-to-day responsibilities and minimize distraction.
- Objectivity. The bank can provide an outside, independent point of view and objective recommendation that can assist you in making an informed decision about whether to sell the business.
What Services Does an Investment Bank Typically Provide?
Investment banks assist with many aspects of the sale process, including:
- Determining an appropriate valuation range for your business
- Evaluating strategic alternatives to selling
- Identifying and contacting potential buyers
- Helping to prepare and market the business for sale (including creating marketing materials and coordinating management presentations and site visits)
- Designing and leading the sale process, including keeping all parties on track to meet important milestones
- Working with legal counsel to evaluate bids and negotiate the transaction agreement, including financing structure and terms
- Reviewing the transaction and rendering a formal opinion on the fairness of the transaction (from a financial point of view) to your company's shareholders
What's the Best Way to Find a Bank to Partner With?
Leverage your personal network, online resources and recommendations from your advisors to develop a short list of potential investment banks to hire. Then, interview the investment banks on the short list to determine the best fit for your business and transaction size.
What Questions Should I Ask When Interviewing Banks?
When interviewing investment banks, be prepared with a targeted list of questions to make sure the bank is the right fit for your business and what you want to achieve from a transaction.
- Ask about prior deals they have facilitated. Have they worked with companies like yours before? In your industry? What was the outcome of those deals?
- Probe their knowledge of your industry. Are they familiar with the competitive landscape? Do they know and have access to potential buyers and key decision makers?
- Review the services they offer. Make sure they are capable of performing the tasks that will help your company effectively manage the sale process. What will the deal team look like? Will you have access to senior team members when you need them?
- Examine their fee structure. What percentage of the final deal value will the bank take as their fee? Do they have a minimum fee that they require regardless of the final deal value? Will you need to pay a retainer? Are there contractual provisions that entitle the bank to a fee if the relationship does not work out and you end up selling the company later on, without their help?