Most business owners approach the task of selling their company in traditional terms, crossing their fingers and hoping for the best in the commercial marketplace.
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If that approach doesn't sound appealing, you may have another alternative. But to get there, you're going to need the help of an investment banker.
An investment banker is an agent for an organization that helps private companies convert ownership equity into securities in the primary market. By issuing an IPO (Initial Public Offering), a good investment banker can be a godsend, raising significant capital for business owners and propelling the company into its next stage of life.
The process typically goes something like this: A company selects an investment banker, who in turn guarantees the company a specific amount of capital minus a fee. The investment banker then proceeds to raise the guaranteed capital through the IPO, but assumes all of the risk should the IPO fail to attract the necessary investors. Not a bad deal, right?
In reality, the success of your relationship with an investment banker will depend largely on two factors: Your company's stage of life and the quality of the investment bank itself. Investment banks are most interested in established, mature companies. Although younger start-ups can conceivably attract an investment banker, the pool of potential candidates will likely be substantially smaller and the deal will be less beneficial for the business owner.
If your company is well-established and mature, the only thing standing between you and investment banking success is the selection of a top-rate investment banker. Here are some of the most important characteristics to look for when choosing investment bankers:
- Relationship - Relationships are built on trust, and a relationship with an investment banker is no exception. You've got a lot riding on the outcome of this relationship, so when screening potential investment bankers you need to take into account the candidate's likeability, communication style, and trustworthiness. If you don't mesh with an investment banker during the initial interview, keep looking.
- Expertise - Investment bankers often specialize in certain industries and market sectors. It's important to find an investment banker who knows the ins and outs of businesses similar to yours, and is able to value your company for what is truly worth. Remember: The investment banker's job is to sell your business to potential investors. The more he knows about your business the easier it will be for him to attract investors, which translates into a higher amount of guaranteed capital in your pocket.
- Experience - There is no substitute for experience in investment banking. Since the nature of investment banking is somewhat speculative, the person you choose to represent your company's interests needs to be confident in his ability to bring in the highest possible price in the IPO. Inexperienced investment bankers often lack the confidence required to fight for your last dollar.