Most business owners have heard about investment bankers.
But unfortunately, relatively few business owners understand what investment bankers actually do. You may be aware of the fact that an investment banker can be a potentially valuable tool in selling your business, but when it comes to understanding the role investment bankers play in selling the business, you're completely in the dark.
Although investment bankers do much of their work behind the scenes, the role of the investment banker in selling your business involves a series of critical tasks that culminate in a successful and profitable final outcome. Roles may vary slightly according to your specific needs and circumstances, but sellers can generate expect investment bankers to perform the following functions during a business sale or investment strategy.
- Establish value. Right out of the gate, investment bankers work with sellers to establish a range of values and expected outcomes. Don't look for a precise number – you won't get it because the market will ultimately determine the sale price. But at a minimum, the banker will make sure you're on the same page before the process goes any further.
- Identify challenges. Good investment bankers identify sale challenges early in the cycle. Although few challenges will be insurmountable, you should expect your banker to pull the plug on a doomed deal early in the process rather than collecting several months of worthless retainers.
- Create the "story". Senior-level investment bankers handle contact with buyers and investors. But their pitch is based on a "story" devised by junior-level staff. Selling stories take into account the company's financials as well as its history and growth potential.
- Develop a marketing strategy. Much of an investment banker's work revolves around developing a viable marketing strategy. Months of planning and preparation go into the creation of a marketing strategy that increases the company's value to buyers and investors.
- Contact targeted buyers/investors. After the stage has been set, senior-level investment bankers contact targeted buyers and investors who are likely to be interested in your business. These are usually corporations and individuals with who senior bankers typically have pre-existing relationships.
- See the deal through to completion. A first-rate investment bank stays on the job until the deal has reached its full maturity. Expect your banker to troubleshoot any last minute hitches that arise.