A good investment banker can be the difference between a successful exit and no exit at all, so it’s critical that you take the time to interview as many as you can and be selective. The right time to hire a banker is typically when: i) you’re ready to sell or at least want to explore it; and ii) you’re receiving sincere inbound interest from a potential acquirer you could see yourself selling to. In both scenarios, a good banker will bring credible buyers to the table thereby driving up the value of the business. They will also shepherd you through what will be a time consuming and challenging process. Below are a few things to note about investment bankers:
Date them all. You should absolutely meet as many investment bankers as time will allow. Not all investment bankers are the same: they have different skillsets, have relationships with different potential acquirers, can get different people on the phone, have different approaches, etc so you need to take the time to understand the value that each brings to the table.
Ask lots of questions. A sampling of questions is as follows: How do you envision the process going (they should meet you, put together materials including a pitch book/CIM, identify likely acquirers, and do the heavy lifting to get you in front of those acquirers)? Who do you think are the 5 most likely acquirers (hopefully they align with what you thought)? Do you have relationships at those acquirers, who are they, and what are their titles (you need to make sure Salesforce, Microsoft, or whomever will pick up the phone)? What is the fee structure (hopefully up front retainer and 3% to 5% of transaction value on the back end)? What deals have you closed in our space (this ensures they have domain expertise and relationships at acquirers relevant to you)? Are we a good fit for you and why (make sure they want to work with you and see a high likelihood of success)?
Look for referrals. You should ask other founders, VC, accountants, attorneys, etc who they would recommend. If there is any chance someone has worked with a banker, ask them who they worked with and what the experience was like.
Overall, hiring the right investment banker is as important as hiring the right attorney. Take your time, do as much research as you can, and make sure you really like working with them because when it’s time for M&A, they’re going to be spending a lot of time with you.
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