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BEWARE THE INDUSTRY EXPERT

So, how many deals have you (the IBanker) closed in my industry? In the last year or two? Really? Is this the most important question the prospect (seller or buyer) should ask?

While nearly universally asked, these may not be the most critical questions. Industry expertise may be relevant in situations with limited strategic buyers. The well-positioned investment banker may know the key players, and should be able to negotiate the highest price and best terms. So what could be wrong with this picture?

  1. Too close an alliance may result in a "cozy" deal (less than ideal for the seller); the banker wants to close more deals with this willing participant.
  2. Who is the real client when the tougher terms are to be negotiated?
  3. Private equity is more aggressive than ever in needing to deploy investor funds. Does the IBanker eliminate or diminish this category of buyer to effect a fast transaction?
  4. Familiarity breeds whatever. At a minimum, the supposed objectivity of concluding the best possible terms may be overridden by the close business relationship(s) at hand. The most important considerations may well be the chemistry of the owner(s) and banking team.
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