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WHY TO HIRE AN INVESMENT BANK?

For different but similar reasons, some buyers and sellers choose not to employ an investment bank (IB). When a trusted advisor strongly urges their client, buyer or seller, to hire an IB, that usually gets their attention. Short of that happening, prospective buyers and sellers provide these excuses:

  1. It was approached by a competitor who offered a good price.
  2. I know the value of my businesses because my neighbor just sold his.
  3. I do not need any service providers to comb through my records. I am fully ready to sell.
  4. I know how to buy (sell) a business and only need my lawyers to effect a deal.
  5. I do not want to pay the “exorbitant” fees of IB’s.
  6. Sellers: I believe the deal I will consummate (have struck) will stand, and not be re-traded below my bottom line minimum.
  7. Buyers: I just do not need any party in the middle, between me and the seller.

Contrary to the above, we offer the following reasons which justify the use of an IB.

  1. The first unsolicited buyer is rarely the ultimate buyer, as they try to avoid an open market process.
  2. At least 50% more deals get done with the help of the IB, than without.
  3. Pricing of deals is usually 30-40% higher, based upon the presentation and negotiating skills of the IB.
  4. Buyers and sellers have much greater credibility when represented by an IB, especially with the opposite party and their trusted advisors.
  5. Buyers and sellers must focus on their own business operations, and let the professionals do their jobs.
  6. Most importantly, a good IB will uncover issues to be corrected and resolved before they are presented to a buyer.
  7. Buyers need the IB who can find the right target(s) and determine if they are fully committed to sell.
Categories: General

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