The investment banking business is very competitive.  I’m guessing that may be true in your industry as well!  Moreover, merger and acquisition dealmakers run the gamut in terms of skills and abilities.  So, how do you go about selecting the right investment banker to sell your business?    

Let’s start with the notion that a dealmaker must be able to deeply understand your business, exceptionally market and represent your business, and advocate on your behalf in the relentless pursuit of their fiduciary responsibility to you!  Of course, a seller or buyer of a company should look for certain key skills before they hire an investment banking representative who has (or doesn’t have) some ability to alter the course of their future!  Skills come in two varieties… hard skills and soft skills.  Some of these skills are easily identified through simple questions and some may only be apparent after you get to know your prospective representative.

So, let’s address the definitions of hard and soft skills. Read more »

Middle-market business sellers have important choices in their divestiture process.  One key choice is whether or not you desire to have an auction OR a negotiated sale.

Sale by Auction is a multi-stage and sometimes complicated process.  The investment banker markets your firm to multiple prospective buyers through potentially more than one round of activity, with successively smaller groups of buyers competing for the purchase.  This process is resource intensive and in difficult M&A markets entails a hint of idealism as well – the belief that your business will be attractive to a relevant number of buyers.  When executed properly, though, an auction will have a positive impact on business value – price and terms.  A side benefit is that it also encourages speed of execution via quick action by buyers.   In the leveraged buyout boom of the 90s, auctions were very common and today are still a preferred method of marketing a business.  Auctions provide a greater degree of comfort that the market has been exploited and is giving the seller a broader set of responses as to value.  Auctions do, however, have their downside.  Even the most astute investment banker who admonishes prospective buyers and ensures they sign strong Non-Disclosure Agreements cannot control how information may be used once it gets into the hands of prospective suitors.  Therefore, auctions can have a negative impact on employee morale if information of a pending sale should leak.  Sometimes bidders may collude as well.  And these variables can ultimately lead to reduced leverage when negotiating once the “winning” buyer is chosen.

A Negotiated Sale is much narrower in scope. Read more »