InSight

Exit and Growth Strategies for Middle Market Businesses

Finding the “Right Stuff” in Your Investment Banker

By Kim Levin | Apr 15, 2011

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.

Hard Skills

Hard skills are teachable and technical abilities that are required in the investment banking business.  Many of these capabilities are also tested by FINRA (Financial Industry Regulatory Authority) before investment bankers become fully licensed.  They include a deep and thorough knowledge of finance and accounting.    Your intermediary must also be well versed in research and marketing.  To the extent your business sector has unique attributes it doesn’t hurt if your investment banker also has specific sector knowledge or experience.  Many skilled bankers are able to deftly work in many industries.  Moreover, to be an effective investment banker one must have at least base knowledge of the law as it applies to mergers and acquisitions.  These are just a few of the hard skills required to be an effective investment banker.  If you meet an intermediary that lacks these basic skills, well, it is time to move on.

However, it is in the application of these hard skills that having so-called soft skills is the most critical value you can receive from your investment banker.  Stated differently, soft skills are the most important drivers of success!

Soft Skills

Wikipedia defines soft skills as a sociological term relating to a person’s “EQ” (Emotional Intelligence Quotient), the cluster of personality traits, social graces, communication, language, personal habits, friendliness and optimism that characterize relationships with other people.  Hard skills are the IQ and soft skills are the EQ. 

Another view is that soft skills are behavioral competencies and might include conflict resolution, negotiation, creative problem solving, strategic thinking, and influencing and selling skills.  Effective bankers and business owners who have sold their companies can attest these latter skills and “owning the deal” are critical to getting deals done.

The Dilemma

Managing a “deal” can be a very complex process.   Every deal is different and every situation requires the ability to adapt – to creatively solve problems, to think strategically, to influence behaviors, to negotiate, and to work through conflict.

How can you identify the key element, the behavioral competencies, when you meet an investment banker?  Well, it so happens that great leaders also have great soft skills.  John Wareham has been exploring this issue for decades in books “The Anatomy of a Great Executive” and “Secrets of a Corporate Headhunter”. 

The simple answer is you have to have keen awareness of these key traits, and ask probing questions that exploit these skills.  However, the more accurate answer is that, well, it takes time to recognize these traits in people.

Get to know your prospective dealmaker well!  Ask them about other deals they’ve worked on and how they’ve solved the challenges they faced.  Explain some of the challenges you face in your business and listen to their feedback.  Listen to how quickly they “get it” when it comes to understanding your company.  These are all clues as to the abilities of the dealmaker. 

I often hear prospective clients ask about how we at CFA differ from others in our industry.   As smart business people they ask us about our value proposition!  I view our value proposition on three different levels.  First, we have organizational might.  Second, our dealmakers have key hard skills that get applied in the machinery of getting a deal done.  And, third, we have the “right stuff” when it comes to behavioral competencies, those soft skills that are the most critical factor leading to deals closing.

Posted by John Klearman.


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