InSight

Exit and Growth Strategies for Middle Market Businesses

Do I Really Need an Investment Banker?

By Roy Graham | May 30, 2008

Every good investment banker knows the value of having a client represented by an experienced transaction attorney. The absence of one can cost your client a deal or worse yet, cement a bad one. What about an investment banker though? First time sellers will often ask what value a good investment banker adds to a transaction. “Why can’t I go it alone”, they may ask.

I have a long list of answers, but I thought I would reach out to several respected transaction attorneys for their comments. In their practices they work for clients who are represented by investment bankers and clients who are not. From their third party perspective they are well positioned to offer valuable insight.

Cliff Pearl, a transaction attorney with the Denver firm of Hensley Kim & Holzer, LLC, believes that, “The biggest value a good investment bank adds is properly orchestrating the process…. Many sellers believe that the only thing they need is someone to find the buyer willing to pay the highest price, and if they find that buyer themselves they think they don’t need the help of an investment banker. They are wrong. Transactions fail in many instances because there is nobody properly orchestrating the transaction process and acting as the shepherd of the transaction…something the participants and lawyers typically can’t do….”

Dan Webster, a San Antonio based attorney with Cox Smith Matthews, Inc., emphasizes management’s need “to keep their eye on running the business…when the company is being marketed and the deal is being negotiated”. He says, “Investment bankers can take the lead in the transaction and bring “process” to the table…. A knowledgeable investment banker can make a big difference in the outcome of a sale.”

Phil Slinkard, an Austin based partner with K&L Gates, lists the following pluses that a good investment banker adds.

  • Puts together a “book” for potential buyers that makes a compelling story
  • Identifies more potential buyers than a seller could on its own
  • Permits the possibility of gauging interest without revealing the name of the seller
  • Saves management’s time marketing to qualified bidders and screening out unqualified bidders
  • Works hand-in-hand with the seller’s advisors (especially lawyers and accountants) and employs their services effectively
  • Increases the “take home” for the seller by an amount in excess of their fees.

If you have any doubts, find an experienced transaction attorney in your area and get their counsel. It’s probably one of the most important business decisions you will make!


Leave a Comment