Most private company owners are used to doing things for themselves. Many founded the companies that they run, and they took care of sales, operations, and financing alone before their company grew large enough to have an organization to manage those functional areas. Entrepreneurs are successful because they are versatile and are unafraid to take on the challenge of doing what needs to be done at each stage in the life cycle of their company. So it’s natural for company owners to want to take on the task of selling their company as one more personal challenge that they can do as well as an outside expert.
As I have mentioned in my last few blog posts, some company owners chose to handle the process of selling their company themselves. Some of these owners successfully sell their company for a high valuation. Many of them successfully sell their company, but for a lower price or on weaker terms than they may have deserved. And too many of them aren’t successful at selling at all.
Company owners hire investment bankers to manage the process and represent their interests in the sale of their companies. There are a number of reasons why smart owners pay investment banking fees for these services.
PERSONAL DYNAMICS. The initial contact with a potential buyer sets the stage for subsequent negotiations. An owner who contacts buyers directly may seem weak or desperate to sell. Alternatively, too casual an approach can lead buyers to think that the seller is not serious about selling the company.
Having an experienced dealmaker make the initial contact sends a message of sophistication and seriousness on the part of the seller. Furthermore, a third-party can maintain the confidentiality of the seller until an interest has been established and initial buyer qualifications are validated. This protects the seller’s confidentiality in the marketplace.