Things To Consider While Choosing Investment Bank
Are you confused about investment bankers? Do you want to know how to pick the best one for your business that suits your requirements & investment goals? This blog answers all your questions.
“How do I select the most suitable & appropriate investment bank to carry out my financial transactions?” is the most common question we hear from business owners when it comes to selling any property or securities. But why is it necessary? Hiring professional investment banking services can be extremely beneficial for those who don’t have any idea how to initiate any buying or selling transactions. Here investment bankers or M&A advisors play a vital role. First, they research the current market scenario to figure out if the sale is favorable or not for its clients, identify & address other issues in the process to secure a good sales deal, etc. And secondly, the presence of an investment banker can boost the credibility of your business.
Therefore, it is essential to know what to look for in an investment banker. In this blog, we are explaining a few things that should be kept in mind while choosing an investment bank. Here they are as follows:
1. Make Sure Of Accessibility - Any type of M&A transaction requires continuous, flexible & transparent communication between the parties of the deal. Though technology has eased the process of information sharing, nothing can beat the relevance of face-to-face communication during the process. Make sure you hire an investment banker nearby so that they can attend meetings anytime and resolve the issues when they arise. Also, an investment bank with in-person communication will try harder to maintain its reputation and therefore give its best.
Related Read: Introduction To Investment Banking And Its Services
2. Ask Past Experience - It is always advisable to hire an investment banker who possesses relevant & recent experience in your industry, niche, or sector especially if your business is well-positioned & occupies a noticeable market niche. If an investment banker has great experience in your industrial sector, they not only provide their expertise in various industry factors determining value but also are well-versed with the industrial trends, terminologies & dynamics. They have trustworthy relationships & contacts with existing buyers. Find out what transactions they have completed in your industry and industry means close to “your niche”.
3. The Banker’s Size Should Be Equal To Company Value -You need to select an investment banker that operates with firms of similar value to your company. It will not be a great idea to hire investment banking services that work with around $10-20 million in value while your company is worth $200 million and vice-versa. Don’t hire an investment banker if your business size is larger than their typical operation size as they may lack professional capabilities to represent your company. Similarly, if your business size is smaller than their size, they may not pay the required attention & efforts.
4. Understand The Way They Get Paid - Many investment bankers get rigid when it comes to deciding the prices for their services. They may demand an advance, ranging from $50,000 to $100,000 or more in some cases. Then, they may set a fixed fee that can be 1% or 2% of the deal value. The drawback of this approach is that they have no incentive to push their efforts in such a way that it benefits your firm. So you need to find someone who strives to make the deal successful & beneficial for you by providing flexibility in prices. You might come up with a substandard fee based on selling the company on expected sales price, and then adjust payments depending on the outcomes.
5. You Are Comfortable With The Banker - Last but not, you need to find out that the investment banker you are hiring is comfortable to work & communicate with. Since you will be working with them regularly & closely for a period during the sale process, he/she will be like your companion, and if you don’t find them appealing or comfortable to work with, achieving a successful sales deal can be a daunting task for you.
Choosing an investment banker requires deep research, time & effort. The process can take several months, starting from interviewing multiple candidates to signing an agreement with them but it is worth doing it. Making the right choice can have a significant impact on the success of business deals.