Has the term “investment banker” ever conjured up a more distasteful image than it does these days? As an investment banker who does mergers and acquisitions in the middle-market, I’m pretty annoyed with the Wall Street guys for ruining the term for the rest of us!
Bankers at a successful “Main Street” M&A firm need more than just great financial and analytical skills. They have to establish solid trust-based relationships with mid-size company owners. The idea isn’t just to make a profit at all costs, but to put the right buyer together with the right seller, so that everyone is happy with a successful transaction.
So when you start the process of selling your company, how can you benefit from being represented by a business broker or middle-market M&A firm?
You Get Educated
Wall Street banking firms deal with big public corporations. Middle-market banking firms work with owners and entrepreneurs who have developed and built a business from scratch, and with family companies in transition.
When you’ve built a tech startup from the ground up, you know your company and your industry inside-out. But if you’ve never sold a company before, you probably don’t have much expertise in that area. The last thing you want is to be taken advantage of by a buyer, so a middle-market M&A firm can educate you on the process:
• What it takes to successfully buy, sell or finance a business
• What kind of valuation is reasonable for your industry in general, and your company in particular
• How to position your company for a successful transaction
• The pros and cons of strategic acquirer versus financial acquirers
• The best way to professionally, confidentially, and thoroughly market your company to reach the right buyers
You Get Guidance
When your identity is closely tied to your company – the thing you’ve poured your blood, sweat and tears into for years – the selling process can be exhausting and even a little emotional. M&A decisions are some of the most important choices you’ll make for your company, and having representation means that the dealmaker can manage the process for your benefit.
And, frankly, an M&A firm is there to stop you from doing something stupid. Many times, our clients get upset about things that are industry standard – for example, they might take offense at some of the terms of a Letter-of-Intent, even though it’s nothing unusual. If the client starts to make mistakes, the dealmaker needs to have the guts to tell the client the truth and start correcting the problem. That’s why a middle-market M&A professional has to not only demonstrate competency, but also build trust with a client.
One of the proudest moments in my banking career was with a CEO who initially said that a man as successful as he was couldn’t possibly need a banker to help sell his company. I knew I had done my job when he introduced me to his colleagues, not as his investment banker, but as his “trusted advisor.”