How to pick the right bank to run M&A sale process?
My firm is looking to sell a mid-market asset (~$0.7-1b), and we begin a beauty parade next week. We are a global firm, and frankly haven't done a ton of US transactions. We have ~4-5 banks (a mix of BB/EB/MM IBs) in mind. As with any seller, when engaging a sell-side advisor, the number one priority is customer service and responsiveness of the team. Despite the size of the company, the top banks really want to do this deal given the brand of the company.
At the same time, we have a very clear idea on how we want the process to run, and definitely don't need to rely on the bank for financial advisory per se. However, we do want to make sure that whichever bank running the deal is not currently operating over capacity, and that senior bankers (MD/D) will be very involved through out the process (not pawning off the deal to VPs and juniors to do the selling/communication with bidders, after winning mandate).
I guess in other words...how do I gauge each bank's capacity, and whether the MD(s) will be invested in our transaction and be involved through out the process? The last thing we want is the MD disappearing, and it's just the juniors running the process.
Am I better off going with a EB/MM bank that I know will definitely value this transaction, as opposed to taking a risk with the BBs?
Any color here would be helpful.
$700m-$1B isn't as mid market as you think, BBs do those deals all the time. It's not marquee for them, sure, but a fee is a fee... especially these days with IB transactions softening YoY.
Perk of a BB is you have a really large team to work with (coverage, M&A, likely multiple MDs/Ds covering you), and they have tons of resources all over the world to help you. You may actually get some more involvement from seniors there, as EBs run much leaner teams and juniors are expected to take on higher responsibilities.
From someone on the other side of it... take a look at the materials prepared. Does the MD have 60 pages of random analysis that isn't helpful, and they kept referring to random pages in the appendix whenever you asked a question, or 20 pages of well-thought out insight, and they were able to answer your questions off the bat even if it wasn't with a specific number? The best and most involved MDs I know don't have to rely on pages and pages of random crap, which means a multiple of less work for their juniors too.
Good part of it is also just going with your gut. Is this guy just a great salesman, or does he actually take the time to explain the process and make sure we are happy with the team? Did he just throw the group head's name on there saying you have access to everyone, or is the group head actually on the meeting answering questions?
Feel free to PM me - looking to bring new clients to my firm.
This forum will never cease to amaze me. You're anon so he can't even PM you and then are asking him to PM you such that HE can bring YOU business.
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I hope this works. Sourcing a mandate from the forum would be a pretty sick story
Think this is silly/feels like it's a troll.
This isn't 2021 where a company risks being the 5th IPO in the industry that a given team are currently in the market for.
Given current dealflow, no one is going to blow off a $1bn sell side.
You completely missed the question...I am looking for tips to select the best bank for our process, and how to gauge whether the MDs will be personally involved after we engage them. (Ie. Practical ways to gauge quality of customer service when every MD/Head is going to be selling us hard)
Obviously, it's a terrible year and any bank that we speak to won't be blowing it off...like I said, it's a prized asset. Any bank will want to work on our transaction. That is not my point or question though...
The only advice that hasn't been mentioned is how to gauge senior banker commitment... Worst case scenario is that the banker with the most relevant experience woos you during the pitch but steps back once the process hits a snag or when you really need them as an advocate (and their relationships). I would ask them directly how many mandates they are working on currently and what are the most recent closed deals that they were heavily involved with. Check the tombstones for their group to see if they are closing a deal a year or a deal a month (that specific banker, not the group). Needless to say, if they're closing ~6 M&A deals a year, they prioritize their involvement across those deals over the success of your individual deal (assuming you're not their #1 deal). If you go with a MM/EB that is M&A focused, the above is a good way to tell if the guy you meet at the pitch is actually going to attend management presentations or if some "rock star VP" who said ~10 words during the pitch is going to support the process.
Also, nothing gets a senior bankers attention like a client who can provide multiple fee opportunities in the future. Feel like small PE firms get burned when they have a very high quality asset and go with a big name bank... The big name bank knows they won't have a $300M+ M&A deal in every fund so they get second rate treatment if the process gets tough. If most of your activity is in Europe, probably a good idea to go through one of your existing relationships with a strong US presence so there's internal pressure to perform (excluding the accounting firms).
Got stung on this last year. Think you'll fair better given the current market but best of luck regardless.
Is it not common to ask for references? My bank always has MD references in a pitch, and talking to recent clients is by far the best way to see how involved the MD is
I would go with J.P Morgan on this one. They easily have the most black, latino and lgbt employees in investment banking. That’s gotta count for something right babe?
Don't hate just bc you're an analyst 1 at nomura
LOL bro it was a funny joke. Don't hate just cuz you're a diversity hire. The deal is you can moonwalk into competitive jobs but in return, you gotta get clowned by all the people who made it in via merit.
FYI Nomura analyst >>>>>>>> GS diversity analyst
Probably few simples ways
- Deal lead MD needs to be coverage focused guy. If he hands off to M&A guy it’s just running process. You want someone who gets the industry / buyer dynamics. This is why BB M&A model fails
- Boutiques are fine but don’t fall for the very old MDs. They are smart, know lot of people but day to day won’t be involved. You want someone young, hungry but not too young. So probably someone who has been MD for 5-7 years. Exception here is a Moelis guy I know but he isn’t doing industrials
- Avoid the guys who are more capital market / buy side M&A focused. Some bulge brackets are like that
- Track record of selling similar business is critical but tbh sometimes they do get lazy and just copy over old CIMs. But it’s better than not knowing anything
- Capacity is hard to judge. You just gotta make noise to get more bodies or demand they get on call. Many cases people don’t sign EL right away. This is a good way to hold hostage / accountable
- Before bake off, you are going to have a pre call to have bankers ask questions? See if the MD digs in or let associate / VP handle
This is definitely the weirdest thread I have ever read on here.
What's weird about it? Pretty sure it's helpful for IB guys hoping to eventually make it to the senior ranks and learn how to win a deal, Buyside guys who want to optimize for their processes, and business owners who are buying/selling a business that is very important to them.
You realize people don't sell businesses every day right? So, you can be working on the Buyside and still have very few exit process experiences. There are horror stories of the low quality of service received post signing EL vs perceived quality of service to be received during RFP stage.
Unless you really need more how a non-target can network their way into IB, Top MM vs low BB, or where to find modelling prep threads...
1. If you don't already have relationships and need to run a beauty contest you are already behind the curve. Better to have an existing relationship with a bank that understands your business. Considering you are a PE firm that's concerning you need to blast out an RFI. Do you not know bankers you already trust?
2. The number one thing that determines whether a sell side process goes well is if the actual company being sold has their shit together. Good management team, all materials ready for detailed due diligence etc. The 29 year old vp banker running a good process or not should not determine it. Simply put, good companies garner interest. Is your CFO ready to answer questions about historical performance and why your projections are sound?
3. Anyone can run a sell process to be honest. Processes fail due to bad companies that are unprepared or companies that are delusional to what they are worth.
4. The only thing that you should care about the banks is does that MD know all the strategic and sponsor contacts on a first name basis (golfs with them, wife swaps with them etc). Any md that needs his team to cold email 100 firms a cim is one you don't want to touch with a ten foot pole.
Summary: the only value an investment bank is to you is their rolodex and "ears on the ground". Nothing more. Don't listen to everyone here saying its all about how well the VP can run a process(thats nonsense and not big picture thinking)