Pay Up for Fave Bank, or Cut Costs
So, here is the situation. I am selling a company, and just met with ~5-6 banks. The bottom 2 are absolutely shit and are gone. 1 is alright, but I don't like the senior bankers. So, there are 3 left. Within these 3, the proposed fee structures vary, and the difference between top and bottom could be say ~20-30% on absolute deal fee amount. They all have some sort of tiered structure. Valuation ranges proposed were all ballpark. We know what min price we should fetch.
I also know who the realistic buyers are (say top 5-7 names). And, technically, I don't need to rely on the best of the 3 to reach out to them, because at least two thirds of these top names will give us offers. To give some context, the best of the 3 is not a GS/MS, but does probably know the top buyers better than the other advisors. Here are my questions:
1. If you are quite certain that the top 5 names will give you decent bids, would you save on fees and go with a cheaper advisor?
2. Do you think the top advisor representing the asset, would lead to a potentially higher price?
3. If you personally do like the top advisor more, but economically, it's more expensive. What would you do?
4. On one of the top 3 names, the top 2 advisors have highly conflicting comments on how they would structure a deal. One says super clean, and one says highly structured. What to make of it? (It's possible that this buyer has done one deal that was super clean, and then another one that was highly structured. Fair to say I guess I won't find out?)
Very curious what the senior PE/IB members on this website think. (Junior IB guys, I beg you not to chime in.)
Whattup homes, junior IB guy here to chime in. I think you should go with your passion and take the offer at the top tier IB. You'll never look back on the experience and regret it, even if the hours are a little bit tough for a (presumable) woman of your constitution. Get paid my G
Literally send the best most competitive fee structure (or even tighter on your own spreadsheet) to all of your top banks and say you don’t want them to lose the deal on fee and you’re willing to be constructive to work with them to make sure they’re in the mix and see how they react. Hope that helps.
Honestly shouldn’t be tipping my own hand here but bankers are eager to sign up a deal in this environment and you should squeeze for all it’s worth.
This is the way.
If I'm reading right, the top advisor is the one who knows the asset and buyer universe best but is also the most expensive? Would make sense.
I'd consider going with them and negotiating fees the way Premia suggested. "Our value expectations are reasonable, we already know the buyers, we already know they'll likely bid, process will be competitive, lots of potential future business for you" etc. etc.
For the deal structure feedback, any view on if the suggestions are based on market check/color or experience?
Both from direct experience. Both have been in 1-2 completed transactions with them (either same side or opposing side), and probably a couple more processes that didn't materialize. So, both could be correct. But, the two assets could have been different in many ways, and competitive dynamics may have been different too. I guess I won't find out. But certainly, it would have been easier if they had shared similar feedback.
My thinking exactly, different processes, different assets and different markets. Was struggling to understand why the banks would position that up front from a pitch perspective rather than react to definitives coming in. I guess market color.
Great discussion on the PE forum thread, love to hear the old heads weigh in.
You are successful enough to sell a company of some scale but need to ask for advice from Wall Street Oasis? Do you know who is on this website? It's 90% college students and analysts.
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