Picking an Investment Bank to Sell Your Company?

Let's say you are selling your company with ~$10m in EBITDA, so probably falls into the realm of people mostly focused on LMM size deals.

What are the questions you would ask prior to engaging an investment bank? How would you run DD on them?

 
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Not an exhaustive list, but I'll kick it off with 3.

1. Track Record (Total deals closed and closing rate)

Essentially tells you if they have experience (meaning they know their stuff) and how often they actually go from engaging to closing. You don't want to have a process start and fail because they did a crap job of marketing your business.

2. Friendliness (Do they care)

Subjective. But do they care about you and your business? Are they interested in hearing your story? Small businesses are often different than big ones because they're usually family owned and operated. Although it's still about the numbers, it's not about the numbers. We've run processes where things get crappy because the CEO didn't tell his wife and kids he wanted to sell, or the CEO wants to reward key employees and ensure people don't get axed immediately. 

3. Industry Expertise

Picking an advisor that has a track record in your industry, or one tangential to it is important. For example, when we get a transportation/logistics company we know exactly what value drivers to focus on, what to watch out for, and who some of the best strategic buyers might be. We already know the industry and the technology, so it makes things much easier. If you're in metals/mining, we'd be useless.

 

I il add to above

  1. Buyer connects: how well do they know the buyers in the industry - both strategic and sponsor - and do they know the latest strategic imperative of these buyers. Bank should be able to communicate a set of most relevant buyers for the business and talk through their contacts or atleast what’s the aspirations (and approach) of each of the buyers
  1. Market/segment intel: what other possible similar asset may be available in the market around the marketing of this asset? Kinda obvious but what’s the transaction multiples in the segment
 

If I were selling my $10m EBITDA company, I'd ask the investment bank about their LMM experience, industry expertise, and deal team. For DD, I'd check their rep, past deals, and client references. 🏢🤝

 

Make all the MD’s from competing banks line up and drop their pants. Whoever has the biggest balls gets the mandate.

 

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