Practical Advice for Bankers: Play the Long Game

A career in “high finance” attracts many driven, intelligent people who are eager to get ahead. And therein lies the temptation to prioritize work above all else—at the expense of relationships, health, and sometimes even ethics and values. While I’m not in a position to offer relationship advice or health tips—that’s your personal decision—I do believe there are core business best practices and values that everyone should adhere to. So, allow me thirty seconds to share some thoughts.

I’ve spent years in M&A, working in investment banking, on the investing side, and even with a stint on the corporate side. Recently, however, I encountered a situation I had never experienced before. I was working on a recap for a portfolio company, looking to sell some shares and bring in an additional partner to help fuel the next phase of growth. We invited three other firms to management presentations, each with its own buy-side advisor. Out of the three funds and their advisors, we had worked with all six at some point in the past. As has been our practice, we shared our “Poised for M&A” page with a list of five bolt-on targets, three of which were in the IOI phase and progressing. These deals were proprietary, with no banker involved. Up to this point, this page had always been blinded, but during these final management presentations, we felt comfortable sharing unblinded names—something we had done many times before at the request of all three sponsors in this process. Sponsors, including our fund, often want to verify these blinded targets to ensure they are legitimate names and not just some fabricated “Target A, B, C” banker-deck tomfoolery.

Fast forward one month: We’re wrapping up the recap with one of the three parties and continuing due diligence on the bolt-on targets under IOI for our portfolio company. I receive an email notification that a calendar invite for our most promising bolt-on target had been forwarded by the founder to one of the buy-side bankers of one of the three sponsors involved in the recap. At first, I thought it was an Outlook glitch, so I ignored it. The next morning, I joined a Zoom call with the target, only to find that the banker from the recap process had also joined. Awkwardness and silence ensued before the banker spoke up, saying, “This might be awkward for your team to see me here, but I connected with the founders recently, and they mentioned they were in a process with you. I told them I’d love to help them negotiate.” We were furious—it was a blatant breach of trust.

Long story short, the banker renegotiated terms that didn’t alter the value we had already agreed on with the target but only tweaked the structure and some minor terms (e.g., slightly more cash upfront, resulting in a smaller earnout). This renegotiation ultimately drove up legal fees threefold. The deal closed, and the banker walked away with a high-six-figure fee—paid from the seller’s pocket. No real value was added by the banker.

Now for the takeaway: Peter Drucker once said, “You have to produce results in the short-term. But you have to produce results in the long-term. And the long-term is not simply the adding up of short-terms.” Our fund has worked with this banker in the past, but we will never work with him or his firm again. Trust was sacrificed for a relatively small, short-term gain. True value comes from laying a foundation where today’s actions align with and contribute to future/long-term success.

P.S. This will likely be the last time we share unblinded M&A targets before exclusivity 😂