Even as a successful internet businessman, your perception of an investment banker is likely misguided. It’s fueled by the bashing they seem to take in the media, lumped in with the “crooked” doings of Wall St. These guys are the enemy right?
No. Investment bankers can quickly have you singing their praises once you consider the benefits they provide in selling your website or business.
Only a fool would not at least make some calls to investment banks, to hear them out before taking their property to market. And yes, I’ve been that fool.
Some of these things you learn through the course of time as an entrepreneur or business owner. They aren’t all cured by the services of an investment bank, but they certainly can be assisted. Especially if it’s your first time selling a company.
Here’s some of the immediate, tangible benefits a good investment bank can bring to the table:
1. Investment bankers have a network that you do not. To be sure, this is what they do. You may know all the travel bloggers online (or something to that effect), but unless you’ve sold multiple businesses in the past, your Rolodex is weaker than theirs. Open up those doors, because they create options.
2. Having options is priceless in a negotiation. The “fool” I allude to is someone who develops tunnel vision in selling their business. You get one offer, can’t stop dreaming about that new Maserati, and sell to the first suitor that comes along.
(Think of it like dating. You need to play the field.)
Investment bankers will reach into that Rolodex and ensure that the offer you receive is the best possible one available at the time. Consider this – it’s almost unthinkable that your buyer is absent a competitor, a competitor that would be just as happy to bid on your business.
The banking boys will always look to create a bidding war, and that remind me . . .
3. You don’t know how to manage a bidding war. It takes skill, experience, time (and timing). The process of selling your company is taxing enough. I wouldn’t burden yourself with the challenge of balancing the whims of 2+ big dog companies bidding on your company. You’re likely to end up with the short end of the stick, or with nothing at all. Let the pros handle it.
4. Speaking of big dogs versus small dogs, investment bankers can ensure you won’t get pushed around. Or taken for a ride on your multiple, your options, your liabilities post-sale and all that good stuff. It sucks to look back on a sale and think “I could’ve done better. Look at what those guys got.”
The acquirers know you are excited and are apt to weaken on some points just to get the deal done, and get a check in your account.
5. Investment banks work on commission primarily, so the more you make the more they make. I don’t think this needs explaining unless you like making less money in any situation.
6. A reminder to leave something un-optimized. They’ll remind you that acquiring companies want to see an opportunity to increase your business, synergies and the like aside. Sure, you’re making money and doing great, but they want to make more money once you’re property is in the fold.
If nothing else, it’s worth the learning experience.
Maybe the coolest thing about talking to an investment bank is the learning experience of it all. If they’re smart, they will give you a crash course in selling your business that any entrepreneur or business owner can appreciate.
I sat in for a full afternoon last year at a prominent investment bank’s offices and learned more about finance than I did in college. 3 hours. Blew my mind. And the finance part was only half of it – what I really learned was how to build businesses or properties that would have buyers salivating. There’s a right way to do this, a right way to time it and a right way to negotiate it.
Timing is everything, in finding the best (read: highest paying) suitor, and in marketing yourself as a hot commodity. Your growth curve leveling off? Not good. You want that thing shooting up like Peak 9 at Breckenridge!
Remember, these guys can be good to have in your corner. If you need help finding a good firm or want get some intros – hit me up.
Image: Steve Rhodes
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