Tips to Ensure You Get the Best Outcome & Experience

So you’ve (smartly) decided to work with an investment banker on your capital raising or M&A endeavors. What’s next? Before choosing an investment banker, it’s important to make sure that your priorities and values align and that they have the bandwidth and expertise to provide you the outcome and experience you deserve. Before signing an engagement agreement, be sure to ask your potential investment banker(s) these questions.

1. 1. Does this investment bank have capacity to take on my deal? Depending on market conditions, some investment banks may have more capacity than others to work on your transaction. Before signing on with an investment bank, make sure your deal team has the capacity to provide you with a timely, professional, efficient and effective process that will give your transaction the best probability of success. There’s nothing worse than signing an engagement agreement, paying a retainer, then finding out your transaction won’t get the attention it deserves. Some investment banks purposely take on more engagements than they should, knowing that service level can only suffer. Your transaction deserves better.
   2. Is your deal team personally accountable for the success of my transaction? Once you’ve signed an engagement agreement, will the communication and attention to detail continue? How easy will it be to contact your investment banker to ask questions or request updates on your process? Is your investment banker located near you? Do they seem passionate and personally invested in the success of your deal?
   3. Is this investment banker driven by fee or by principle? When challenges come up along the way, can you trust your investment banker to give you advice that’s right for you? Effective investment bankers should be comfortable handling the difficult conversations that may come up throughout a process, and their advice should be guided by principles and values that align with yours – not by maximizing their success fee. When challenges arise in a process, it will be important to have a deal team that prioritizes honesty and integrity when they’re going to bat for you.
   4. What is the continuity of your deal team? In other words, how long have the members of your deal team worked at this specific firm, and how long are they expected to stay? Investment banking is an extremely high-turnover field where the average tenure at any given firm is only around 12-18 months. When the average M&A and capital raising transactions can take 6-12 months, there’s a good chance that there will be turnover on your deal team during your process. This can hinder your chances of a successful outcome when precious time is spent getting new members up to speed on the intricacies of your transaction. This turnover also does not lend itself well to the long-term relationship your company should have with its investment banker in order to get the best outcomes and solutions throughout your company’s corporate lifecycle. Firms who are committed to their culture, values and mission tend to have much lower turnover, but they are few and far between throughout the field of investment banking. Bridgepoint is proud to maintain one of the lowest turnover rates in the industry, which is one more factor that can set your transaction up for success.
   5. Does this investment banking team have any conflicts of interest? What portion of this investment bank’s deals represent my potential buyers? Many investment banks work with sponsors, or financial buyers such as private equity firms, on a repeated basis. This can lead to conflicts of interest, as investment banks may sacrifice some of your upside in order to give their sponsor relationships a better deal. This is a more common practice than you might expect, and it can negatively impact the success of your transaction. Seek out unconflicted investment banks such as Bridgepoint who are unequivocally dedicated to working exclusively with founders and owners, not sponsors. You’ll likely be surprised there aren’t many of these.
   6. Does this investment banker have experience working with family-owned and founder-led companies like mine? Many investment banks do not discern between working with family-owned companies and sponsor-backed companies, but there are many unique challenges that may arise during the sale or capitalization of a family-owned company. Few middle-market investment banks work and communicate exclusively with founders, entrepreneurs and families, and possess the skills necessary to guide families and owners through the complex – and often emotional – process of selling your company or raising capital. Bridgepoint is proud to be one of the few investment banking firms who exclusively serves family-owned and founder-led companies.
   7. How customized will the buyer messaging and process design be? Some sell-side M&A transactions involve a “spray and pray” approach which offers minimal customization in order to reach potential buyers en masse. This approach can lead to decent performance when appealing solely to financial buyers, but when your ideal acquiror might be a strategic buyer, tailored messaging is crucial. Customized messaging to strategics takes much more time, thoughtfulness and research but it can lead to much better results – so make sure you know upfront whether your prospective investment banker is willing to put in the extra effort.
   8. Does this investment banker offer capital raising / leveraged finance solutions? Most middle-market investment banks only offer M&A advisory services, but many transactions benefit from the optionality of creative financing solutions. Choose an investment bank that can offer many liquidity options, exit alternatives and financing solutions beyond sell-side M&A. This gives you the flexibility to be nimble while your deal is in market and maximizes your chance for a successful outcome. Capital raising / leveraged finance solutions and connectivity also help drive value on your M&A deal.
   9. If they don’t offer leveraged finance solutions, does the investment team have leveraged finance experience? Even if the firm doesn’t offer leveraged finance / capital solutions, your deal team should have experience with leveraged finance and understand how much leverage a buyer could reasonably use to purchase your company.
   10. How involved will the senior investment banker be in the execution of my transaction? Who will be making calls to the buyers? The success of your transaction can be influenced by whether the senior investment banker is focused more on originating your transaction and then redirecting their attention to the next deal, or on seeing your transaction through to the finish line. It’s important to understand upfront how involved the senior investment banker will be in the strategy, execution, communication, buyer outreach and other aspects of your process.
   11. How involved in the transaction process will my investment banker and deal team be after the LOI phase? Once a company receives an LOI (letter of intent), some senior bankers start to divert their attention away from the transaction and focus on their next one. In reality, the post-LOI phase is when a large portion of diligence occurs and the highest retrade risk, or risk of the deal falling apart, occurs. You will want an investment banker and deal team that will be committed to your process all the way to the end.
   12. How many deals has the team completed? Investment bankers learn how to be more effective with each deal they complete. It’s important to have an accurate understanding of how many deals the senior investment banker and their deal team have completed. You may also want to ask on how many deals the deal team has worked together, which can be an indicator of how effectively they communicate and work as a team to accomplish your goals.
   13. Does this investment banking team have relevant experience in my sector? Every industry and sector differs when it comes to valuation drivers and multiples, market trends and other factors that influence the unique process and potential outcome of a transaction. It’s important to know whether your prospective deal team has completed any transactions in similar or adjacent industries and you should determine how relevant this experience is to your company’s goals and objectives. Evidence of sector experience could include client testimonials (ideally on video), client reference checks, published reports and thought leadership relevant to your sector.
   14. Does your firm have references I can contact? An investment bank that is committed to their client’s success will have a strong reputation in its community and among its clients and referral sources. Ask for a list of recent clients and/or referral sources that can be contacted and ask them candid, detailed questions about their experience working with your prospective investment banker.

No matter which investment bank you choose to work with, asking these questions before entering an engagement will help ensure your goals and priorities align so that you get the outcome and client experience you deserve. It’s not all just about tombstones. Trust, accountability and expertise will greatly impact your ultimate satisfaction with your transaction’s outcome.

To keep this list of questions handy, download them as a printable PDF here.