Common Questions Business Owners Have When Considering an Investment Banker

Why do I need an investment banker?

Investment bankers are experts at selling a business. Our firm runs a rigorous, broad-based and highly structured auction process. A reputable investment banking firm will do exhaustive due diligence, formulate a range of presentation materials both qualitative and quantitative, develop a comprehensive buyer list and actively market the company on the sellers behalf. Similarly, use of an experienced investment banking firm helps maintain confidentiality, minimizes interaction with unqualified or uninterested parties, allows key management to focus on day-to-day operations, facilitates the receipt of all proposals in a synchronized and timely manner so that a well informed decision can be made by the Board of Directors and shareholders encompassing all available options. Finally, a capable investment banking firm will coordinate and integrate the activities of the seller's legal, tax, accounting and other advisers, minimize costly mistakes stemming from sellers inexperience, and is the best means by which to engage in "bare knuckle" negotiations with the buyer, should that become necessary. The fee charged by an investment banking firm such as ours, usually pales in comparison to the additional incremental value that we are able generate. Don't take our word for it!-Janes Capital Partners has a long list of client references, that we are confident will support this assertion.

Should you choose to go it alone, the forces arrayed against you will likely be greater in number, more experienced, focused and unemotional, and usually very well coordinated. It is unrealistic for a seller to think that even though they have never sold a business before, that they are as capable and experienced as those that have, in most cases, many times over. It is telling that the majority of seasoned strategic and financial buyers won't even consider selling, once it becomes time to do so, without employing an investment banking firm-why would you? The real question is not "should you engage an investment banking firm" but rather "which one should you choose"?

What Qualities should I look for in selecting an investment Banking Firm?

Not all firms are equal. Similarly, no one firm is right in all instances. Our firm may or may not be the right firm for you, and if it is not, we will probably be the first to tell you. Our reputation stems from, among other things, past decisions to walk away from opportunities that we had even the slightest doubts as to our abilities to deliver in the manner expected.

In evaluating an investment banking firm, a seller should consider certain "prerequisites" and be attuned to any and all "red flags" or "warning signs". The prerequisites include strong negotiation skills, good presentation materials, a successful track record, a high closing rate, excellent references, proper regulatory licenses, size compatibility and industry experience. In contrast, the red flags and warning signs include high upfront fees, undue pressure to sign the firms engagement agreement, onerous and unreasonable engagement terms, a false or misleading valuation, not properly licensed, few if any references and little or no relevant industry experience.

In the final analysis, the specific experience, capabilities and chemistry of the transaction team (members of the firm specifically assigned to work on your transaction) matter more to the eventual outcome of a transaction, than do generalizations about the firm as a whole.

What does an Investment Banker Typically Charge?

Our fee structure is comprised of two (2) components including a modest monthly retainer and a success fee payable at closing. The incentive is heavily skewed towards a successful close. Accordingly, we like you, are squarely focused on a successful liquidity event. We commit to work tirelessly on your behalf and do so on an exclusive basis. In return, assuming your needs our met successfully, we typically receive a "low single digit percentage" of the transaction payable from the sale proceeds at closing.

Do I Still Need to hire an investment banker if i already have an offer?

It is not uncommon for a business owner to receive unsolicited expressions of interest from parties claiming to be interested in acquiring his/her company. Although some of these inquiries may be genuine and sincere, a majority of them are not and should not be relied upon. Periodic expressions of interest from various unknown parties does not constitute an effective "auction" which is an essential element of any successful sale. It takes several (at least 3-4) interested, knowledgeable, and financially qualified candidates to create a bidding environment. One offer is simply not sufficient.

Even if the seller engages a single buyer in preliminary discussions which result in an offer, any such offer is usually quite unreliable until such time as the prospective buyer has conducted comprehensive due diligence. In the absence of pre-offer due diligence, the buyer uses information discovered during post-offer due diligence to negotiate significant price concessions. What once seemed like an attractive offer soon becomes less than desirable. An investment banker will establish a structured auction process, expand the buyer list, develop comprehensive due diligence information, and determine a clear and objective valuation for the business. This limits a potential buyer's ability to present a certain offer with the intent to negotiate the price down as opportunities present themselves.

Are there any other advisers that are needed?

Yes. There are a range of professional disciplines that may be involved in selling a business. Expert advice is a necessity. In addition to an investment banker, the team may, depending upon the circumstances, include some or all of the following disciplines: M&A attorney, accountant, tax, estate planning and investments. Each brings a unique and invaluable skill set at different parts of the process. The investment banker typically coordinates the activities of each and ties it all together.