One of the biggest reasons I love investment banking is that it combines the deep expertise of multiple disciplines. The most successful investment bankers are “quick studies” of nearly any sector and have deep expertise in marketing, finance and operations. The very best include a light garnish of professional salesmanship to effectively negotiate and win deals for their clients. Any good investment banker with his/her sales-cap on will likely state something like the following when looking to win a mandate with the client…
If the deal is a sell-side merger or acquisition:
"We actively promote your deal to the broadest market of potential buyers, ensuring you receive maximum exposure for your deal. When we take your deal to market, we build an extensive list of the most active business buyers in your sector. We not only have 'pocket buyers,' on the list of our existing relationships, but we also maintain an active proprietary industry database as well as subscriptions to Privco, CapitalIQ, etc. No rock will be left un-turned when it comes time to sell your business."
If the deal is a capital raise:
"Capital raises are rarely easy. Therefore, we suggest the broadest market approach possible. We will first focus on institutional players that invest in your sector. If our initial institutional list fails to produce the right outcome, we may work our way out from there to the investors of last resort, even eventually expanding to the individual accredited investors in a Regulation D 506(c) or Regulation A+ offering."
Either of the above pitches showcases a banker’s need to console the potential seller or issuer that regardless of how the process is run, a quality deal can get done. However, reading between the lines in these two statements shows somewhat of a lack of confidence in 1. the deal itself or 2. the investment banker’s own ability. I’ll leave #2 for another day and discussion. Truth be told, the best deals need no introduction. They do not need a broad sell-side auction, Regulation D 506(c), Regulation A+ or whatever the promoters are touting as the latest structure purported to complete a deal. The best deals not only stand on their own, they do not get shopped or re-traded. They are typically done behind closed doors with a simple handshake. And, just because such deals are not shopped, does not mean the owner-founders are squeezed-out or taken advantage of. They are the types of deal investment bankers like us are constantly hunting for.
The best advice to business owners is to build a great company. Great companies include those with healthy cash flow, high margins, recurring or repeat revenue, sustainability, customer/geographic diversification, clean cap-tables and streamlined operations. Such a business can almost sell itself.
The best companies attract investors without trying and substantial business valuation premiums without asking. They are not necessarily the unicorns of the world. Many are simply solid cash-flow-producing companies across the middle market. If your deal is good enough, multiple investment bankers will compete/vie for your attention and investor dollars will flow like the salmon of Capistrano.
Even if a company considers itself in the realm which I am describing, it is still advised to hire an investment banker with the right expertise in both industry and process.