Yes. In almost all circumstances, the buyer (whether a strategic buyer or a financial buyer) will have more financial resources and will be more experienced in buying and selling businesses. Retaining an experienced and effective investment banker will help you level the playing field.
If your goal is to maximize price, you need to get as many offers as you can and take the highest one. You will not achieve the highest price without a competitive process. An investment banker should know your industry and the best potential buyers. The banker should get to know your business well.
With your help, the banker will prepare a confidential memorandum (or “book”) about your business, including historical financial information, financial projections, and information about operations and customers. The investment banker will then contact and solicit offers from as many potential buyers as possible and then help select a smaller group with the best potential to close on the best terms for you. If the banker knows your industry well, the banker should already have a short list of potential buyers for your business before the engagement begins.
In our experience, though, good investment bankers do much more than just identify potential buyers and then wait until closing to collect a fee. They also:
- assist with financial modeling;
- propose and analyze different transaction structures;
- analyze and compare the offers from different potential buyers;
- help to manage unrealistic expectations about price and other deal terms;
- organize and manage the seller’s due diligence disclosures (typically through a virtual, on-line “data room”); and,
- once a buyer is selected, assist the seller and its counsel in negotiating the definitive acquisition agreements.
Negotiations with a potential buyer can be heated at times and involve some degree of posturing by both sides. A good investment banker can also serve as a buffer between you and the buyer, either helping to defuse tensions or, in some cases, acting as the “bad guy” on your behalf. Having an investment banker to act as the bad guy during negotiations can be especially helpful if you will be required to work with–or for–the buyer for some period of time after closing.
It can be challenging to run your business and manage the sale process at the same time. The sale process may take up to 12 months. You will better serve your business if you stay focused on management and day-to-day operations and let an experienced investment banker run the sale process for you.