So you are on the board of a public company that has decided to explore strategic alternatives, including a potential sale of the company. Or perhaps you are the CEO of a company who is looking at a significant strategic acquisition or divestiture of a business unit or division. You have a great team of lawyers at your disposal to advise on legal and structuring matters but you need to find the right investment banker to provide sound financial advice, including potentially a fairness opinion.  Here’s a list of things to look for that I’ve developed with significant input from Brent Layton, Vice President, Investment Banking, at Canaccord Genuity:

  1. Meet More Than One – Best to meet with a few potential candidates so that you can compare what each has to offer. Be sure to ask each candidate what they can bring to the table that the competition can’t. And not a bad idea to take pitches from investment banks that range in size – ask them what advantages they see to their size and brand.
  2. Meet the Deal Team – The big shooters will be out for the pitch presentation but ask to meet the rest of the deal team that will be working with you. Chances are that a chunk of the day-to-day management of your deal will fall to someone lower on the totem pole than the vice chair, partner or managing director. Good to assess whether you can have confidence in whomever that someone might be. Make sure the deal team that will work on your file has the internal clout to deliver the resources of the firm to your mandate.
  3. Look for Industry Expertise – Make sure that the investment bank and the deal team that will work with you have significant expertise in your industry. Good to ensure that the bankers understand your business and the industry from the get-go and that they know the key players well.  Leveraging industry contacts of the bankers will be key in any sale process.
  4. Need Transactional Experience – Each investment bank will provide you with a pitch book with pages of tombstone advertisements highlighting the transactions they’ve advised on. Make sure that those transactions are relevant to what you are proposing to do. Ask the bankers what their role on those transactions was – better that they had a lead financial advisory role than simply having prepared a fairness opinion or completed valuation work.
  5. A Good Reputation is Always Nice – Ask around about the investment bank and the deal team to get a good grasp on their reputation. The ideal banker is smart, qualified and creative but also needs to be someone that gets along well with others and ensures that deals get done. You also want to ensure that the deal team will give your transaction the time and attention it deserves.
  6. Consider Independence Issues – Keep an eye out for other mandates that might put the investment bank in a position of conflict. For example, think carefully about letting your sell-side financial advisor offer up financing to potential buyers or how a current lender might have conflicting objectives to the shareholders. At the end of the day, you want your financial advisor to act in your best interests and fees paid by others can sometimes get in the way of that.
  7. Have the Fee Discussion Early – And you thought your lawyers were expensive…  Discuss fees early on in the process. You should understand how much this process is going to cost you if you get a deal done. Ask for a rough fee range in the pitch – you can then compare that with ranges received from other candidates. Remember that financial advisors often work on a success basis and success fees can be structured to align interests with those of shareholders.