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How to Choose an Investment Banker

How to Choose an Investment Banker

The selection of an investment banker either makes or breaks a company. Choosing an investment banker is a key issue for small or large corporations in the current business world.
Kundan Pandey
Unarguably, one of the hottest designations in the financial world is that of an investment banker. Being at the helm of some of the vital activities of a company like company asset investing and mergers & acquisitions, investment bankers play a critical role in shaping the fortunes of the company. For a blue chip company that has been in existence for decades, investment banking is vital for its success. To do so, it needs a dedicated team of investment bankers working for the welfare of the firm.

Choosing an Investment Banker

When we talk about major business deals, we are not referring to just a single investment banker but an investment firm with a team of bankers working for the company's aim. One of the toughest tasks for a CEO or the top management in a company is to find the best suited investment firm for their company. This is because the downside of a poor sale of a company's asset (like a business owned by the firm) can be detrimental to the financial future of the company. Increasing competition in the financial market has led to the mushrooming of numerous investment firms. Almost all investment companies focus on market research, statistics, awesome presentations and success stories to impress clients. That's why business heads and CEOs must weigh an investment company and its investment bankers on several parameters before choosing the most suitable one. How to go about choosing an investment banker professionally has been discussed further.

➝ Large deals take considerable time to finish and not just a week or two. They may take 6 months to a year. The value of the right people matters for such a long period. Months of preparing marketing material, collecting information, chalking out plans, negotiating buyers, attending meetings and closing the deal must be handled by the most competent people in the investment firm. If your deal is really big, generally senior investment bankers will handle everything. However, at the grass root level, junior investment bankers may also be involved. What you need to ensure is that the investment firm allots the most talented, experienced investment bankers in your case. If senior members work on your case, it is easier to close it profitably because senior bankers mostly have awesome contacts in their professional world and they will help you find good buyers more easily.

➝ The value of your company is something that matters most to you. If you have built a multi-billion dollar business from scratch, you won't even sell a part of it without getting its right evaluation. An experienced team of investment bankers will help you get the best evaluation for your business. Market conditions like recession do play a role in the valuation of a business and you must be realistic in your expectations of your firm's value. Nevertheless, good investment firms will always help you to benefit from the sale. It is advisable to compare evaluation rates of several investment companies that you have chosen. The 'evaluation rates' must be related to your industry and must not be otherwise.

➝ In assessing investment firms, you must look forward to choose those firms that have a history of closing transactions in your industry specific domains. Analyze the firm, if it has closed transactions in your related business in the past four to five years. If yes, then it is a good hint that the firm is updated about the current economic factors and matters related to them. Also focus on the failed transactions as it will help you know the track record of your company and if it is good in one specific industry or has proven a track record in all.

➝ How well you know your company matters a lot. If you are a small company, you won't even require an investment banker. In case of small companies, you can reach out to certified financial analysts, and investment brokers for advice and help in sales or investment of company assets. For big corporations, investment bankers are hired. If you are a billion dollar plus company, you should choose an investment firm that has experience in dealing with sales of similar value. You can't expect to hire a big investment bank for your small scale business. Larger the investment firm, greater will be their fee. If you are the iconic GE or the IBM, you will obviously, hire the best investment firms in the world.

➝ Ask questions to the investment firms especially regarding their procedure to short list the most potential buyers. If they give you random reasons like they have great relationship with any company, don't just believe them in one go. Ask them to validate their responses by asking about the people whom they know in the other company. Good investment firms have great contacts in the investment field and you can take benefit of it.

I hope you did get the point that in a business scenario where markets fluctuate, it is only good for your company to hire an investment banker. Good investment bankers and their firms have relevant experience in the same field and they can easily adapt to market changes. Trustworthiness and excellent relations with investment bankers are also vital for successful deals besides experience and performance.