What Your Investment Bank Can’t Do For Your Exit


I built two investment banks in London both focused at small to mid-market transactions, working approximately, in the $10m to $100m deal range. Prior to that I helped turnaround a division of Thomson Reuters in the 80s and led the disposal project to Reed, for about $50m without the help of a bank. In Boston I’ve led the turnaround of two software businesses achieving exits for the investors. So as you consider cashing out over the next 24 months (potentially a very good time to do so) here is a heads up on the areas a bank can’t help you with and the areas in which they excel.

 What Investment Banks Can’t Do (The pre 24 months to sale agenda)
  1. Make your value proposition into a compelling story.
  2. Find new niches for your expertize. We call it Red Zone thinking.
  3. Dilute customer dependency to ensure that no customer accounts for more than 10% of your sales.
  4. Ensure your lead generation is process driven, based on activity you know that works. The sales pipeline is aligned to all marketing initiatives.
  5. Build a reliable sales process that does not rely on recruiting superstars to succeed.
  6. Develop HR strategies to build a comprehensive management team to ensure the business is NOT perceived as a one-man band. Buyers will be nervous that the company can reach the next level without expensive intervention. Buyers don’t have a warehouse full of spare staff.
  7. Build processes that quietly lift margins each quarter.
  8. Tweak business models to produce sales annuity streams – supporting sustainable earnings growth.
  9. Transform the accounting records and operational systems to ensure you ace the diligence test one day.
  10. Build a metrics culture. The right stuff gets measured and actions are taken to correct.
  11. Develop a more aggressive approach to New Product Development. Ensuring that new products actually get launched.
  12. Build simple but effective internal training programs to show you can handle scaling your team.
  13. IPR, patents, and trademarks are well documented.
  14. Your competitive positioning is documented over time. Reasons for your successes and failures are trapped.
What are Investment Banks really good at?
  1. Valuing your business. Giving you a realistic range of values achievable from appropriate buyers.
  2. Producing an Information Memorandum that summarizes why your company is remarkable.
  3. Producing additional information packs personalized to each shortlisted buyer bringing out the strategic advantage of owning you.
  4. Understanding the drivers that motivate buyers in your sector.
  5. Researching the most appropriate strategic and financial acquirers.
  6. Project managing a covert controlled auction to ensure confidentiality is maintained.
  7. Handling unreasonable requests for information from acquirers.
  8. Managing communication between acquirer’s and the shareholders of the seller.
  9. Assisting/leading negotiation of the terms of the deal.
  10. Structuring the deal to maximize your exit proceeds.
  11. Structuring the earn-out formula if appropriate.
  12. Identifying dangerous commercial issues in the sale and purchase contract (Clearly this will be one of the main tasks of your M&A lawyer).
  13. Closing deals in your sector at premium valuations.
  14. Or telling you to walk away from the wrong deal.
Today is my 400th blog post. Thanks for reading them.
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  1. great post Ian. At Successful Transition Planning Institute , we say that an M&A advisor is like your realtor: they can tell you what the house is worth and some may offer suggestions to improve value, but they aren’t painting your deck. One more thing, they will not help you as the principal owner figure out if the sale is the right thing to do for you PERSONALLY. For that, you need to speak with a qualified professional coach or consultant

    • Agreed Paul. Don’t get me wrong I’m a big fan of well run investment banks but owners need to consider all the help needed to achieve their exit goals

  2. I completely agree with you, Ian. Most of investment bankers have Ivy League pedigrees and all kinds of fancy certifications, but majority of them never run a real business. In fact I can bet that not too many investment bankers lost sleep at night because they were worried about making a payroll at the end of the week.

    So, if you wonder WHY your Investment Bank can’t do for your exit – because they have not done it before. Here is my approach: First, look for a banker with a real hands-on experience. Second, ask your banker how do they get compensated and make sure that their interests are aligned with your interests.

    Also, see if perhaps a Merchant Banker is a better solution for your needs. Many of our clients see Merchant Banking as a game changer.



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