Reply To: Do not listen to your M&A advisers

#112265


Participant

I’ve only participated in one sale. Sellers’ ownership and management may have different wish lists for an investment banker. But both groups will place a premium on the IB’s ability to maximizing selling price. A great IB will know how to analyze the company, position and best present it in the CIP, and articulate its value–or potential value–to suitors. A company is a much more sophisticated product than a trinket at a bazar, a piece of real estate, or an insurance contract, and their job is harder because every product is different and a fresh sales approach has to be crafted for each one. So as salespeople go, they probably need to be among the most talented out there in any profession. Don’t forget they are applying those sales skills to their sell-side clients as well as to the potential suitors. I left the company before the sale was complete. But the CEO was the consummate saleswoman, and she carefully selected the IB with an eye toward getting the best value for the firm and maximizing her chances for staying in the CEO chair afterward. Ultimately, she didn’t get the desired outcome on the second objective. Although I wasn’t there to see what advice she was given in selecting a suitor with whom to complete the deal, it is reasonable to conclude that the IB is going to place more priority on factors that affect their fee formula (i.e., price) than on helping management navigate the mine field of the post-merger landscape. So as far as listening to your advisor, know what you are getting, and caveat emptor.

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