By Joseph Anton and Brad Lucas

Business owners have a team of professionals to handle a variety of inevitable events.  They carry insurance to manage risk; they retain attorneys and accountants to handle legal and financial affairs.  But who will help them prepare for the most crucial event in the lifetime of their business—a merger or acquisition?

Achieving Super Valuation

    Advance planning leads to success

Investment bankers are usually retained only after a business owner decides to sell.  By then it’s too late.  The best time to retain an investment banker is before an owner decides to sell.  As part of the retained professional team, an investment banker can anticipate financial, strategic and valuation issues in advance and use his knowledge and experience to set the stage for a super valuation.  Whether you are doing an M&A assignment now or in the future, here’s why you should engage a standby investment banker:

Planning for Tomorrow

    Strategic decisions to boost long-term value

A standby investment banker knows what makes a company most attractive to prospective buyers.  He can help a business owner make ongoing decisions on such issues as management structure, branding decisions, and expansion opportunities—all with an eye toward creating long term value.

Join the Dance

    Preparing the company for sale

Private companies are illiquid and take time to convert to cash.  A standby investment banker anticipates an offering and completes preliminaries so that the client can choose when to go to market.  The approach is proactive, not reactive.

Catch the Wave

    Monitoring market conditions

Industry and market cycles—these trend affect valuation.  A retained investment banker monitors trends and approaches the market when the time is right.  Having completed the preliminary steps, your client can move swiftly to take the advantage.

The World Is Your Oyster

    The client picks the buyer—how novel!

Identifying the right buyer makes all the difference.  A standby investment banker helps an owner determine whether he wants an institutional investor, a full operational partner, or someone who can completely take over the business.  A standby investment banker focuses on global sources to recruit unique, competitive buyers.

No Big Bang Theory

    Discreet communication with the buyer pool

Investment bankers called in specifically to find a buyer and manage a sale often conduct “big bang” searches for prospective buyers.  Indiscriminately, they flood a market with offering memos, announcing to the world (including competitors, customers, vendors and employees) that a company is for sale.  By comparison, a retained investment banker seeds the potential marketplace before an owner has even decided to sell.  A retained investment banker follows a plan that stimulates a private dialogue with each candidate.  This approach facilitates “quiet auctions” to preserve the confidentiality of a sale.

You don’t need to put the investment banker on your permanent payroll—but you should develop a relationship early—calling him from time to time.  Standby investment bankers generally charge a retainer during the assignment and receive a closing fee based on the sale price once a deal is complete.  When negotiating such a retainer agreement, the contract must be flexible so that the retainer can be suspended if the assignment is postponed.