For many business owners, engaging an investment banker or M&A advisor when selling their business is a no-brainer.
: There are five main benefits of engaging a banker.
- Structure. The banker can assess the company’s strategy and financials to determine what capital is necessary, and how much service (interest, amortization, dividends) can be sustained. The structure also depends on market appetite for various tranches of the capital, from debt to equity.
- Presentation. Through the information memorandum, financial forecast, and marketing strategy, the banker can represent the company in the most positive (and accurate) light.
- Strategy. The determination of market acceptance and the selection of potential capital providers is critical.
- Negotiation. Assuming the strategy includes established investors, pricing and terms may vary with each investor’s unique focus. Reaching the optimal transaction depends on a banker’s knowledge of market conditions and ability to communicate the company’s requirements.
- Execution. Clearly, the successful transaction must reach a conclusion with funding the most efficient structure and pricing.
Q: Do you have a specific example of a way in which you helped a business owner prior to raising capital?
A: In a recent transaction, our capital raise strategy included a “staged” approach, securing senior debt first and adding layers to the capital structure as the company’s funding needs increased in parallel with its growth. Although this approach involved more execution time, it avoided initially “over-funding” the company, and allowed lower tranches of financing to work in concert with more senior layers.