What are some questions business owners should ask investment bankers before selecting them?
My husband and business partner, Chris, and I tend to get a lot of husband and wife couples as clients. I think that’s because we sort of mirror back to them what they are, which is a team, whether or not they are both still working in the business.
I would say that you need to ask the business broker or investment banker, depending on the size of your business, if your business is similar to other businesses they have sold based on size, industry, and types of buyers. I don’t feel that getting an industry specialist is necessary, by the way. There is certainly nothing wrong with that, but, assuming you have a highly sellable business, a good M&A person should be able to make a market for any type of business, get attractive offers, and get a deal closed.
I would definitely ask for references from a variety of sources. These could be both sellers and buyers that the investment banker has worked with, as well as attorneys, CPA’s, and financial planners. Don’t be afraid to ask for multiple references from different sources, not just past clients. I would ask them about their process and make sure that you understand the work involved on their end. I would ask them for examples of their work product, too (valuations, teasers, selling memorandums, etc.). I wouldn’t hesitate to sign an NDA if they ask, so that you can get an idea of the quality of their work. You want to be confident in how they are going to represent your business in the marketplace.
On a softer note, I would listen to the types of questions they ask you. Obviously, they are going to ask you a ton of questions about your business. But see if they are interested in things like your post-exit plan, what your family thinks about this decision, your motivation for selling, and what your expectations are about the process. I find that good M&A people are very concerned about setting appropriate expectations with the business owner, and some of that might have to do with family members or other issues outside of the business itself.
Lastly, I would look for an M&A person who you feel is being brutally honest with you. One of my pet peeves is advisors who tell you what you want to hear. Selling your business is not the time or place for that: The stakes are too high. You want to be dealing with somebody who will not hesitate to give you their opinion about your business, buyers, deal terms, or anything to do with the sale; good, bad, or otherwise.