For owners · Guide
Why hire an investment banker?
Some owners try to sell their business on their own. The results can fall short on price, and on the terms that matter just as much.
The largest companies in the world use investment bankers for their transactions, because bankers bring knowledge, contacts, analysis and a process that can improve the result by more than the cost of hiring them.
Finding every buyer, not just the ones you know
Investment bankers know how to identify the full universe of potential buyers. That includes strategic buyers inside your industry, and also companies looking to integrate vertically by acquiring a customer or supplier. A banker presents the strengths that drive value, such as competitive advantages, barriers to entry and untapped growth, and shows the true financial picture by normalizing your financial statements to reflect the business’s full earning power.
Hiring a banker also lets you keep running the company. A sale process is long and demanding, and a business whose results slip during the process is worth less at the end of it.
The unsolicited offer
Large companies and private equity firms regularly call private companies to “make an offer,” “see your financials” or “come by and visit.” Usually the goal is to buy your business at the lowest price and on the best terms for them, before any competition or banker is involved.
These buyers value and buy companies for a living. Most owners do not. It is like playing a sport against a professional when you are an amateur. An unsolicited offer can be a lowball, or a high number meant to get you hooked, which then comes down once you are too far along to invite other buyers back in.
The hidden costs of going it alone
Price is only part of the deal. Owners who sell without an advisor often give up value in the contract itself:
- Representations and warranties, and limits on liability
- Escrows, baskets and holdbacks
- Non-compete, employment and consulting agreements
- Lease terms on buildings the owner still holds
Hire a professional
When you need serious surgery, you find the best surgeon you can afford. When you sell a house, you hire a broker who knows the neighborhood. Yet some owners try to sell their most important asset on their own, because “there is already an offer on the table and it’s enough for me to retire on.”
Please don’t make that mistake. We recommend that you hire a professional for the most important transaction of your life, even if that professional is not William & Henry.