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4 Things Successful Investment Bankers Will Never Do

So much of success, in life and in business, is about what you don’t do versus what you do. Investment banking is no different. There are a few things that the most successful bankers will never do.

1) They don’t say yes to every deal

It is important that a banker take on transactions where they can add value. Not every banker is qualified to work on every deal. For example, if they have no experience in that industry, if it’s raising equity and they only perform mergers and acquisitions, or if they are too busy with other clients. There are a multitude of reasons why an investment banker should say no to that deal.

As tempting as it is to take on every potential client, successful bankers know that being strategically selective is a much better long-term strategy. This means working on transactions that are a good fit for your organization, and referring the ones that aren’t to other professionals.

2) They don’t make a living on retainers

An investment banking retainer is a fee charged upfront in a transaction. It can range between $30,000 and $100,000 depending on the transaction. The retainer is either paid in a lump sum, or in increments over the first couple of months while the banker is working with the client.

Retainers are an excellent way to make sure that clients are definitely interested in pursuing a transaction and they compensate the banker for some of the upfront costs associated with selling a business.

However, a banker cannot make his or her living on retainers. If a banker is not working diligently to close a transaction, then costs associated with the work of selling a business will eclipse the retainer in no time.

3) They don’t compete with their clients

Almost all of our clients come to us with some ideas about who the buyers of their business should be. Some clients have even had beginning conversations with several potential buyers, and suggest we offer a discounted fee if one of these client-found buyers ends up being the ultimate acquirer of the business.

I understand the logic of course, but a client needs to think longer term about why this can play out badly in real life. If your banker receives a full fee when certain buyers complete the deal, and a partial fee if other buyers complete the deal, guess which ones the banker will be incentivized to support more during your transaction? As a business owner, you want all buyers to be on a equal playing field, and competing on who can present the best purchase price and terms.

Finding buyers is an important part of what the investment banker does for the seller, but it is a fraction of what it takes to complete a successful transaction. A good banker will make sure that the fee is the same for every buyer, no matter who brought them to the table.

4) They don’t always defer to their clients

There are many, many times during a business sale, where an investment banker must pull the client aside and explain why their (the client’s) position is one that needs to be changed. There is so much emotion and pride involved in a transaction, that without a cool-headed advisor, things can really veer off track. Your investment banker should not be a yes-man. Successful bankers know that difficult conversations happen with their clients as often as they do with potential buyers.

The best way to make sure your investment banker is focused on your long-term goals and a successful sale of your business, is to make sure that they are not looking for the easy buck. A successful transaction requires a banker that has the discipline to look at the bigger picture, even if that is not an easy choice.


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