For all you skeptics out there that think that investment bankers or business brokers are irrelevant and expensive, let me show you behind the curtain at all the wizardry that happens here.
Investment bankers generally have access to resources, software, and databases that give us a clear picture of what's happening in the market at any given moment. For very large companies, data is obviously readily available in the form of stock prices, analyst research, and countless financial blogs. For smaller companies, however, the market price of any given business is a bit of a black hole.
Here are some types of resources that we use on a daily basis:
Buyer Lists, Transaction, and Company Information
S&P Capital IQ ($$$$)
The S&P Capital IQ database provides an array of financial and industry data and serves a wide variety of functions. TKO Miller utilizes S&P Capital IQ to develop a comprehensive buyer list containing a mix of prospective strategic and financial sponsors, as well as a data source to benchmark companies against the industry standards.
GF Data ($$)
GF Data sources proprietary data from surveys of over 200 private equity firms and publishes quarterly reports on middle market trends and dynamics, in addition to leverage reports that track capital structure and pricing by size, industry, senior-debt, sub-debt, PIK notes, warrants, and fees.
There are several key metrics other than purchase and leverage multiples that are important to track. GF Data publishes periodic reports that offer details on key deal trends other than price, such as indemnification caps, escrow hold-back, and baskets.
Private Equity Info ($$)
Besides maintaining relationships with a vast network of private equity firms, TKO Miller uses Private Equity Info to search a database of over 3,500 PE firms to gain access to contact information, acquisition criteria, industries of investment interests, and related portfolio companies. By utilizing the Private Equity Info database, we can fine-tune the initial base of financial buyers to make sure each identified buyer is a fit for the perceived buyer profile.
Data Rooms ($-$$$$)
Data rooms are used to store transaction documents and are accessed by the deal team and potential buyers throughout the process. Data rooms can have a variety of functions and range from the very basic (store data) to the very complex (digital leashes and things I can't even begin to explain).
Virtual data rooms help facilitate the due diligence phase of a transaction. Potential buyers are given access to a variety of documents including financial data, operational matters, environmental reports, and other key documents. The investment banker acts as the administrator of the data room to control what information is uploaded and what parties have permission to access the information.
The lists above give just a small sampling of resources that our firm uses in the sale process. There are more options and it seems like new ones arrive every day. The lesson here is that when you hire an investment banker, ask about what resources they bring to the table. A good banker will have something equivalent to the above listed items.
Lots of Deal Experience
Most importantly, a good investment banker will use these resources to supplement an already deep experience with transactions and the M&A marketplace. Deal experience is the best way to make sure your sale transaction goes smoothly.
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