Page 10 - NBIZ Magazine April 2024

1. Typical Deal Size – Select an investment banker that not just to protect one’s individual interests but also
routinely works with companies of similar size and value to make sure that one creates a team of advisors who
to one’s business. A banker who usually works with $10 work together effectively.
million companies may not be the best choice if your busi-
ness is worth $100 million, and the reverse. To discern Exit Planner (that’s Us)
if the size is a good match, ask the investment banker to The last professional to add to the team is an exit plan-
list five to ten recent transactions that he or she directly ner. At NAVIX, we specialize in exit planning, and we have
represented, including company size, industry, and/or extensive experience assisting business owners pursue and
other relevant data. If the banker is part of a larger team successfully exit by way of a company sale. Our sole focus
or firm, be sure the list includes transactions that the is to help our business owner clients plan for and achieve
investment banker directly worked on, and not a list of successful exits. Engaging us creates three potential
deals done by other people from that firm. advantages: saving time, reducing risk, and helping one
net more money at the end of the process.
2. Industry Experience – In many cases, it makes sense
to select an investment banker who has relevant 1. Saving Time – Reading this three-part series of
experience in a similar industry or sector. This applies articles probably has highlighted for you that selling
if one’s industry is highly specialized, technical, or a company is a significant time demand. The time
presents a niche market. A banker with experience in burden is greater if the seller and his/her leadership/
like industries needs less ramp-up time, possesses a management team have limited experience in these
deeper understanding of industry factors influencing transactions, and/or if the business was put into this
company value, knows relevant industry trends, and potential sale situation on short notice. Furthermore,
may have relationships with potential buyers. How- when selling a company, it is imperative that all
ever, in some situations it can be disadvantageous to involved avoid getting distracted or bogged down
work with an investment banker who specializes in with the sale. While in discussions with the potential
the same industry. That investment banker may have buyer, that party is closely watching the company’s
ongoing relationships with the more prolific buyers financial results. If the company misses its revenue
in the industry—relationships the banker may not or profit targets during the sale process, which most
want to push hard to get the highest sale price. Also, commonly occurs when the leadership team does
being too much of a specialist may insulate the banker, not have enough time to lead and grow the company
leaving them unaware of potential buyers outside the while simultaneously assisting with the sale of the
traditional players. company, that can cost the owner a lot of money or
even kill the deal. When selling a company, insuf-
3. Compensation Alignment – In recent years, invest- ficient time equals lost money and increased risk.
ment bankers have evolved into a greater variety of Engaging NAVIX saves you time, because our experi-
compensation methods and practices. For example, ence means we know what needs to be done ahead of
some investment bankers charge a fee payable upon time and how to get it done as quickly as possible.
the successful sale (thus commonly called a “success
fee”) that is expressed as a percentage of the total 2. Reducing Risk – All of the professionals on an advisory
company value at sale. Another approach is to charge team— accountant, M&A attorney, investment banker,
a flat fee or tier of flat fees, with or without an incen- and exit planner—help reduce the risks that inherently
tive on top of the flat fee tied to achieving a higher come from selling a company. Those risks are not just
sale price. To further complicate matters, retainer legal and transactional. Common risks include the
fees can vary greatly in amount from one banker potential that:
to the next, and some bankers credit their retainer
against the success fee, while others do not. This • Employees, customers, competitors, or vendors prema-
diversity requires one to sift through a wider range turely learn the company is for sale.
of compensation methods. By doing this, one will • The company falls short of reaching the amount it
gain the opportunity to select a banker whose com- wanted to net from the sale.
pensation structure aligns with his or her situation • The owner and his/her partners find themselves
and preferences. divided about the sale opportunity (if applicable).
• A potential buyer turns out to be unqualified,
4. Other Advisors that Support One’s Choice – Selling dishonest, and/or predatory.
a company is a team sport. An investment banker • The deal closes, but the buyer later trashes the
usually plays the lead role in negotiating with the company culture and/or reputation.
potential buyer but will need help from your other • Less than 100% cash is received at closing, and one
advisors along the way. Ask other advisors for their doesn’t get the rest of the funds.
input on which investment banker you intend to use, • One sells too soon when he/she should have just waited.

10 NBIZ ■ APRIL 2024