Selecting an investment bank when selling your business

Selecting an investment bank when selling your business

Choosing an advisor to help sell your business is nearly as important as the decision to sell in the first place. Whoever you choose should start by listening–actively–to your goals and objectives.

However, in order to select an advisor you must first understand their role.

Advisor’s role

  • Provide the seller with guidance on realistic objectives, outcomes and potential strategies for the sale process
  • Analyze the operations, employees and financials of the company to best position the company in the market
  • Develop the marketing materials (including the teaser and offering memorandum) from information provided by the seller, and work with the seller to determine the best presentation for the company
  • Prepare a population of potential strategic and financial buyers who may have an interest in the company, and discuss the merits of potential buyers with the seller
  • Based on the population of buyers approved by the seller, contact buyers, send out the teaser / non-disclosure agreement / information memorandum; solicit indications of interest from potential buyers and work with the seller to select the buyers to be invited to a management presentation
  • Develop and facilitate the management presentations with the seller
  • Provide guidance to the seller on key terms included in the term sheet / letter of intent and negotiate with select buyers
  • Assist the seller in preparing for the buyer’s due diligence process, facilitating the flow of information
  • Work with the seller and the seller’s legal team to negotiate the terms of the purchase agreement

Key considerations when selecting an advisor include:

  • Trust: The sales process can be an intense time for the seller; selecting a trusted advisor helps to significantly reduce the stress of the process.
  • Experience: Each sale process is unique and involves many variables. Selecting an advisor that has extensive experience in successfully closing deals is important to identify and address issues and ensure a smooth transaction process with limited or no surprises.
  • Access to potential buyers: It’s important to select an advisor that has access to relevant strategic and private equity buyers domestically (and globally if applicable) that meet the seller’s goals.
  • Fees and expenses: Minimizing transaction costs is important to any seller. An example of typical fee structures is as follows:
  • Retainer: Agreed upon one time or recurring payments made during the transaction process. 
  • Success fee: Typically a percentage of the enterprise value (EV). This approach helps align the seller’s and financial advisor’s objectives to maximize EV.
  • Expenses:  Out-of-pocket expenses, including travel, data room costs and other expenses are typically reimbursed by the seller.

Selling is often the largest transaction in the business’s life cycle. It’s critical to choose a reputable, experienced advisor that collaborates with you and is motivated and incentivized to help you sell your business to maximize value and achieve your goals.

Connect with a Baker Tilly Capital advisor

This information should not be construed as a recommendation, an offer of services, or an offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The reader should not rely on this information other than as authorized by a written agreement with Baker Tilly Capital, LLC. The commentaries provided are opinions of Baker Tilly Capital, LLC and are for informational purposes only. While the information is deemed reliable, Baker Tilly Capital, LLC cannot guarantee its accuracy, completeness, or suitability for any purpose and makes no warranties with regard to the results to be obtained from its use, or whether any expressed course of events will actually occur. Securities involve risk and possible loss of principal. Past performance does not guarantee future results. No compensation has been paid to person providing a testimonial. Any testimonial is not representative of the experiences of other clients and is not indicative of future performance or success.

Securities, when offered, and transaction advisory services are offered through Baker Tilly Capital, LLC, Member FINRA and SIPC; Office of Supervisory Jurisdiction located at 4807 Innovate Ln, Madison, WI 53718; phone 800 362 7301. Baker Tilly Capital, LLC is a wholly-owned subsidiary of Baker Tilly Virchow Krause, LLP, an accounting firm. Baker Tilly Virchow Krause, LLP is an independently owned and managed Member of Baker Tilly International.

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