Role of an Investment Banker

By Welch Capital Partners on
By Welch LLP on
By PitchBook on
By
On
March 15, 2024

What is the Role of an Investment Banker?

As you embark on the journey of selling your business, you will want to make sure you have the right people on your team. This starts with the investment banker / M&A advisor. This blog outlines the role that the investment banker will play as you navigate the process of selling your business.

Initial Analysis

An investment banker’s role starts before entering the market to sell your business. Their first task is often explaining the process to business owners, giving them market insights, and setting expectations. They might even advise that now is not the right time to take your business to market, citing reasons such as prevailing market conditions, business performance, or the quality of information readily available.

Preparing for Market

If the time is right for selling, an investment bank will start preparing materials that will be used to profile your business to prospective buyers. The primary document used for narrating your business's story is termed a confidential information memorandum (CIM). A well prepared CIM will allow a buyer to make an objective evaluation of your company.

Containing sensitive information, the CIM is withheld from buyers until the execution of a non-disclosure agreement (NDA). Consequently, the initial communication with buyers occurs through a teaser, which provides a condensed version of your story – akin to "Coles Notes." The investment banker will prepare the teaser ensuring it gives a buyer enough information to generate interest without divulging who exactly you are. 

Marketing

Your investment banker plays a pivotal role in compiling a list of prospective buyers to share the teaser with. This list typically encompasses financial buyers (such as family offices and private equity firms) and strategic buyers.

The banker will then take the deal to market, overseeing initial communications and dialogues. They ensure the execution of NDAs with interested parties and distribute the CIM.  As discussions progress, prospective buyers typically express a desire to meet with the owner and management, a process facilitated by your investment banker. 

Ultimately, the objective of the investment banker is to orchestrate a competitive process aimed at enhancing the value of your business

Selecting a Buyer

If everything proceeds according to plan, you can expect to receive multiple offers to evaluate. Your banker will assist in this evaluation process, offering guidance and taking the lead in negotiating with the remaining prospective buyers. Eventually, a definitive step forward will be taken by entering into an exclusive letter of intent (LOI) with one party, followed by a final push to close the deal.

LOI to Close

Once an LOI is entered into, the buyer is going to want to perform due diligence to confirm that everything presented to date in the CIM, teaser and other communication is true. This phase can be extensive and demanding. While you control access to your information, your investment banker should have been assisting you in preparing for the due diligence process. A competent banker can expedite this process by anticipating the requests and providing guidance around how to best present the information.

While diligence is happening, the legal documents will be prepared, and any necessary tax planning will be getting finalized. At this point, your banker will take on the role as project manager, ensuring all the various service providers are working together to get the desired deal across the line. For further insights into the parties involved in a transaction, please refer to our blog post on assembling your deal team. 

Many business owners go through an M&A transaction once in their life while others are more experienced. Nonetheless, a strong investment banker is critical to ensuring the deal runs efficiently, and that value is maximized.

Check out our article on the roles in a Sell-Side M&A Deal Team.

Please contact cenman@welchcapitalpartners.com to learn more about our experience with successfully closing transactions. 

What is the Role of an Investment Banker?

As you embark on the journey of selling your business, you will want to make sure you have the right people on your team. This starts with the investment banker / M&A advisor. This blog outlines the role that the investment banker will play as you navigate the process of selling your business.

Initial Analysis

An investment banker’s role starts before entering the market to sell your business. Their first task is often explaining the process to business owners, giving them market insights, and setting expectations. They might even advise that now is not the right time to take your business to market, citing reasons such as prevailing market conditions, business performance, or the quality of information readily available.

Preparing for Market

If the time is right for selling, an investment bank will start preparing materials that will be used to profile your business to prospective buyers. The primary document used for narrating your business's story is termed a confidential information memorandum (CIM). A well prepared CIM will allow a buyer to make an objective evaluation of your company.

Containing sensitive information, the CIM is withheld from buyers until the execution of a non-disclosure agreement (NDA). Consequently, the initial communication with buyers occurs through a teaser, which provides a condensed version of your story – akin to "Coles Notes." The investment banker will prepare the teaser ensuring it gives a buyer enough information to generate interest without divulging who exactly you are. 

Marketing

Your investment banker plays a pivotal role in compiling a list of prospective buyers to share the teaser with. This list typically encompasses financial buyers (such as family offices and private equity firms) and strategic buyers.

The banker will then take the deal to market, overseeing initial communications and dialogues. They ensure the execution of NDAs with interested parties and distribute the CIM.  As discussions progress, prospective buyers typically express a desire to meet with the owner and management, a process facilitated by your investment banker. 

Ultimately, the objective of the investment banker is to orchestrate a competitive process aimed at enhancing the value of your business

Selecting a Buyer

If everything proceeds according to plan, you can expect to receive multiple offers to evaluate. Your banker will assist in this evaluation process, offering guidance and taking the lead in negotiating with the remaining prospective buyers. Eventually, a definitive step forward will be taken by entering into an exclusive letter of intent (LOI) with one party, followed by a final push to close the deal.

LOI to Close

Once an LOI is entered into, the buyer is going to want to perform due diligence to confirm that everything presented to date in the CIM, teaser and other communication is true. This phase can be extensive and demanding. While you control access to your information, your investment banker should have been assisting you in preparing for the due diligence process. A competent banker can expedite this process by anticipating the requests and providing guidance around how to best present the information.

While diligence is happening, the legal documents will be prepared, and any necessary tax planning will be getting finalized. At this point, your banker will take on the role as project manager, ensuring all the various service providers are working together to get the desired deal across the line. For further insights into the parties involved in a transaction, please refer to our blog post on assembling your deal team. 

Many business owners go through an M&A transaction once in their life while others are more experienced. Nonetheless, a strong investment banker is critical to ensuring the deal runs efficiently, and that value is maximized.

Check out our article on the roles in a Sell-Side M&A Deal Team.

Please contact cenman@welchcapitalpartners.com to learn more about our experience with successfully closing transactions. 

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