4 Tips for Finding an Investment Banker to Support M&A
Investment bankers play a pivotal role in mergers and acquisitions (M&A). Depending on the deal, they may handle any or all of the following tasks: company valuations, due diligence, deal sourcing, negotiation, deal closing, post-deal integration, and more.
Because they play such a pivotal role, there is enormous value in finding the right investment banker to support your company’s M&A activities. There is also enormous risk; choosing the wrong banker could result in strategic and cultural misalignment, ultimately hurting deal flow and undermining your company’s competitiveness.
Finding and managing the right investment banker(s) to support M&A activity was the subject of a recent Outthinker Strategy Network (OSN) Forum. Four chief strategy officers (CSOs) gathered to compare notes on experience with investment bankers in M&A contexts—here is a summary of what they discussed.
4 tips for finding and managing investment bankers to support M&A activities
1. Prioritize culture and process fit when selecting a banker.
There is a natural division between an investment banker’s priorities and your company’s priorities. The best M&A support comes from bankers who are naturally aligned on a cultural level and who show history of adapting to their clients’ internal processes.
OSN CSOs recommend: A good way to feel out whether a banker would be a good culture fit is by getting some references on deals they’ve handled in the past. If past customers are willing to provide references, it signifies that the banker was able to achieve process harmony in the course of the deal.
2. Find a banker who can bring you deals that might not be on your radar.
Certain circumstances call for a specialist: someone well-versed in a particular industry, who has their finger on its pulse, and who can bring you deals that you haven’t already identified. However, this necessitates a filtration system—both on the banker’s part, and on your part—setting up internal procedures for evaluating and triaging deals the banker brings in.
The right banker won’t bring you every conceivable deal, but only those that they deem a good fit with your culture, processes, and strategy.
3. Balance proactive and reactive deal identification.
There are pros and cons to both the proactive and reactive approaches to finding deals. A proactive approach ensures that you, the client, have total strategic control over M&A activity—that the banker is there to support your vision and objectives, not to sway them.
But a reactive approach has its merits, too. Particularly when entering a new space, or when developing a foothold in a new industry, you’ll benefit from the expertise of a banker who has more industry experience than you do. Every deal, every market trend might not be on your radar—you’ll depend on the banker to enlighten you.
There is no one-size-fits-all balance of proactive and reactive approach. Evaluate the status of your company in its industry, and adopt an organizational philosophy.
4. Pick a good facilitator between the banker and your internal team.
Another possible result of the divide between the banker and your team is internal resentment of deals introduced by the banker.
OSN CSOs recommend: Select deal facilitator in your organization. Depending on the situation, you, the CSO, might play this role. Positive deals tend to result from lead integrators having strong people skills and facility with connecting the dots between the external deal and the internal stakeholders.
Anticipate potential friction points and smooth them over by understanding your decision criteria, your priorities (and blind spots) as a company, and important cultural points to promote.
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