How to use investment banking?

Investment banking is an effective component to the financing, sale, merger, and acquisition activities of larger businesses. At times, their roles and functions are misunderstood by the investment community. Here are some general tips on how best to use investment bankers to your advantage in business situations. Depending on your “position” in a transaction, your specific steps to effectively use their talents will change, depending on whether you are on the buy or sell side. Here are the best ways to approach the use of investment banking firms.

  1. Understand what investment bankers do. They may “specialize” in services or industries, or they may offer a more complete menu of options. Among the services they offer: * Raising funds via financing, issuing debt or equity securities, private investment, and/or public investment.
  2. Determine whether or not your situation may be qualified to use investment banking services. Most investment bankers deal only with larger companies and/or high net worth clients. If you are involved with a smaller business needing financing or want to sell the business – or purchase another – you’re probably not a potential client.
  3. If you’ve decided you’re qualified and have decided to use an investment banker, do your homework. Closely examine their service menu, experience in similar transactions, and references, including other companies they have successfully helped in the past.
  4. Decide what services you need from your investment banker. Negotiate, in a positive fashion, their level of involvement, exact responsibilities, realistic time frames, and fee structure. Even if you’re considering an investment banking firm that has an extensive menu of services, there is rarely a “packaged” design that works for everyone. Discuss what you think you want and listen to their suggestions about what you need to complete your financing, sale, or other business transaction.
  5. Be as honest with your investment banker as you would with your religious advisor, attorney, or accountant. Don’t oversell yourself or your company. Give your investment banking firm all the information they need to perform successfully for you. To accomplish this goal, your investment banker needs all the data, even those items you’d like to forget.
  6. Once you’ve settled all apparent questions and concerns, and have received an agreement that meets your needs, don’t hesitate. Go forward. The condition of the business and investment community can experience rapid changes, for better or worse, at times. Unless you and your investment banker have agreed on a delay as a result of certain conditions, move ahead immediately. A delay can sometimes negatively affect the advice and/or plans you and your investment banker have made, since economic conditions could be quite different after a long otherwise unnecessary delay in implementing your plans.

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