It’s as important to say ‘no’ to few things as saying ‘yes’ to the right things to be a successful investment banker. However, don’t think that investment banking is cryptic.
Let’s make this straightforward. Here are a few things that investment bankers will never do.
1. Successful bankers don’t say yes to every deal
Investment bankers are smart and highly capable of materializing most things in business. They are also smart enough to recognize that they can’t do everything. Thus, don’t involve themselves in every deal. Successful investment bankers pull themselves out of deals where they can’t contribute meaningfully. Sometimes, they may not have experience of the industry. Or they may have experience in merger and acquisition, while the job is raising equity.
There are several reasons an investment banker may not fit a particular deal. It’s tempting to take every deal that comes on the way, but successful bankers know that strategically selecting every deal is the long term strategy. This means good investment bankers work on deals that are best for their organizations, while referring other deals to other professionals. Anyone with a successful career in investment banking sticks to this rule.
2. Successful investment bankers don’t work on retainer
Retainer is a fee charged up front for a transaction. A retainer could range from as low as $30,000 to $ 100,000 depending on the transaction. Sometimes a retainer is paid up front, while in other cases it could be paid in increments over the first few months when the banker is working with client.
Retainers ensure that clients are interested in pursuing a transaction and compensate the banker for costs associated with selling a business.
This, however, isn’t how successful bankers make their living. Why? Because if a banker doesn’t work diligently to close a deal, the costs associated with selling a business will eat the retainer fast.
3. Successful investment bankers don’t compete with clients
Many clients come with pre-vetted buyers or some idea of who their buyers will be. A few clients have already started their conversation with some potential buyers and seek a discounted fee in case one of the client-found buyer ends up buying their business.
Intuitively, this sounds logical, but in the long term this might play out differently. Suppose a banker receives full fee when certain buyers complete the deal, while the banker receives partial fee if other buyers complete the deal. A banker will be more incentivized to support the latter category of buyers. A business owner wants that all buyers are on an equal playing field and compete on who can present the best purchase price and terms.
Finding the right buyers of a business under sell is an important part of the banker’s job. However, this is a small fraction of what it takes to complete a successful transaction. A successful investment banker ensures that fee is the same for every buyer irrespective of who brought them to the table.
4. Successful investment banker don’t defer their client
During the sale of a business, an investment banker will pull the client aside to explain that client’s side need to change based on the circumstance. A transaction can involve emotion and pride, which must be kept aside. However, involved parties can get carried away in emotion and a transaction can take unexpected turn. In this situation, a successful investment banker keeps his calm and doesn’t give into emotions and maintains a cool head. A successful investment banker understands difficult conversations can happen with clients as often as it happens with potential buyers.
One of the ways you can ensure that your investment banker is focused on long term goal and a successful sale of your business is by checking that the investment banker is not looking to make an easy buck. A successful transaction is a result of a long term disciplined approach that maintains a bigger picture, which is often a difficult choice.