How to Vet Middle Market Investment Banks

If you’re considering hiring a middle market investment bank to either buy or sell a business, it’s important to check the firm out carefully. Successful transactions don’t just happen. To obtain the best result, transactions have to be managed carefully by seasoned professionals.

Middle market investment banks should have both domestic and international reach. That’s important for both buy and sell side transactions in M&A. On the buy side, one shouldn’t miss the chance to view every possible target in the defined geography. On the seller's side, it’s important that the seller not miss another possible buyer, who might have offered better terms and more consideration, just because they’re outside of the territory that is most familiar to a particular firm. In other words, one should hire a firm that can truly cover the world. There are always opportunities if one knows how to find them.

It’s also important for middle-market investment banks to have the ability to create excellent documentation. Those documents will be the first thing that the potential target or buyer will see about your company. As they say, “first impressions count.” If you take a moment to examine the documents that the prospective investment bank sent you, it’s a giant clue as to how they present their clients.

Another important element to check is the firm’s ability to structure and negotiate difficult transactions. The best way to ferret out this information is to ask about a complex transaction. Another way is to look at the firm’s “tombstones.” Are they all transactions between well-known buyers and sellers or are some of them cross-border and between companies that aren’t so obvious?

Staffing on any advisory engagement is important. How long have the principals of the firm been employed by that particular middle-market investment bank? What is their experience level? What are the chances that they will leave the firm mid-transaction? There have been many cases of clients being impressed with the individual handling their project, only to find that they took a better position across town. And, understandably, the transaction stays with the firm, not the individual. As we say, buyer beware.

To summarize, check out your middle market investment bank's experience level, years in business, credentials of the staff and ability to present well.

A little due diligence goes a long way to ensuring a successful transaction.

Speak Confidentially with Versailles Group

Versailles Group provides clients with both buy-side and sell-side M&A services and has been completing cross-border transactions since its founding in 1987.

If you are considering selling or acquiring a company, we welcome the opportunity to discuss your objectives and offer a clear perspective on your options.

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