Corporate Finance Associates Canada

Selecting an Investment Banker

With credit difficulties causing a shake out in a number of the big investment banks, like Merrill Lynch, we’re going to see new investment banking firms set up. These new firms are going to be aggressively targeting people to use their services. How do you choose who to use?

When a good friend of mine asked me, “Who would you use?” I responded that there are whole variety of different issues that that I would like to walk them through. Maybe in future articles on corporate finance we’ll get into more of these, but, for me, the starting point is the individual.

The Individual

Who at that firm will you use to handle your transaction? To use a military analogy, there’s a big difference between being on the front line with a gun and driving a truck around the base. There are a lot of people who have been involved in transactions who have essentially been driving that truck around the base.

These would be people who have done the financial analysis; these would be people who handled the administration, people who have proof read documents, people who have written some marketing material. This is all transaction related experience but it’s not the experience that you need in the person you’re going to hire to handle a transaction.

What you need is somebody who’s been in the trenches, someone who has negotiated transactions, led the deals and successfully got them over the finish line.

Three Questions to Ask

So how do you identify those people? The starting point is to ask three key questions.

A lot of people will answer: “I’m working on this deal, I’m working on that deal, I’ve been involved in this one or that one”. That tells you immediately that either they’ve not led transactions or they’ve not completed them.

When people ask me this question I can tell them that in the last four years I’ve completed thirty transactions here at CFA. I can tell them that I played a major part in all of them and in almost all of them I was the lead negotiator. In several cases, changing circumstances in the market place led to the transactions having to be renegotiated.

That’s the kind of experience that you want in the person who is handling any of your investment banking needs.

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