Finance Things Nobody Explains (pt 3): What Investment Bankers Actually Do in a Deal

Finance things that nobody explains part three. What do investment bankers actually do in a deal? Because most people think investment bankers, bankers are either trading stocks or just making power points till 2:00 a.m. and honestly, the power part is not totally wrong. But in an M&A deal, investment bankers are really there to run the transaction process. Let's use an example. Say a private company wants to sell itself. The owners might know they want to sell, but they probably don't know every potential buyer. how much their company's worth, how to position the business or how to create some sort of competitive deal process and that's where the bankers come in. First, they help package the company. They take the financials, they take the growth story, the margins, customer base industry future opportunities and they turn all of that into materials that buyers can then understand. That usually means a teaser and a sim. The teaser is the short version. The sim is like a detailed book that tells the story of the business. Then they build a buyer list. They figure out which strategic buyers and private equity firms might actually be interested in purchasing this company. Then they reach out. They manage confidentiality agreements. They send over materials, they answer questions about the materials. They try to create competition and competition is the whole point. One interested buyer is really nice, but 10 interested buyers creates leverage. That's why the bankers there. Then the bankers will actually manage the process. They'll start to set deadlines. They'll collect offers, they're comparing bids, they'll coordinate management meetings, help organize diligence and keep everyone moving. And once an offer actually comes in, they help negotiate more than just the headline purchase price because the highest number is not always the best deal. You also have to look at what would the structure of the deal look like post acquisition. Is there role over equity? Is there Escrow, financing uncertainty, working capital terms, closing risks. So yes, investment bankers make a lot of power points. But the real job is packaging the company finding buyers, creating competition, negotiating terms and keeping a deal alive. The best way to think about it is this. Lawyers handle the legal terms, accountants help with the financial diligence, management runs the business, but the investment banker runs the whole deal process. And in M&A, the process can honestly change everything. If you like this content, you want to see more, hit the follow button and click the link in my bio. Peace.