![\"Advanced](\"https:\/\/berkonomics.com\/wp-content\/uploads\/2012\/08\/Advanced-Berkonomics-soft-front-cover-small.jpg\")
<\/a>Then there is the question of fees.\u00a0 For small deals, an investment banker will ask as much as ten percent, although the average is slightly above half that.\u00a0 For larger deals, expect the fee to start at five percent and scale downward with size.\u00a0 And expect the investment banker to ask for an advance against expenses of at least $20,000 or much more with larger deals, with any unexpended funds not to be refunded.\u00a0 If a buyer is already in hand, many will work for far less in percentage fees, and even in advances, because much of their work is done at that point.<\/p>\n[Email readers, continue here…]<\/em><\/span>\u00a0 And there is the question of whether an investment banker has a personal agenda to get a deal done in minimum time, even if the proceeds to the seller are less than could have been expected.\u00a0 Is there any conflict of interest? \u00a0Is this not a parallel to the question of a real estate agent who cares little about that last five or ten percent of the purchase price, if it would kill a deal or slow its close, since the agent\u2019s \u00a0commission amount is only a fraction of that difference?<\/p>\n And finally, could not the corporate attorney do just as good a job of negotiating a great deal for the seller, and do it for hourly rates instead of a percent of the transaction?<\/p>\n My experience is that good investment bankers do add significant value to a deal in most cases, easily earning multiples of their fee by increasing competition, upping the price, and finding areas for extra value that the seller did not think of.\u00a0\u00a0 Good investment bankers work with your attorney to structure the deal, help the seller to see more of the value hidden in the candidate seller, and increase the sense of urgency to close the deal among all parties.<\/p>\n Perhaps most of all, a good investment banker will insulate the seller CEO against the anger and ire of the buyer during the process that always accompanies stressful negotiations or issues revolving around the seller CEO\u2019s continuing employment contract.\u00a0 Imagine you\u2019re fighting with the buyer CEO about your expected salary and benefits during a transition period to follow, expecting to work harmoniously with that CEO after all the tension and conflicts during the negotiation of the deal.\u00a0 And imagine having that buffer in the form of the investment banker arguing on your behalf while you sit silently, giving up little or no good will during the maelstrom around you.\u00a0 Presented with these mental pictures and the recommendations from so many of us that have done deals with and without investment bankers, you may lean toward interviewing a group of your industry\u2019s best for the size of your deal, and being convinced that creating such a team is a good investment.<\/p>\n","protected":false},"excerpt":{"rendered":" Many CEOs have asked me if I felt an investment banker adds value if the buyer has already been identified. Investment bankers sometimes slow the process by requiring a \u201cdeal book\u201d to be prepared containing considerable information about a company … Continue reading