The Benefits of Hiring an Investment BankThe Benefits of Hiring an Investment Bank
A key benefit to using an investment bank is the objectivity of bankers.
January 30, 2023
Seth Collins, Managing Director at martinwolf
For the last 30 years, Seth Collins has been a pillar in the IT industry. In 2004, Collins was introduced to martinwolf while selling the first of several businesses that he owned or operated, Manchester Technologies. A few years later, Marty Wolf, founder of martinwolf, approached Collins with an interesting opportunity: Come work for the firm to help other owner/operators in the IT industry achieve financial freedom.
Collins joined the firm in 2013, and he is now managing director, leading the firm’s core engagements and business development. He feels strongly about the advantages of using a bank.
“I failed in my first attempt to sell my business because I tried to do it on my own,” Collins explained. “In my experience, buyers are usually more sophisticated and less emotional than proprietors. The reason you hire a banker is because it increases the likelihood of successfully closing a transaction. Genuine buyers appreciate your efforts when you hire a bank because they know it increases the likelihood of completing that transaction.”
A key benefit to using a banker is the objectivity of bankers, added Collins: This “helps take you off the frontline, creating separation during challenging negotiations and keeping the buyer honest throughout the entire process until close.”
Once you elect to sell your IT business, Collins and the team of experts at martinwolf offer industry knowledge to help make your sale smoother.
Banks, Due Diligence and Selling
Due diligence is a key component to the M&A process. martinwolf’s proprietary approach helps evaluate and qualify the interest level of each buyer through its multi-step methodology. It is critical to select the best possible buyer before going into exclusivity. “Once exclusive, leverage will be more weighted with the buyer,” said Collins. “So, after selecting the right buyer, our goal is to keep the buyer honest — not just to finish what we started, but to finish where we started.”
Maximizing the Value
The first step to maximizing the value of your company is to properly prepare your business for a successful transaction. It starts with aligning your objectives, interests and desires with a thoughtful go-to-market strategy. The next step is to find the right buyer who meets or exceeds those objectives.
“We have carefully curated a network of buyers who have qualified themselves. We’ve done deals with them in the past and, basically, they are trusted partners,” said Collins. “The ability to pitch a new prospect to a business you haven’t done business with before separates one bank from another. We’re very good at that — offering not just the obvious opportunities, but the not-so-obvious benefits.”
At martinwolf, there are four factors influencing the sale of an IT business:
Total enterprise value (EV) of cash at close
EV over time (for example, as earn-outs)
Qualitative items (such as a soft landing for employees)
Highest likelihood for success (for example, certainty to close)
How to Strategically Sell My Business
Collins has one simple approach to timing the market: Don’t. “The right time to sell your business is the right time for you and your family, not for the market. Don’t chase the market. Look at it for when it fits into your lifestyle, not because you think the market is supposedly ideal. That is just opportunism, not strategy.”
With this mindset, the martinwolf team uses a calculated approach to selling your business. A combination of comps, formulas, market research and overall experience provide the real number, not an ideal. Collins says banks and sellers can better align to ensure all parties are satisfied.
“For most founders/owners, their business represents most of their net worth,” he said. “After one’s family, the business tends to be the most important thing in their life, so the emotional weight of selling their business only increases risk that the deal won’t happen or that you won’t maximize value if you don’t use a bank you can trust. It’s safe to say when it comes to M&A, it’s not your bank — it’s your banker.”
The right banker is the banker who earns your trust.
martinwolf, through its ITX offering, has partnered with Channel Futures to launch an M&A Marketplace for the global Channel Futures community of owner/founders. Visit the marketplace
This guest blog is part of a Channel Futures sponsorship.
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