What could investment banking do for your business?

When most people hear the term “investment banking,” they likely think of Wall Street: publicly traded mega-corporations doing mega-sized deals. Gordon Gekko types.

In actuality, if you own a business or a medical practice, even if it’s not publicly traded on Wall Street, investment banking could be relevant to you. Whether you are looking to grow or sell, or need help with succession planning—it may make sense to include investment bankers on your team if your business is valued at $50 million or more.

Think of it this way: if you were selling your house, you would likely hire a realtor. The realtor would assess the strengths & weaknesses of the property, work with you to address & minimize the latter, and then price it accordingly. But whereas real estate listings are public and you can use comparable listings to help determine price, the market for small to medium-sized businesses is opaque. You might think your business is worth $40 million when it’s really worth a lot more. A professional who has in-depth knowledge of activity in your specific industry can provide valuable perspective and direction.

But note: you don’t want to wait until you are ready to sell your business to start working with an investment banker. Ideally, you have a relationship in place by the time you are ready to sell. Or your goal may not be a sale—perhaps you are looking to grow and acquire, or do a partial recapitalization; an investment banker can lend expertise in all of these areas.

It’s not unlike working with a financial advisor, but whereas I advise clients on their personal affairs, the investment bankers advise on the business assets and related planning considerations.

Earlier this month, I attended a meeting with a client and several members of the Raymond James investment banking team, including Ken Grider, Managing Director; and Zach Kuzemka, a senior associate. By the way, the last time I met with Ken was here in the big city of Hagerstown, Maryland.

At this meeting, we discussed the vision that the client has for the future of the business, the current challenges, and the opportunity set. The client is considering some strategic acquisitions but also realizes there are benefits to staying “small” at $50 million in annual revenue. As the leadership team works to complete their new strategic plan, the investment banking team will review it and provide feedback. Even though no immediate banking activity is taking place, the relationship is useful to the client because the bankers can provide an outside perspective and guidance, with a depth of knowledge including trends and valuations in their subsector.

If you own a business, it’s most likely your largest asset. How good is your planning if you aren’t exactly sure how much the business is worth or how marketable it is, or if you don’t have a succession plan in place? What you don’t know *can* hurt you, so don’t wait too long to include an investment banker in your planning.

If you are not sure where to begin, let’s discuss.

P.S. Zach recently joined me for a podcast episode of FRESH OFF THE VINE to discuss these aspects of investment banking. Click here to listen.

Any opinions are those of Karen Coyne and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.