Should a startup engage a banker when there’s inbound acquisition interest? I have a point of view, but I’m genuinely curious here.
Here’s the background:
A potential acquirer reached out to a client, who is now considering the opportunity.
Their investors and advisors are all telling them to engage a banker to run the process and ensure the best potential outcome.
I feel like the lone dissenter in the group.
Here’s my point of view:
1) Bankers are primarily useful in two situations:
- an extremely desirable company decides to sell and the banker is effectively an order taker who plays “bad cop” by pitting aggressively interested buyers against one another while the founders remain “good cops”.
- a distressed company decides to sell and the broker is the most efficient way of letting the market know that there’s a bargain to be had.
2) If a startup is not in the former group (highly desirable), then the presence of a banker signals that they are in the latter group (distressed).
3) Most growing startups are not in the “highly desirable” category. They’re also not “distressed” but hiring a banker will more likely make them appear in the latter category.
4) People frequently suggest using a banker to engage additional buyers, but this is generally ineffective. A banker can’t sell a “story” to an acquirer any more than an intermediary can create VC investment interest. Either the startup is buzzworthy enough that players will fight to be involved, or the CEO needs to be telling the story.
So, that’s my point of view. But I’m potentially (probably?) wrong here.
Founders and investors, please tell me about your experiences and expand my thinking. I would really appreciate that.