By Belinda Ephraim, Managing Director

Recently, I was in conversation with several investment banking firms around the shift toward industry specialization versus being more of a generalist. The consensus seems to be “this is what all of our clients want.” However, as founder of a DTC startup and M&A banker whose industry sector experience focuses on the intersectionality of consumer, manufacturing, and digital transformation, I enjoy capitalizing on my earlier Wall Street banking experience as a generalist. This unique ability gives me the advantage to offer a holistic perspective that ensures my clients successfully exit their businesses at maximum value, which is what matters most.

The decision to sell your business is an important one and requires careful consideration of several factors. One of the most critical decisions you will make is selecting the right M&A investment banker to represent you in the transaction. While there are many qualified professionals to choose from, one question that often arises is whether to hire an M&A investment banker who specializes in your industry or a generalist. In this article, I explore the pros and cons of each option to help you make an informed decision.

Selling your business is a complex and often daunting process. One of the key decisions you’ll need to make is selecting the right investment banker to help you navigate the transaction. This decision can impact the success of your sale and the value you receive for your business. Many business owners are unsure whether to hire an industry specialist or a generalist. In this article, we examine the advantages and disadvantages of both options, so that you can make an informed decision about which type of investment banker is best for you and their alignment with your long-term goals.

Industry Specialist Investment Banker

An industry specialist investment banker has extensive knowledge and experience in your specific sector. They understand the unique challenges and opportunities that only exist in your industry, and they have a vast network of contacts within it. They can provide valuable insights and advice throughout the sales process, from preparing your business for sale to finding the right buyer.

Advantages

• In-depth knowledge of your industry: An industry specialist investment banker will have a deep understanding of your business and industry, which can help them position your company for sale more effectively.
• Access to industry-specific buyers: An industry specialist investment banker will have established relationships with potential buyers in your industry, which can increase the likelihood of a successful sale.
• Understanding of market trends: An industry specialist investment banker can provide insights into market trends, competition, and valuation, which can help you make informed decisions throughout the sales process.

Disadvantages

• Limited perspective: An industry specialist investment banker may have a narrower perspective, which could limit their ability to see opportunities and potential buyers outside of your industry.
• Conflict of interest: An industry specialist investment banker may have relationships with potential buyers, which could create a conflict of interest and limit their ability to negotiate on your behalf.

Generalist Investment Banker

A generalist investment banker has experience in a wide range of industries and can bring a broader perspective to the sales process. They can identify potential buyers from different sectors and provide valuable insights into market conditions and trends.

Advantages

• Broader perspective: A generalist investment banker can provide a broader perspective and identify potential buyers from different sectors, which can increase the pool of potential buyers and drive up the sale price.
• Less potential conflict of interest: A generalist investment banker is less likely to have pre-existing relationships with potential buyers, which reduces the risk of a conflict of interest.
• Greater flexibility: A generalist investment banker can adapt to changing market conditions and identify new opportunities throughout the sales process.

Disadvantages

• Less industry-specific knowledge: A generalist investment banker may have less in-depth knowledge of your industry, which could limit their ability to position your company for sale effectively.
• Fewer industry-specific contacts: A generalist investment banker may have fewer established relationships with potential buyers in your industry, which could make it more challenging to find the right buyer.

In conclusion, deciding whether to hire an industry specialist or a generalist investment banker to sell your business requires careful consideration of several factors. While an industry specialist can provide valuable insights and contacts within your industry, a generalist can bring a broader perspective and identify potential buyers from different sectors. Ultimately, the decision comes down to what’s best for your business and your goals for the sale. Consider your industry, your company’s unique attributes, and your desired outcome when making this decision. It’s important to interview potential investment bankers and ask about their experience, network, and approach to selling and buying businesses.

Ultimately, the most critical factor is finding an investment banker you trust and who will represent your best interests throughout the entire sales process. Look for someone who has a proven track record of success, strong communication skills, and a deep understanding of your business, industry, market dynamics, macro-economic trends, and potential buyers (within the industry and those in complementary industries).

Whether you choose an industry specialist or a generalist, the key to a successful sale is to work closely with your investment banker to prepare your business for sale, identify potential buyers, and negotiate favorable terms. Selling a business can be an emotional and challenging process, but with the right investment banker by your side, you can maximize the rewards of a lifetime of hard work and achieve a successful sale.

If you’re considering selling your business and need help choosing the right investment banker, contact me today. Our team of experienced professionals has a proven track record of success in helping business owners navigate the sales process and achieve a successful outcome. We offer a range of services, including valuation, buyer identification, negotiation, debt placement, and transaction support. Whether your company is generating $5 million or $100 million in revenues, our knowledge and expertise help ensure your process is as smooth as possible.

So, after reading all this are you going to work with an investment banker who is an industry specialist, a generalist, or both? Let me know in the comments below!

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Sources:

• CFA Institute
• Forbes Article
• Wikipedia
• Image: glowonconcept/ Adobe Stock