|
Jul28
|
Over the years that we have been in business, I have learned that we, meaning my firm, can be of the most help to the smartest people.
You would think that it would be otherwise. Wouldn't someone who doesn't have a clue benefit more from our help? Clearly someone who is at "level one" has more room for improvement than someone who is already at level ten, right?
 Nope. It doesn't work that way. The smarter people are, the more likely they are to listen to everything you say and extract all the value from it--and ignore the balderdash. At the other end of the spectrum, folks tend to ignore everything we say, rejecting golden nuggets right along with the balderdash.
Recently, I contacted a CEO offering to help him sell his business--if the time were right. He took the time to send me an e-mail telling me he didn't need my help and never would, after all, he'd been offered a buyout by a private equity group already and had passed it up.
I responded that we'd gladly take him off our list and I invited him to get back in touch if he ever decided he needed our help.
|
|
Mar 7
|
Ryan's comment suggested to me that I should add a bit to my comments about dutch auctions.
 Some have written that one of the big advantages of a dutch auction is that lower fees result. Clearly, there is a lot I don't know, but I can't see how lower fees are inherent in this alternative process. Well executed, I don't think there is much difference in the amount of work required--and therefore the costs associated--with one method of distribution over another.
In fact, the role of the investment banker is vitally important and should be well rewarded even in a Dutch Auction IPO. For instance, we had a client a few years ago that spent in the neighborhood of a quarter million dollars preparing software and legal filings to conduct a self managed IPO. Didn't work. Period.
|
|
Mar 6
|
Know More:
Acquisition, Buying a Business, Due Diligence, Entrepreneur, Entrepreneurship, Executive, FAQs, Fairness Opinions, Investment Banking, M&A, Merger, Middle Market, Raising Money, Selling a Business, Transaction Costs, Middle Market
One of the most frequently unasked questions, but one that everyone wants to understand, is what is a fair M&A advisory fee?
To be clear, for a firm that genuinely plays the role of a broker-dealer or investment bank, operating under the requisite legal framework, the answer falls into a fairly narrow band.
 Ignoring the costs of any required fund raising (see my post on fees for raising capital) the fees for advising the buyer or seller in the middle market arena, tend to follow the 5-4-3-2-1 "Lehman Formula."
The Lehman Formula provides that the advisors get 5% of the first million, 4% of the second, 3% of the third, 2% of the fourth and 1% of all the consideration above four million.
|
|
Mar 2
|
Know More:
Angel Investment, Capital Sources, Entrepreneur, Entrepreneurship, Fred Wilson, Hal Halladay, Investment Banking, Tim Stay, Transaction Costs, Venture Capital, Entrepreneurship
A discussion is raging on the web among bloggers who have an opinion about Advisory Capitalists.
 First, let me tell you what I think is meant by this new term. I believe it is intended to represent a group of people who have become powerful (my word) in the web 2.0 economy by being early adopters of new technologies, specifically by blogging and networking on-line. They have developed genuine expertise and influence in an emerging industry--expertise and influence that previously was found primarily among venture capitalists whose money garnered them their power. Advisory capitalists do not contribute capital, but provide that power and influence that venture capitalists traditionally do.
By extension, the label of "advisory capitalist" can be applied to any advisor, consultant, guru or guide who provides, under any basis of compensation, assistance or advice to early stage businesses.
|
|
Feb12
|
Know More:
Acquisition, Buying a Business, Entrepreneur, Executive, Fairness Opinions, Investment Banking, Merger, Selling a Business, Thorpe Capital Group, Transaction Costs, Thorpe Capital Group
Entrepreneurs and executives, often ask when, or in the alternative, why they might need a fairness opinion on a purchase or sale transaction.
 The primary reason for the Board of Directors of a selling company to seek a fairness opinion is to establish, primarily for the benefit of minority shareholders who lack board representation or whose votes won't count (because of their relatively low shareholdings), that the transaction as contemplated is fair to all shareholders.
The Board is, as you might imagine, seeking to insulate itself from claims of those who may disagree with the decision. There are a variety of legal maneuvers employed to manage this risk, including the use of an auction procedure to demonstrate that the highest or at least best bid has been received, reviewed, negotiated and ultimately accepted. Good counsel will usually recommend a "belt and suspenders" approach, utilizing multiple means of protecting the board from rancorous shareholders.
|
|
Jan25
|
The most common question I think prospective clients have of investment bankers--and rarely ask--is what does it cost?
 It is remarkable that investment banking fees for raising capital, when calculated as a percentage of the equity capital raised, are fairly flat even as scale increases. For instance, a $5 million private placement of venture capital or private equity is likely to cost about six percent, plus or minus a point or two. At the same time, a $500 million public offering is likely to be subject to approximately the same fee, that is, about six percent, plus or minus a point or two.
In addition to the banker's fees, expect legal costs to fall in the range of one-half to one percent of the capital raise--no matter how big the transaction gets. Other diligence costs, including the investor's costs, should also fall in that range. In addition, the investor may asses a point or two (or three) at closing.
|
Nope. It doesn't work that way. The smarter people are, the more likely they are to listen to everything you say and extract all the value from it--and ignore the balderdash. At the other end of the spectrum, folks tend to ignore everything we say, rejecting golden nuggets right along with the balderdash.
