Why Middle-market Businesses Need an Investment Banker


Investment bankers add a lot of value to merger& acquisition transactions. However, if a middle-market transaction (usually transaction value varies between $10 million and $500 million) occurs without an investment banker (where business owners take the charge), it can be inefficient. 

All merger and acquisition transactions benefit immensely from an investment banker. They make these transactions easier to handle. A career in investment banking is incomplete without mergers and acquisitions for an investment banker.  

Private equity firms involve investment bankers for nearly all their transactions (not just buyouts). If private equity firms rely on investment bankers to handle transactions, there’s no reason why business owners shouldn’t involve an investment banker to carry out transactions and assist them throughout an M&A transaction. A Fairfield University report found that in 84% of the cases where investment bankers were involved final sales price was either equal or higher than estimated price by the banker. 

This is one major reason for middle-market transactions to have an investment banker. The following are other reasons why business owners should hire an investment banker while they are in the process of selling a business. 

  1. The middle market is opaque 

You can’t depend on the stock market to see a company’s worth. Business owners who typically do one transaction in their lifetime, can’t possibly know the worth of their business in a real sell-side transaction. Estimating the worth of a business is a complex process. Investment bankers have tremendous experience in estimating the valuation of a business, across several industries. 

Many business owners think they can address this challenge by calling their competitors and building a sale process and get a credible valuation of their company. Valuation of a business is a deep sea; they are merely scraping the surface of the sea by doing so. An investment banker helps business owners to find a realistic valuation for their company. 

  1. Lack of market information 

Nearly 3000 middle-market private equity firms operate in the U.S. These firms have millions of dollars in funds, which makes them potential buyers of large companies. So why operate in the middle market?

Middle market business owners don’t have access to finance-related information. Hiring a certified investment banker allows business owners to have the same level of knowledge as that of a private equity firm and make the business selling process easier.

Looking for investment banking certifications from global bodies is one way business owners can ascertain the capability and worth of an investment banker while hiring them.   

  1. Spread the word about sell of your business 

Business owners are typically approached by competitors or a few known business, which they have often heard of. However, this is not enough to make a sale. 

Investment bankers bring competitors knowledge and other relevant which aids business owners to find suitable buyers. An investment banker will add more buyers that you may not hear of. 

  1. Lack of staff with the knowledge of finance 

Selling a company is a complex process. It requires a multitude of resources including financial statements and memorandum, which are necessary in order to sell the company. 

Hiring an investment banker will make the selling process easy. They will prepare all the information necessary for a sale and make sure that materials are appropriate for the transaction and position of the company. 

  1. Add credibility to your business 

Hiring investment bankers add more value to your business. Businesses will see your business as a credible one and trust that you are actually looking to sell your business and just ‘shopping around’ seeking valuation. It also gives signals to other businesses that you’re ready to sell and is ready to have a negotiation.

In a nutshell, an investment banker fills the gap left due to lack of knowledge of business owners. By bringing a banker on board, they make selling their business easier. 


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