Should You Hire a Local or a US-Based Investment Bank to Sell Your Business?

If your company is based outside the United States, you may feel that working with a local investment bank instead of a US-based investment bank will better serve your goals when selling your business or raising capital.

In reality, the exact opposite may be true, since domain expertise, proximity to buyers, and alignment of interests will play a more important role than physical or cultural proximity to the seller.

When contemplating whom to hire to represent you in the sale of your business, consider the following questions.

• How important is domain expertise when selling my business?
• Will physical distance impede the way a process runs?
• Is there a benefit to including American buyers in my sales process?
• Could cultural differences affect the way a deal operates?
• Which banks have experience running an international process?
• Which banks (local or otherwise) have a conflict of interest?

How important is domain expertise when selling my business?

A critical aspect of achieving a great outcome in the sale of your business is framing the company’s metrics and intangibles in a way that addresses buyers’ key objectives.

Knowing what and how to frame a business is dependent on the business model. For example, the aspects of a SaaS business that you should highlight for buyers will differ greatly from what you would emphasize in a services business. Consequently, when considering banks to represent you, you should prioritize their domain expertise over their physical location.

Will physical distance impede the way a process runs?

Working in different geographies doesn’t need to affect how smoothly a process runs. Especially now that doing business over the phone/Zoom has become the norm, conducting an entire transaction virtually across geographies carries no disadvantages.

Time zones need not be an issue. As long as your bank is available when you need them, their proximity to the buyers will be more valuable than their proximity to you, the seller. On that note, it’s important to recognize that, particularly in the software & internet space, some of the best buyers are located in the United States.

Is there a benefit to including American buyers in my sales process?

The US represents a large market with a lot of capital as well as a large universe of exit paths (e.g. IPO, large American PE firms, etc.). These factors create better returns and thus allow investors and buyers to be more aggressive in what they’ll pay for a company.

Because American buyers/investors are in a position to spend more for an asset, having these parties participate in your sales process can raise the bar both in terms of valuation and deal structure.

Even if you don’t end up selling to an American firm, including US-based companies in the sales process can materially improve your outcome. A US-based bank will better understand the American buyer and investor landscape and therefore be better equipped to market your company to the best buyers and investors.

Could cultural differences affect the way a deal operates?

There will certainly be some cultural and linguistic differences between your company and a US-based bank (think "Turnover" as opposed to “Revenue”) . These differences, however, are not significant enough to impede a deal when the incentives between the founder and an M&A advisor are aligned—given that the bank has experience running international processes.

Which banks have experience running an international process?

While having your bank be "local" isn’t important to the success of a transaction, that your bank can successfully balance the norms of disparate international markets is important. If a bank has no experience in this area, the result will be a sup-optimal process. For example, understanding that the early seller diligence expectations from European investors is much greater than for US investors is important because it allows for appropriate resource allocation by your bank.

Which banks (local or otherwise) have a conflict of interest?

Another point to consider is whether or not banks in your region have a conflict of interest—an issue common both inside and outside the United States.

When an investment bank offers both buy-side and sell-side services, they are incentivized to give favors in sell-side transactions to the buyers they could represent in future deals. As a founder, your best play is to hire a bank who exclusively works on the sell-side so you know that your interests are aligned.

Selecting the Best Representation

Ultimately, your decision in whom to hire will boil down to the bank’s:

• Domain expertise
• Experience representing companies like yours
• Experience running sales processes internationally
• Ability to place your company in front of the best buyers
• Ability to create a competitive sales process
• Potential conflicts of interest

If you can find a bank who is able to meet these criteria, local or otherwise, then you’ve found a good fit.