Buying or selling an auto center can be a challenging, confusing, and highly complex process, that can be further complicated when a real estate transaction is part of the deal. While some individuals wish to go it alone in undertaking this type of transaction, they may lack the specialized knowledge to identify the correct market price for the business and/or real estate in question, the connections necessary to produce an optimal deal, or the time to effectively manage a transaction while attending to their current business ventures amongst other things.
Though there is a strong temptation to avoid the cost of using an investment banker as an intermediary when conducting an auto center transaction, their contribution to the process adds value that more than compensates for the additional expenditure.
What Is an Investment Banker?
Before discussing how an investment banker can add value to your transaction, it is important to identify what an investment banker actually does.
Investment bankers facilitate complicated financial transactions, frequently structuring acquisitions, mergers, and sales. They also are involved in issuing securities as a means to raise capital, but that subject is beyond the scope of this article.
Ideally, investment bankers are experts in their particular field with the insight to identify risks and opportunities, having an in-depth understanding of the current investing climate.
How an Investment Banker Can Add Value to Your Auto Center Acquisition or Sale
Far from being mere number crunchers, or the wheelers-and-dealers seen in Hollywood films, investment bankers possess a diverse range of skills and abilities that all contribute to the structuring of the most advantageous deal for both buyer and seller.
The following list comprises the main attributes that a qualified investment banker brings to the table to maximize the value of your acquisition or sale:
- Investment Bankers Have Strong Quantitative Abilities (i.e. They are very good at math.)
An investment banker’s quantitative acumen is extremely important in identifying the correct market price for an auto business as well as any associated real estate that is part of the transaction. They apply specialized financial mathematical analyses to arrive at the appropriate market price.
An incorrect sale price for the business will result in a suboptimal outcome for the parties involved. If the price is too high, then the business may not sell. If the price is too low, then the seller is giving away value that they otherwise could have captured. And, while it may be tempting to accept on trust the offer of a known colleague, sellers must be aware as to whether this offered price matches the market price.
On the other side, an investment banker can advise a potential investor whether the asking price for a business is too high.
Additionally, an investment banker’s adeptness in evaluating numerical data can assist buyers and sellers in deciding whether to include real estate in a transaction if the option exists.
The specialized experience of an investment banker is unparalleled when it comes to conducting numerical analyses to determine pricing.
- Investment Bankers Are Excellent Communicators
That investment bankers are able to communicate unambiguously and effectively is important on several fronts.
From the seller’s perspective, it is important that an investment banker be able to articulate the reasoning behind a recommended sale price as well as any possible advisement that pertains to real estate holdings. Financial concepts are far from intuitive, so it is important that the investment banker be able to translate these concepts into working terms.
Secondly, an investment banker plays a key role in marketing a business for sale. Beyond financial analysis, the investment banker can draw up a broad and comprehensive overview of a business, highlighting its key selling points. This information can be assembled into a thorough presentation package that explains to potential investors the nature and workings of the business operation under consideration.
This clear communication to both buyers and sellers helps to remove confusion and overwhelming complexity from the transaction, enabling them to better consider their options and assisting them in making the best decisions for themselves.
Adroit communication is absolutely critical in another aspect of facilitating a transaction.
- Investment Bankers Are Highly Skilled Negotiators
All is for naught if an investment banker cannot structure a mutually beneficial trade between parties. As such, investment bankers must maintain strong communication with both buyer and seller to ensure that they are able to cooperatively achieve the best possible outcome.
As a negotiator, an investment banker must be quick-witted and persuasive with an eye to creative problem-solving. Not seeking to exploit one party for the benefit of the other, the savvy investment banker wishes to reach a deal that both parties can agree to with confidence and satisfaction. Game theorists need not apply. An investment banker cannot expect to have many clients in the future if he or she develops a reputation for cheating one side of a transaction for the other’s gain.
In this way, an investment banker contributes tremendous value by ensuring that a transaction meets both the buyer’s and seller’s financial goals.
- Investment Bankers Protect Confidentiality
Frequently automotive business owners require confidentiality when putting their business on the market. The major reasons that sellers wish to keep a possible change in ownership confidential are:
- To avoid customer flight should they be concerned about the continuation of the business, which in turn would harm the prospects of a profitable sale
- To avoid losing the top talent among their employees who might look for other employment when fearing a change in management
- To protect their financial information and intellectual property rights
To maintain confidentiality, an investment banker can require all parties to a sale to sign non-disclosure agreements. Once signed, the seller is willing to share proprietary information to the potential buyer while ensuring that news of the sale remain private and that the information shared remain confidential and not be revealed to a third party.
Should a potential buyer violate the terms of the non-disclosure agreement, the business owner has the right to sue for compensation.
Yet again, the communication skills of the investment banker come into play so that they can explain to prospective buyers why non-disclosure agreements are necessary as well as why access to certain information may be limited.
A major perquisite of an investment banker’s non-disclosure requirement is that it serves to qualify the buyer. Essentially, it identifies the individuals or entities with a sincere interest in acquiring a business and excludes those only interested in mining for inside information.
- Investment Bankers Have A Solid Network of Industry Connections
To aid clients who need supplementary assistance with financial, legal, or other business-related matters, experienced investment bankers have a highly developed network of industry connections from which to draw in order to provide useful referrals. Much as a primary care physician may refer a patient to specialists to treat their specific needs, so an investment banker may refer a client to certain industry professionals to optimize their business’s wellness to ensure maximum enterprise value.
Knowledgeable automotive business investment bankers are capable of reading the client’s needs and directing them to a range of professionals from attorneys to insurance agents to real estate agents, vendors, lenders, accountants, and other industry professionals. The goal is to connect the client with the right specialists to address any aspects of the business or legal process that might become obstacles to the most advantageous transaction.
An investment banker, therefore, generates a sort of network effect by bringing disparate interests to bear on a given deal, which synergistically increases the value of the transaction for all parties concerned.
- Investment Bankers Display A Tireless Work Ethic
Investment banking is not for the faint of heart. It requires dedication, patience, attention to detail, and substantial time to structure a successful financial transaction. At the outset of their careers, many investment bankers work 60-70+ hour work weeks in a dues-paying trial by fire.
The ingrained habit of hard work is a massive benefit to the clients of an experienced investment banker. They can expect their investment banker to approach their project with focus and commitment, executing a transaction with a superior level of efficiency and know-how.
The net result is that the client saves time, energy, and money, allowing them to remain focused on their current business ventures and other pursuits.
Black Iron Advisers Can Help
The investment bankers at Black Iron Advisers possess the qualities described above and more. As one of the few FINRA licensed investment banks focused on serving franchised and independent auto centers, Black Iron Advisers can represent their clients in the full breadth of transaction structures. They were founded with a client first philosophy with their only priority being maximizing value for you. If you want to learn how an investment banker can help you, please contact Black Iron Advisers for further information.