What Does a CFO Look for in an Investment Banker?

Services

• The preparation for a first private placement or public offering of stock or bonds is long and involved. Your investment banker should start out with a thorough due-diligence inspection of your company books, contracts and production prior to promising success in an offering. Often financial records, assets and business processes need to be restructured to make the offering more attractive from a credit standpoint. Look for an investment banking firm that has the resources to provide the advisory services you need.
  
  

Funding Capability

• Completion rate is the most important quality of an investment banking firm. It is easy to promise $30 million in 30 days but, as any CFO who has dealt with an investment banker, extending the promised 30 days out for months of non-performance, is not a realistic promise. Check references and deal history. Call up the CFOs of recent deals in your industry and ask about the performance of your investment banker. Look for an investment banking house that has extensive clientele that follows your industry and buy the types of securities you will be offering.
  
  

Reputation

• Investment bankers make their money by charging a management fee and commission on the securities they sell. If they are willing to underwrite your issue, they will buy the securities from you first and take the risk of selling the securities in the public market. If they are not willing to underwrite the deal, they will work on a best efforts basis, selling as much as they can and making their fees from the transaction commissions. A reputable investment banker will not try to charge large fees unless he has your deal sold. There may be small fees for legal work and document preparation, so ask about fees and compare the answers of several different investment banking houses.
  
  

Considerations

• Sometimes you can't work with the top-of-the-line investment bankers and must settle for smaller firms and consultants. Again, there is a difference between empty promises and professional performance. You may be better off choosing the investment banker who seems demanding and critical versus the one who tells you exactly what you were hoping to hear.