Hiring an investment bank makes sense when several credible buyers will compete for your business and you want that competition organized. Below that threshold you are paying for choreography, and the retainer starts whether or not the process ever produces a bid.
Get quotes to sell my business
The test is buyer depth, not revenue
If you can name five acquirers who would plausibly pay a full price, a run process is worth its fee, because the difference between the first offer and the best offer will exceed it. If you can name one, an adviser cannot manufacture the others, and the money is better spent on a lawyer and an accountant testing that single offer.
What the mandate costs
A retainer, monthly or at milestones, plus a success fee on a declining scale with a minimum. Whether the retainer is credited against the success fee is negotiable and worth asking in writing. The tail, and whether it covers all buyers or only introduced ones, is the term most likely to cost you later.
Questions that expose a weak team
Who by name will run the process day to day, and how many other live mandates do they have. How many buyers will be approached, and how many are firms they have closed with in the last two years. What happens if the highest bidder is a client of their buy side desk. Answers in writing, please.
Questions people ask about hire investment bankers
Is an investment bank different from an M&A adviser?
For a lower middle market seller, not meaningfully. Both run processes; a bank is usually larger and has a higher minimum fee.
What size business do banks take?
Most state a minimum fee rather than a minimum revenue. If that minimum is a large share of your likely price, look at boutiques instead.
Can I hire one part way through a sale?
Yes, though a bank asked to take over a process already shown to buyers has less to work with. Check any existing agreement's tail before signing a second one.