1. What is an investment bank?
An investment bank (IB) provides many financial advisory services to people and entities. Some help companies and governments issue securities and some help investors purchase securities, manage financial assets and trade securities. The McLean Group is a specialized investment bank, also referred to as a boutique bank, meaning:
- We are smaller and offer more personalized service than larger IBs.
- We specialize in a particular area, which is mergers & acquisitions (M&A) and capital formation for middle market businesses.
- We serve a particular niche, in our case middle-market companies with up to $500 million in annual revenues.
- We do not manage financial assets, trade securities, manage IPOs, or provide investment advice. Clients requesting such highly specialized services are referred to professionals whom we trust for their knowledge and abilities.
2. What is the middle market?
While the definition of middle-market varies somewhat and is often defined in terms other than revenues, a generally accepted definition is that it comprises companies generating revenues between $5 million and $500 million.
3. What is M&A?
Mergers & acquisitions (M&A) refers to the buying, selling and merging of companies.
4. What distinguishes The McLean Group from other investment banks?
The McLean Group differentiates itself from other M&A investment banks as follows:
Several of our professional staff instruct or lecture, some nationally, on M&A, accounting and business valuation.
Dedicated teams emphasize our client commitment and personalized service. At a minimum, four experts, including a valuation specialist, research analyst, and two senior-level investment bankers or principals, are assigned to each engagement.
Such a degree of support and senior experience is typically not available to all companies at larger investment banks, where junior associates often perform most of the work. This seems to be particularly true with middle-market companies in our target market.
5. Why use an investment bank when selling, buying, or funding a company?
When selling a company, an investment bank (IB) adds value as follows:
- As the company seller, you are able to maintain focus and energy on company operations, thereby avoiding unnecessary business disruptions. Your company's performance must remain strong during a transaction.
- The IB can view and represent your company objectively.
- An IB's valuation experts can find unrecognized value in your business.
- An IB can identify prospective investors, buyers, or sellers, in your or other industries. The IB teams use their extensive network of contacts and relationships to confidentially yet assertively market your business to prospective partners.
- An IB is experienced in negotiating complex transactions. Thus, because you may ultimately become partners with the future investor or buyer, the IB can insulate the future seller/buyer relationship from possible damage during strenuous negotiations.
- Your interests and the IBs interests are in alignment, as most of the IB fee is contingent upon the IBs consummation of a transaction.
6. Why does The McLean Group hold seminars?
The McLean Group offers seminars for two main reasons:
1) The education of attendees results in greater M&A-related knowledge and an increased appreciation of what we do and how well we do it, and
2) To increase our firm's visibility.
7. What's the difference between an investment bank and a business broker?
The difference between an investment bank and a business broker could be described as follows:
A business broker tends to work with smaller companies generating revenues below $2 million.
A business broker generally is not staffed with professionals and experts with accounting, valuation, research and other expertise, as is an IB.
A business broker typically employs websites and listing services to advertise a business as being for sale. An IB does not, as confidentiality is paramount.
8. How is an investment banker compensated?
An investment bank's compensation is primarily a success fee. If a transaction is not completed, the IB receives little or nothing. The success fee is generally an agreed-upon percentage of the transaction value, with a smaller percentage as the value increases.
9. Is a retainer required and if so, why?
A retainer is a payment that helps to cover the firm's administrative costs for such things as compilation of client information and research and analysis, all of which are detail-oriented and extremely time-consuming. The retainer also serves as a commitment from clients that indicate their seriousness about pursuing transactions, as opposed to mere curiosity at the opportunity costs and expense of the banker.
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