Negotiating from a Position of Strength
We recently helped a neighborhood business, owned by a doctor and her husband, sell for more than ten times its earnings.
We met this business owner through a bank and its investment banking department. Our business is helping cross-selling work more effectively for banks and their investment banking teams.
So this story is as much about how we helped the bank as it is about how we helped the business owner reach a successful outcome, though they absolutely did.
Here’s the challenge the bank was facing.
It is a regional bank that aims to provide full-service banking in all the markets where it operates. It has market presidents leading those regions, along with home office departments, like investment banking, that are designed to serve customers across those markets.
The bank expects its in-market teams and home office departments to work well together. At the same time, it expects each division to hit its performance targets.
That creates a very specific dynamic within investment banking.
The department typically only works on deals where fees exceed one million dollars on a contingent M&A engagement. In practice, that means they focus on transactions north of forty million dollars.
That works well for the investment banking team when those deals are available. But in reality, a forty-million-dollar business sale is relatively rare in most markets.
By contrast, a ten-million-dollar business sale, like our client’s, is much more common.
And both types of business owners need investment banking support at roughly the same frequency, which is typically once in their career.
It is also worth noting that a one-million-dollar fee is not especially large when you factor in the amount of work and risk involved in earning it.
So the question becomes: how do you make cross-selling work in a way that serves all of the bank’s clients?
There are a few options, but each comes with trade-offs.
You could ask market executives to only refer businesses larger than forty million dollars. But that does not work well in practice, because it makes the investment banking function feel disconnected from the day-to-day realities of the market.
Alternatively, you could have market presidents refer smaller deals to local business brokers. But that creates a mismatch in expectations. The home office operates with a certain level of professionalism and a specific approach to client service, and that standard would not always carry through.
The bank’s solution was to work with Oaklyn Consulting to serve smaller clients.
This works because we provide the level of professionalism the bank expects. And by billing on a time-and-materials basis rather than relying on contingent fees, we are able to work with clients of any size.
The result is a system that works for everyone.
Market presidents get support on deals that matter to them and their clients. The investment banking department can extend its services in a way that aligns with its standards. And the bank, as a whole, is able to deliver on its promise of being a full-service partner to both large and small businesses.
That alignment is what makes cross-selling actually work.