Our by-the-hour-model allows us act as a counselor, working alongside our clients to help them achieve their objectives. It seems like a little tweak, but the billing model allows us to help in many situations where traditional investment bankers cannot. Here are the stories of a few recent assignments:
1. “One-off deal” – when our client knew who they wanted to negotiate with and they didn’t want to create an auction.
When a physician group came to us, they had received an unsolicited offer for their practice from a private equity backed roll-up. We guided them through the due diligence, built a financial model for their practice, represented them in negotiations and helped them to understand the difference between being compensated as an owner and being compensated as a doctor. Most importantly, we helped them understand what a fair offer would look like. When the offer came back, it was fair, the doctors agreed that it was fair —and then they declined it. In the end, they decided that they valued their autonomy more than the money. In this case, “no deal” was the successful outcome.
2. “Making a decision” – when our client wanted to assess ‘internal’ and ‘external’ options.
One of our clients has built a profitable, fast growing business. He wants to sell most of the company, ideally to his management team, and carve out a small piece to keep for himself. He has to decide on a way to finance it and has to have buy-in from his team. Our first step was to interview the team and find out what they want out of a possible deal. Next we determined how to split the company and how to finance the transfer. Our role has been to work out the details and give everyone involved a straightforward, unambiguous set of options so that the decision is as clear as possible.
3. “Late in the holding period VC investment” – when multiple scenarios could be success.
Recently, we have been working with a healthcare software company. Their software is truly innovative and useful, but their sales cycle is long. Their investors were ready for cash returns or at least breakeven cash flow – either would work. We developed an investor presentation, and ran a version of the traditional sell-side M&A process, soliciting interest in customer relationships, joint-ventures and acquisition of the company. They will be able to work with one or more of theses potential partners to end the cash burn, sell the whole company or both. Any choice might be a successful outcome.
4. “Early stage” – when the situation is too small for a transaction fee.
A start-up financial services company approached us. They had one large investor and needed more money to expand. In the interest of frugality, they wanted to do as much of the capital-raising work as they could themselves. We worked with them to determine just how much money they needed and to establish the most effective case for fundraising. Then we helped them polish their fund-raising material and presentation. They have done most of the nitty-gritty work themselves, only using us to expand their capacity when necessary. Not many investment bankers would or could work this way.