Questions to Ask an Investment Banker Before You Hire One
Questions to ask an investment banker when you are the client: a founder or owner hiring one to sell the company, raise money or make an acquisition. The list starts with the first pitch meeting, then covers the firm and its team, valuation and buyers, fees and the engagement letter, and how the process runs, and it ends with questions for your investment banker once the deal is under way. Each has a note on what a good or bad answer tells you. It is written for the client's side of the table, not for candidates asking a banker about the job.
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The questions
Each question, and why to ask it
First meeting
Which deals you closed in the last two years look most like mine?
Why ask it
You want closed deals at your size and in your sector, not a logo wall. If every example is much larger, yours would be the smallest file on the desk. Find out who ran each one and whether that person is still at the firm.
Who on your team will run my deal day to day?
Why ask it
The senior banker in the room often hands the work to an associate after signing. Ask for names and get the day-to-day contact into the meeting before you commit.
What do you think my company is worth, and how did you get to that range?
Why ask it
A useful answer names the method and the inputs: comparable transactions, an earnings multiple, the adjustments they would argue for. An answer that is only a number, with no explanation of what moves the top and bottom of the range, is a pitch rather than an analysis.
What are your fees: the retainer, the success fee, and what the percentage is charged on?
Why ask it
Get the base the percentage applies to, not just the percentage. Enterprise value, equity value, and value including earnouts or assumed debt can differ by a wide margin on the same deal.
Who would be on your first call list of buyers or investors, and why those?
Why ask it
This tests whether they have a thesis about who wants your business and why. Watch for a list that is just the obvious strategic names anyone could assemble from a trade publication.
When did you last speak with the people on that list?
Why ask it
Relationships are the product you are paying for. A banker who spoke to those acquirers this quarter is worth more than one who covered them five years ago.
From what I have told you, would you recommend a full sale, selling a stake, a raise, or waiting?
Why ask it
A firm tends to recommend the kind of deal its team is set up to run, which is not always the one that suits you. Listen for reasons drawn from your own aims: how long you want to stay, how much cash you need out, who you want owning the company. If their description of the job keeps drifting from yours, expect the same drift when the engagement letter is drafted.
How long will this take, from signing with you to the money arriving?
Why ask it
Listen for the stages they treat as slow: preparation, buyer diligence, financing, regulatory clearance. One round number with no stage detail means they have not thought about your specific deal.
Is now a good time to go to market, and what would make you tell me to wait?
Why ask it
Every advisor should be able to name conditions that argue for waiting: an unfinished audit, a customer renewal in doubt, a buyer set that is between funds. One who cannot name any is selling you a mandate, not advising you.
What size of deal does your firm usually take on, and where would mine rank among the ones you are working on now?
Why ask it
Fee size tends to decide who gets a firm's attention. A boutique for whom your deal is the largest of the year will staff it differently from a bank fitting it between bigger ones, so a frank answer about ranking is worth more than enthusiasm.
Firm and team
How many mandates is the lead banker carrying right now?
Why ask it
Ask for the number, then ask which of them are in the market this quarter. A senior banker with several live processes will be on your calls at launch and at signing, and you should know who covers the months in between.
How does your work split between selling companies, advising buyers, and raising capital?
Why ask it
The three jobs share a title and little else. A firm that mostly raises growth capital knows investors and term sheets, and one that mostly sells companies knows how to run bidders against a deadline. The bulk of their recent work should match your mandate.
Is my company big enough for an investment bank, or would a business broker or a smaller M&A adviser suit it better?
Why ask it
The labels overlap and mean different things from one market to the next, so ask what each would do differently for a company your size: how buyers are found, whether a price is published or left to bidders, how the fee is built. A banker who says plainly that you are too small for the firm has saved you a retainer.
Of the mandates you signed in the last three years, how many closed, and what happened to the others?
Why ask it
No firm closes everything, and one that claims to is counting selectively. The reasons matter more than the ratio: a seller who changed their mind is ordinary, while a run of processes that drew no bids suggests mandates were won with prices the market would not pay.
Tell me about a deal of yours that went badly, and what caused it.
Why ask it
The answer separates people who have run hard processes from people who have only pitched. Blaming the client entirely is worth noticing, since you would be the next client.
Which past clients can I call, and can one of them be an owner whose deal fell through?
Why ask it
Every firm keeps a list of happy references. The owner whose process failed can tell you whether the banker kept working and kept telling the truth once the fee looked unlikely, and that is the behavior you are hiring.
What licenses or registrations do you and the firm hold for a transaction like this?
Why ask it
Whether an advisor needs a securities license depends on the country, the deal structure and sometimes the size of the company, so ask which regulator they answer to. Many regulators keep a public register you can search, and checking it takes a few minutes.
If the senior banker on my deal left the firm partway through, what would happen to my mandate?
Why ask it
Bankers change firms, and their relationships go with them. Ask whether the engagement letter can name the people you are hiring and let you leave, without a tail, if they do.
Does your firm have any relationship with the likely buyers, including lending to them?
Why ask it
Financing the buyer while advising the seller puts the firm on both sides of your price. Have them disclose it in writing, not just describe it across the table.
Are you advising a competitor of mine now, or have you in the last couple of years?
Why ask it
Past work in your sector is where their knowledge comes from, so a yes is not a problem in itself. What you need to hear is which team did that work, what they still hold from it, and whether that client could turn up as a bidder for you.
Who inside your firm will see my financials, and how is that information walled off?
Why ask it
A good answer is a named list and a description of how research, trading, or other coverage teams are kept out. If the process sounds informal, assume your numbers travel.
Do you expect to pitch the eventual buyer for work once my deal has closed?
Why ask it
A banker who sells to the same private equity funds year after year has a repeat customer across the table and a one-time client in you. That is normal and not disqualifying. Ask how they have handled it in a hard negotiation, and notice whether the question is taken seriously or waved away.
What is going on in my sector right now that will change how buyers look at me?
Why ask it
Sector knowledge shows up as specifics you can check: who bought whom recently, which buyers have gone quiet, what has changed in how deals are being financed. General remarks about a strong market could have been written before they met you.
Valuation and buyers
Which comparable deals are you leaning on, and how does my company differ from each one?
Why ask it
Comparables are chosen, and the choosing is where a pitch gets optimistic. Ask for the size, growth and margins of each company on the list next to yours. If the flattering ones are all several times your size, ask what the ones your size went for.
If you thought my company was worth less than I do, would you tell me before I signed?
Why ask it
You are asking whether they will hold a line under pressure. A firm that wins the mandate by agreeing with the owner's number has to walk it down later, usually once the letter is signed and the first bids are in.
Which adjustments to my earnings would you defend in front of a buyer, and which would you drop?
Why ask it
An owner's salary above the market rate and a one-time legal bill usually hold up. A long list of costs that will supposedly vanish under new ownership usually does not, and a banker who strikes a few of your add-backs in the pitch is showing you how the buyer's accountants will read them.
How would you describe my company to a buyer in two or three sentences?
Why ask it
You are hearing the first page of the marketing document before it is written. If the description could fit any company in your sector, buyers will hear it that way too. Someone who has understood the business leads with the one thing only you have.
Would you run a broad auction, approach a short list, or negotiate with one party, and why?
Why ask it
A wide auction creates competition and puts your information in front of many more people. A single negotiation is quiet and leaves you with no alternative if the buyer cools. The reasoning should come from your company and your buyers, not from the firm's habit.
How would a strategic buyer and a private equity buyer differ in what they pay and what they expect from me afterwards?
Why ask it
The headline price is one difference, and the rest is your life after closing. A trade buyer may want you gone within a year, while a fund may want you to stay, keep a stake and report to a board. Decide which future you could live with before the bids arrive.
How much say would I have over what happens to my staff after a sale?
Why ask it
Only as much as gets written into the deal. A buyer's assurances in a management meeting bind nobody, so ask which bidders on the list have kept teams together after earlier purchases, and what retention terms sellers in your position have managed to negotiate. What the law itself protects varies by country, which makes this one for your lawyer as well.
Is there anyone you would keep off the buyer list, and why?
Why ask it
Some competitors join a process to read your customer list and margins with no intention of bidding. A careful banker will name them, and will explain how sensitive data is held back until a bidder has shown it is serious.
Would buyers outside my country be interested, and how would you reach them?
Why ask it
Cross-border buyers can pay well for a foothold in a new market, and they add approvals, currency questions and time. Ask whether the firm has its own people in those countries or relies on a partner network, and when that network last brought a bidder through to closing.
Would you give buyers a price expectation or let them bid without one?
Why ask it
Guidance anchors the bids, for better or worse. Without it you may be surprised in either direction, and with it few buyers will go far above the figure you named. Listen for a reason tied to how many bidders they expect.
Apart from price, which terms in an offer should I look at hardest?
Why ask it
Two offers with the same headline can be far apart in what you receive and when. Cash at closing, earnouts, equity you roll into the new company, money held in escrow and your own employment terms all move the real figure, and a banker should be able to rank them for your situation.
At the price you expect, roughly what would I take home once debt, fees and tax are paid?
Why ask it
The headline price and the money that reaches you are different figures. A banker can lay out the steps between them: debt repaid, the working capital adjustment, advisers' fees, anything held back in escrow. Tax depends on where you live and how the deal is structured, so take that line to an accountant before you fix on a number.
For a capital raise, which investors fit my stage and the amount I need, and what do they ask for besides a valuation?
Why ask it
Investors negotiate control as well as price: board seats, vetoes, preferences on how money comes back in a sale. A banker who raises capital regularly can tell you which of those a given fund insists on and which it gives up when pressed.
If I am the one buying, how do you approach an owner who has not put the company up for sale?
Why ask it
Buy-side work is mostly patient outreach to owners who had no plan to sell, and firms differ in whether a senior banker or a junior caller makes the first approach. Ask as well how the fee works if you study ten targets and buy none of them.
Fees and terms
What outcomes trigger your success fee if the deal changes shape?
Why ask it
Deals turn into minority investments, recapitalizations, or asset sales. Find out now which of those the banker gets paid on, and at what rate.
Is the retainer credited against the success fee?
Why ask it
Some letters credit every month paid, some credit part, some none. The sum is small against the size of the deal, but it tells you how the firm sees the retainer: as an advance on a fee it expects to earn, or as income whether or not you ever close.
Is there a minimum fee, and at what deal value does it stop applying?
Why ask it
A minimum protects the firm if the price comes in low, which means that on a small deal it can become a far larger share of your proceeds than the quoted percentage. Work out the fee at a disappointing price before you compare firms on rate.
Would you take a lower rate up to an agreed price and a higher one above it?
Why ask it
On a flat percentage, the last stretch of price adds a little to the banker's fee and a lot to your proceeds, so closing soon suits them better than holding out. A stepped fee lines the two of you up. Where they propose to set the step also tells you what they really expect the company to fetch.
What expenses do I cover on top of the fee, and is there a cap?
Why ask it
Legal support, data room hosting, travel, and printed materials get billed back. Push for a cap and for written approval above a set amount.
How long is the engagement, and what is the tail period after it ends?
Why ask it
A tail clause means you owe a fee if you close with a contacted buyer months after the mandate expires. The length of the tail and the definition of a contacted party are both negotiable, and worth negotiating.
Is the engagement exclusive, and what happens if a buyer approaches me directly while it runs?
Why ask it
Engagement letters commonly make the firm your only adviser for the term. Under that wording a fee can fall due on any deal closed in the period, whoever found the buyer, so ask which transactions sit outside it, such as a bank loan or the sale of one division, and have the letter list them.
If I change my mind about selling, can I end the engagement, and what would I owe?
Why ask it
Look for a notice period measured in weeks and no charge beyond the retainer already paid. Read the termination clause and the tail clause together, since ending the engagement usually starts the tail running instead of removing it.
Can buyers or investors I am already talking to be carved out of the fee, or charged at a lower rate?
Why ask it
If a party approached you before the banker was involved, a full fee on that deal can feel unearned. Bankers often reply that they will still negotiate it and bring competition to raise the price, which is fair. A reduced rate for named parties, listed in the letter, is a middle ground worth asking about.
When do you get paid on money I receive later, such as an earnout or a seller note?
Why ask it
A fee charged at closing on the full headline price means paying commission on money you may never collect. Ask for the fee on deferred amounts to fall due as you receive them, and expect a discussion, because firms differ on this.
What indemnity does your engagement letter ask me to give, and which parts will you negotiate?
Why ask it
These letters usually ask the client to cover the firm's losses from claims connected to the deal. Your lawyer should read the exceptions for the firm's own negligence or misconduct, since the wording varies between firms and between jurisdictions.
Process
How often will you report to me, and what will each update contain?
Why ask it
Settle the rhythm before you sign, while you still have the leverage to ask: a standing call and something in writing. An update that says conversations are going well is not an update. A useful one has names, dates, and what each party said.
What will you need from me and my finance team, and how much of our time will it take?
Why ask it
Sell-side processes run on the seller's data, and the burden falls on whoever closes your books. An experienced one will quote you real hours per week and name the documents.
If I hired you today, what would you want fixed before we go to market?
Why ask it
This turns the meeting into free advice and shows what they noticed. Specific asks, such as cleaning up contracts or restating a year of accounts, tell you they have already done work on your file.
Where in my business will a buyer's diligence team push hardest?
Why ask it
A good answer is uncomfortable and concrete: customer concentration, add-backs to earnings that will not survive scrutiny, a key person with no contract. If nothing comes up, they have not read your numbers closely.
Should I pay for an independent review of my earnings before we launch?
Why ask it
A sell-side quality of earnings report finds the awkward items while you still have time to explain them. A buyer's accountants would find the same items later, when you have none. It costs real money, so the answer should turn on your size and the state of your books and not come automatically.
Who writes the teaser and the information memorandum, and when do I approve them?
Why ask it
These documents make claims about your company that a buyer will later ask you to stand behind. Insist on approving every number and every forward-looking statement, and ask to see a redacted memorandum from a past deal to judge the standard of the work.
What does a bidder have to sign before they see anything with my company's name on it?
Why ask it
Normally a confidentiality agreement comes first, and the teaser that precedes it is anonymous. Ask who negotiates those agreements, whether they stop a bidder from approaching your staff and customers, and how many parties will end up holding one.
If word of the sale reached my employees or customers early, what would we do?
Why ask it
Leaks happen in processes that involve dozens of people, so a banker promising total secrecy is not being straight with you. A prepared one has a holding statement drafted in advance and a view on which senior people you should tell yourself before anyone else does.
When would you put my management team in front of buyers, and how would you prepare them?
Why ask it
Management meetings are where a bidder decides whether to believe the numbers. Good bankers rehearse the team, raise the hard questions beforehand, and keep the meetings to bidders who have earned one, so your executives are not pulled off the business for a month.
At what point would you grant one buyer exclusivity, and for how long?
Why ask it
Exclusivity is the moment your leverage drops, because the other bidders go home. Ask what has to be agreed in writing before it is granted, how many weeks they would allow, and what happens on the day it expires with nothing signed.
How do you handle a bidder who tries to cut the price late in the process?
Why ask it
Late retrades are common, and the answer shows their tactics: keeping a second bidder warm, structuring deposits, setting deadlines. Vague reassurance is a warning.
Which other advisors will I need, and how do you divide the work with them?
Why ask it
A banker runs the process and the price negotiation. The purchase agreement belongs to a lawyer who does transactions for a living, and the tax position to an accountant who has seen deals before. Take the introductions, and remember that your lawyer should owe nothing to your banker.
What is the plan if every offer comes in below the range you showed me?
Why ask it
The honest options are to accept, to wait and return to market later, or to change what is being sold. Ask how a failed process would follow your company around, since buyers remember a business that was shopped and then withdrawn.
During the deal
Who has been contacted so far, and where does each of them stand?
Why ask it
The contact log is the record of what you are paying for, and it later defines who falls under the tail clause. Have it sent to you in writing every week, with the date of the last conversation beside each name.
What reasons did the parties who passed give?
Why ask it
One or two declines tell you little. The same objection from five buyers is market feedback on your price, your story or your timing, and a banker should bring it to you unsoftened along with a view on what to change.
What are buyers asking for that we were not ready to provide?
Why ask it
Repeated requests for the same missing analysis, such as revenue by customer or margin by product, point at a gap in the materials. Filling it once for everyone is faster than answering each bidder separately, and it stops the slowest answer from setting the pace.
Is the timeline you gave me still right, and where has it slipped?
Why ask it
Deals slow down quietly. Asking outright every couple of weeks makes the banker say which stage is late and whose desk it is sitting on, and often that desk is in your own finance team.
Which of my monthly numbers are buyers watching while this runs?
Why ask it
A weak month in the middle of diligence hands a buyer the reason to reopen the price. Know which figures go out monthly, and ask how much of the process the banker can take off your desk so that running the sale does not cost you the quarter.
What are you telling bidders about price and about who else is in the process?
Why ask it
It is being said in your name, so you are entitled to hear the script. Hinting at a rival offer that does not exist can win a higher price or lose the only real buyer, and that risk is yours to accept or refuse.
Which bidder is most likely to get to closing, and what makes you think so?
Why ask it
The highest offer is not always the one that arrives. Financing that is already committed, approvals the buyer does or does not need, and how they behaved on earlier deals all bear on it, and your banker should have looked into each before recommending anyone.
Before I sign this letter of intent, which of its terms will be hard to reopen later?
Why ask it
Price, structure, the length of exclusivity and the basis for working capital are far easier to argue while other bidders are still in the room than after they have gone home. Have your lawyer mark which clauses bind you, since that differs from one letter to the next.
With this offer in front of us, what would you do in my position?
Why ask it
Ask it late, with a real offer on the table, and remember that the banker is paid when you sign. Advice to hold out or walk away costs them money, which is exactly why it deserves weight when you hear it.
Choosing and using a banker
Practical guidance for the conversation itself
How to run the meeting
Meet more than one firm
Pitches only become readable when you can compare them. Put the First meeting questions to each firm in the same order, so the differences are about them and not about how you asked.
Separate the pitch from the fee letter
Enthusiasm in the room is free. Read the engagement letter with your own lawyer, and mark the fee base, the tail, the expense cap, and the exclusivity language before you discuss anything else.
Ask for the deal team, not the pitch team
Request a second meeting with the people who will do the work. If the firm resists putting them in front of you, that is the answer.
Save the fine print for the shortlist
The Fees and terms and Process groups are too detailed for a first pitch. Send them to the firms still in the running and ask for written answers, which is also a fair test of how each one treats a client's request.
Fee terms worth pinning down in writing
- The exact base the success fee is calculated on, including whether debt, earnouts, and rollover equity count
- Whether the retainer is credited against the success fee
- The fee treatment if the outcome is a minority investment or a recapitalization rather than a sale
- Tail length after termination, and the definition of a contacted buyer
- An expense cap and a threshold above which you approve spending
- Exclusivity: which transaction types are carved out so you can act on an inbound offer
- Whether a minimum fee applies, and the deal value below which it takes over from the percentage
- When the fee on deferred payments falls due: at closing, or as the money reaches you
- Your right to terminate, the notice period, and what happens if the lead banker leaves the firm
Once the mandate is signed
- Fix a weekly call at the same hour, with the contact log sent to you the day before
- Name one person on your side as the banker's daily contact, so requests do not scatter across the company
- Read every document before it goes to bidders, however late in the evening it arrives
- Pass on bad news about the business the day you learn it. A banker can manage a problem they know about
- Keep your own record of who was contacted and when, since that list decides what the tail clause covers
- Go back to the During the deal questions whenever an answer has turned vague
Common pitfalls
Hiring on the highest valuation quoted
The number in a pitch costs the banker nothing. Weigh the reasoning and the buyer list instead, and ask each firm what would move their range down.
Launching before the data is ready
Going to market with unreconciled accounts or unsigned customer contracts invites a price cut during diligence. Fix the file first, even if it delays launch by a quarter.
Leaving conflicts undiscussed
Ask directly about lending relationships and other mandates in your sector, and ask for the answer in the engagement letter rather than in conversation.
Taking your eye off the business
Buyers reprice on a weak quarter. Decide before launch who keeps running the company while you sit in management meetings, and protect that person's time.