By: JEREMY OSTERBERGER, President and COO, BIC Alliance

Mergers and acquisitions in the downstream O&G sector are rarely straightforward. These transactions are often complex undertakings involving multiple stakeholders and financial, legal and operational considerations. According to the book “The M&A Failure Trap: Why Most Mergers and Acquisitions Fail and How the Few Succeed” by Baruch Lev and Feng Gu, a study of 40,000 transactions over 40 years revealed that 70 to 75% of M&A deals ultimately fall short of expectations.

While many factors contribute to this high failure rate, one of the most critical — yet often overlooked — success factors is finding the right buyer. Business owners may attempt to manage this process independently, but doing so can limit outcomes. In fact, a study by S&P Global Market Intelligence found that private sellers who engage experienced or top-tier advisers tend to achieve higher valuations. After adjusting for self-selection bias, the data showed that advisers can add value to a transaction.

Investment bankers can identify and screen prospective buyers for sellers in the O&G space, tapping into networks to do so. Moreover, because of their relationships across the industry, they can facilitate and move conversations forward. The right investment banker is a seller’s confidante and advocate, there to help them secure the best deal.

The keyword, however, is “right.” Not every investment banker is the right fit for every seller. A bad fit could negatively impact the process and delay a deal from coming to fruition or halt it altogether.

If you’re in the market to sell your business and are seeking an investment banker who is the right fit for you, there are several important qualities you should screen for.

As a baseline, evaluate whether the investment banker you’re considering has deep expertise in the O&G industry and your company’s niche. If they don’t know the industry and your niche, they won’t know the relevant buyer pool to target. An investment banker with industry knowledge will be able to pinpoint market opportunities that may not be immediately apparent.

While knowledge of your niche is vital, so is experience — ideally on two fronts. First, check that any investment banker you’re considering has a proven track record of successfully closing deals in the O&G sector. Ask about their deal history and testimonials from former clients. Second, make sure that there isn’t a mismatch between the investment banker’s typical deal size and your transaction.

Moreover, an investment banker should have strong financial acumen and be able to prepare clear, comprehensive deal materials. Request that they put together a mock sample based on your situation to assess their ability to present your business to potential buyers.

Additionally, screen for an investment banker’s ability to communicate complex financial information in a clear and concise manner. They should also have a communication style that aligns with your preferences.

Then there’s the issue of bandwidth. Get clarity on an investment banker’s current work volume to get a sense of whether or not they can dedicate the necessary time and attention to your deal.

Additionally, ensure that any investment banker you’re considering hiring doesn’t have any conflicts of interest that could compromise your transaction.

Even if all the above criteria are met, you should ensure that you hire an investment banker whom you like and respect as a person. Mutual respect and rapport are crucial for a successful partnership. Keep in mind that liking and respecting someone doesn’t eliminate the possibility of conflict; it simply builds a stronger foundation for navigating it. That way, when conflicts arise, you’ll be able to work more smoothly to resolve them.

As a critical last step, carefully evaluate their fee structure. Watch out for high upfront fees with minimal performance incentives, as that could mean an investment banker wants to create a deal book but has little motivation to close your transaction. Instead, look for an investment banker who has a reasonable retainer fee and a performance-based approach that ties their compensation to what matters the most — successfully closing your deal.

For more information, visit ivsinvestmentbanking.com or call Jeremy Osterberger at (281) 538-9996.