The Startup Journey

Extracts from Mukund Mohan's post titled "What to negotiate on your investment banking advisory engagement letter" : Most bankers typically charge between 2% (highly unlikely, but possible if you are a hot company, with a high probability of sale at a large price) to 7% (smaller transaction, < $5 Million).  ...Term of the agreement: Since most M&A transactions take 3-6 months, these agreements will last at least for that duration. Most agreements also specify that if your company gets sold for 6-12 months after the start of the engagement, the investment bank will likely get a portion of the sale, even if they did not make the introduction or help negotiate the final sale. While many will claim it is standard to have a 12 month clause, there is no “standard” – it is all negotiable.  The engagement fee or retainer: To help prepare your documents, pitch deck and start to position your company, the company will ask for a retainer fee between 10% and 20% of t...

Extract from an Economic Times article by Manish Kanchan, managing director of SAGE Capital. Very often we see entrepreneurs consulting with well wishers, old-time chartered accountants or their loyal CFOs during the deal-making process. Usually this is the first time anybody is dealing with private equity transactions and are therefore completely out of their depths. Sometimes, they are also insecure about their own future position in the company. ...Investment bankers are your allies. Choose them based on their track record of having closed similar transactions Ask for references and speak with them. Do not appoint them based on the valuation they promise you. Investment bankers do not sign the cheque. Once appointed, trust them and encourage them to provide you with honest feedback directly. The same applies for lawyers as well. ...The business plan must be realistic with a slight optimistic bias. It should also be linked to past performance. If the business has grown at 15% over l...