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Do You Know These Two Common Mistakes In Selecting An Investment Banker To Take You Public By Stan Medley 2007-01-15 Well, I first started assisting taking companies go public around 1987. I started off as a paralegal and quickly learned my way up to being a consultant.. For the last 5 or 6 years I and my associates often operate as what we describe as "Senior Consultants" to the companies we advise.
Over the last 20 years, the most common mistake I see companies, large and small alike, making while going public is: 1) letting their "money raising" investment banker be their "senior consultant" and 2) not having a "senior consultant" at all, but rather letting one of their junior consultants (such as an investment banker, attorney, accountant, broker dealer, investor relations guy) act functionally as their "senior consultant."(Of course there are more mistakes, but we will save those for another day.)
What is a Senior Consultant? Well, when you go public, you will have and need a team or crew of consultants helping you: investment bankers, broker dealers, market makers, attorneys, accountants, investor relations consultants, PR consultants, marketing consultants, etc. Your senior is the guy who understands all of the functions of these other consultants, can help you select and put together your team of consultants, and can educate you on the process, role, cost efficiency, and anticipated products of these various consultants.
A Senior should have hundreds of connections in these other consulting groups and yet be independent of them, not taking any finder fees from or beholden, in anyway, to any of these other consultants, and certainly able to recommend their dismissal when they are not working in the best interest of the company.
So let us address common mistake number one. NEVER, NEVER, NEVER let the guy who is raising or giving you money be your senior consultant. Why? Well simply put, his loyalty is always to himself or his money first. Your company will always be second if even that. There are no absolutes, but the guy who raised you the money will most always give you advice that is "best for him" not best for you. You need a senior between him and you.
Your Senior should be someone who works for the company first, and foremost. He is your most senior and trusted advisor. He should be someone who educates you and gives you choices, and tells you the consequences of pursuing each of your choices. Not someone who is going to get a finder's fee or commission for referring someone you hire or someone who gives you money.
Common mistake number two. Let me give
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you some examples. I have seen companies let an SEC attorney with little or no connections at all with other consultants, and with little or no knowledge of other areas (such as investment banking) act as their senior advisor. I have seen such attorneys structure a public company that while legally sound, violated all investment banking principles. The result: no market maker would sponsor the company to go public, or the company failed miserably, once public, because of the poorly devised structure. On the other side of the coin, I have seen investment bankers as senior consultants, try to save some money by using cookie cutter legal forms, or legal forms from some past deals they did (rather than hiring attorneys) and make gigantic legal mistakes that prevented a company from ever getting through their SEC legal filings, or worse yet ending up in trouble with the SEC. A senior knows you need a complete team of professionals, has connections in all these areas and doesn't sell you short. A senior will help you save money by helping you select the most cost efficient professionals for the situation, not by cutting out "functions" that are totally vital to your success. Let me give you another example of what I mean. As a senior I currently have some 5 or 6 SEC attorneys that I recommend for various jobs to my clients. These attorneys range in prices from $150/hr to $500/hr. I had one client come to me, after we took him public, because he needed an opinion letter. The attorney he consulted wanted $10,000. It was a rather routine job and that was way over priced. I got him an attorney to do it for $200. On the other hand, must companies put out press releases either written by investor relations consultants, or public relation consultants, with no legal review or review by a transactional attorneys only. Now that is a missing function. I, as a senior fill this missing function for my client. Not only do I fill the missing function but I fill it right. I refer a $500/hr criminal litigation SEC attorney to all my clients to review all their press release before they put them out. Why? There is noting that will get you in trouble faster with the SEC than a faulty, misleading, or inaccurate press release. Criminal litigating attorneys who are facing the SEC in court every day know a lot more about what will get you in trouble than even the best transactional attorneys. Even at $500 an hour the cost is only about $100 - $150 or so to review an average press release. The potential savings from doing it right: immeasurable. If you are going to go public, do it right, get yourself a senior consultant, or don't do it at all. (c) 2007 Stan Medley Article Source: http://www.upublish.info Tags: Articles Legalities **ARTTECHNORATI** Free Articles on Legalities and many other topics - Add this category to your RSS Reader
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About the Author:
Stan Medley
Stan Medley is a that has been assisting companies "going public" for over 20 years. Stan is a consutant to Artfield Investments which provides full services for companies that want to go public. Additional information on this topic is at www.artfieldinvestments.com. Free Articles on Legalities and many other topics
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