Selling your business is one of the most consequential decisions you’ll ever make. It’s not just about finding a buyer—it’s about maximizing value, minimizing risk, and ensuring a smooth transition that aligns with your long-term goals. For many first-time sellers, one of the most critical and often misunderstood players in this process is the investment banker.
You may hear that an investment banker will “run the process” or “bring you the right buyer.” While that’s true in part, it’s essential to understand what investment bankers actually do, where their role overlaps with legal counsel, and how to protect your interests when engaging them. Here’s what every business owner should know.
What Does an Investment Banker Do?
Investment bankers play a central role in helping business owners navigate the sale process, particularly when it comes to presenting the company to the market and managing buyer interest.
One of their key responsibilities is preparing the company for the market. This involves creating marketing materials such as a confidential information memorandum (CIM), which highlights your company’s story, financials, and strengths. They also help manage the due diligence process by organizing documentation and ensuring your business is presented in its best light.
Throughout the sale process, investment bankers coordinate communications between potential buyers, internal stakeholders, accountants, and legal advisors. They oversee the setup and management of secure data rooms and help maintain momentum by scheduling meetings and managing interactions with prospective buyers.
They also provide input on deal structuring, timing, and engagement strategy. Their role includes helping shape the value proposition of your company in a way that resonates with the right buyers—often by highlighting unique positioning, competitive advantages, and growth opportunities.
Where Investment Bankers Stop—and Lawyers Step In
One of the most common misconceptions is that investment bankers handle the entire deal. They don’t and shouldn’t.
While investment bankers offer strategic insight, they are not licensed to provide legal advice or negotiate the final terms of a sale agreement. This is where your lawyer becomes indispensable.
Legal Counsel’s Role
Think of your investment banker as the architect of the process—and your lawyer as the engineer who ensures the structure is sound. Both are necessary, but they serve different (and non- substitutable) purposes.
What to Know Before You Hire One: Key Contract Terms
When engaging an investment banker, it’s important to carefully review their engagement letter. These agreements are negotiable—and a few clauses deserve particular attention.
Exclusivity clauses are common and grant the banker sole rights to represent your company for a certain period. While this can align incentives, it can also restrict your flexibility if the relationship isn’t productive. Always consult legal counsel before agreeing to exclusivity.
Another key clause to review is the tail provision. Even after the engagement ends, some bankers request a tail period during which they’re entitled to compensation if a deal closes with a buyer they previously introduced. These clauses should be clearly defined in scope and duration to avoid future disputes.
Fees and Compensation Structures
Most investment bankers are compensated through a success fee—typically a percentage of the deal’s value. Common structures include:
It’s not uncommon for total fees to reach six or even seven figures, depending on the deal size. A clear understanding of these costs—and their triggers—is essential before committing.
You Need Both: Investment Banker and Attorney
Engaging an investment banker can be a powerful move—especially when selling a business for the first time. They bring valuable market access, process management, and strategic presentation skills. But they are not a substitute for legal counsel.
In fact, the most successful transactions occur when investment bankers and attorneys work in tandem:
Having one without the other can expose you to missed opportunities or unforeseen risks.
If you’re considering a business sale, understanding your team’s roles is the first step toward maximizing value and minimizing stress. At GNS Law, we work closely with investment bankers, financial advisors, and your internal team to ensure every aspect of the transaction is aligned with your goals.
We help you negotiate smart contracts, avoid costly oversights, and close deals that stand the test of time. With us by your side, you’ll never be left guessing who’s handling what—we bring clarity, strategy, and protection to every phase of the sale process.
Let’s set your deal up for success. Contact GNS Law to start building your transaction team today.
