4. Choosing Your Investment Banker 28

Who will lead the underwriting team? Can he or she command the full resources of the firm?
Can the firm provide complete syndication, after-market support, and other services? Who will price the IPO and is the personal chemistry good between you?
Is the size of the planned offering or long-term financing attractive or just within the underwriter’s threshold?
Is the underwriter primarily a retail or institutional firm?
What is the firm’s backlog of other equity business over the timeframe of your offering?
What are the firm’s national or regional distribution capabilities and how does this compare to your company’s needs?
How strong and responsive is the research department and its reputation for your industry?
What happens if the market heats up and the underwriter becomes uninterested in your offering or wishes to increase the offering size?
What kind of unique terms, if any, will the underwriter require?
You can answer some of these questions by talking to the underwriting team, both the team leader and the members of the team of whom you may see more as your work progresses. You will find other answers by talking to companies with whom the underwriter has worked in the past. You should make a few calls because it
is important to know whom your company is about to “marry” before you say “I do.” Ultimately, you must take the time to form your own opinion and trust your instincts. If the relationship won’t work on a personal level, the hard work that must be done will be made all the more difficult.
Certain indicators that may be offered as “facts” aren’t necessarily so. The proposed per-share offering price is one such area, and you should exercise caution when evaluating underwriters on this basis. As attractive as the most favorable price may be, the reality is that the final offering price frequently changes — most often downwards.

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