Podcast Summary: The Path to Exit

Episode 33: The Do's & Don'ts of Hiring an Investment Bank When Selling Your Business
Host: Mike Lyon, Vista Point Advisors
Guest: Miles Lacy, Managing Director, Vista Point Advisors
Date: October 14, 2025

Episode Overview

This episode offers a comprehensive guide for technology founders contemplating the sale of their company, focusing on best practices and common pitfalls when selecting and engaging an investment bank. Host Mike Lyon and guest Miles Lacy share in-depth, practical insights on choosing the right advisor, evaluating sector expertise, understanding fee structures, mitigating conflicts of interest, and timing your engagement for the best outcome.

Key Discussion Points and Insights

1. Why Hire an Investment Bank?

• Complexity and Guidance:

  • Selling a business is complex, lengthy, and can become volatile.
  • An experienced banker offers market knowledge, negotiation leverage, and process guidance.
  • “Selling a business is incredibly complex and at times can be a bit of a volatile process… It really helps to have someone who’s been there before.” — Miles Lacy (00:58)

• Maximizing Value:

  • Good bankers drive higher valuations and better deal terms by leveraging knowledge and competition.

• Resource Augmentation:

  • Transaction requires significant manpower—a professional team can outperform a solo founder or small executive group.

• When Not to Hire a Bank:

  • For small capital raises under $10-15M without liquidity, hiring a bank may not be justified.

2. How to Choose the Right Bank

a. Sector and Product Expertise

• Work with banks that deeply understand your industry (e.g., SaaS, Internet) and the relevant buyer/investor ecosystems.
• “If you were a generalist banker... you’re not going to have… very good insight into how to position and frame that business.” — Miles Lacy (03:26)
• Avoid generalists and ensure recent, relevant transaction experience.

b. Objectivity in Assessment

• Bankers are expert salespeople; validate their claims.
• Check press releases to confirm deals banks claim to have worked on.
• Scrutinize who actually led and executed prior deals and if those people remain at the firm.
• “Sometimes bankers will market deals that they weren’t really a part of... easiest way to know if a banker really worked on the deal is go check the press release.” — Mike Lyon (05:19)

c. Bank’s Average Deal Size

• Don’t be the bank’s smallest (unmotivated) or largest (overwhelming) client.
• “You do not want to be their smallest transaction, but you also definitely do not want to be their largest transaction.” — Miles Lacy (07:18)
• Align with banks whose ‘sweet spot’ matches your anticipated deal size.

d. Diligence on the Deal Team

• Ensure the senior bankers you pitch with are those who work your deal (consider a “key person” clause).
• Longevity and cohesion of the deal team matter for execution.
• Investigate deal team turnover and overall bank health.
• “Look at the deal team… add up the cumulative number of years they’ve all worked together. Sometimes you’ll be shocked at how little these people have worked together.” — Mike Lyon (10:42)

e. Client References

• Don’t settle for hand-picked good references.
• Demand a broad list (10–15) and select references at random.
• View buyer references with skepticism (potential for conflicts/interlocking interests).

3. Conflicts of Interest and Alignment

• Banks boasting “buyer access” can be concerning if relationships turn into a conflict (e.g., serving the same buyer repeatedly, or running buy-side processes).
• Ensure the bank’s incentives are aligned with founder outcomes, not ongoing buyer relationships.
• “That actually goes from an asset to a liability... they need to feed that relationship and you can become the food.” — Mike Lyon (13:10)
• Clarify whether the bank only works on sell-side for founder-led companies and avoids representing strategic or investor portfolio companies on the sell-side.

4. Fee Structures & Engagement Letter Negotiation

• Key Elements:
  • Include ‘key person’ clauses to lock in your chosen team.
  • Align fee incentives with your transaction priorities (valuation, structure, roles).
  • Negotiate success-based (not retainer-heavy) fee structures.
• Watch for ‘Retainer Shops’:
  • Retainers should be minimal; success fees should compose 90%+ of firm revenue.
  • “...if the retainer is a big proportion, I’d be really concerned about that because that implies they don’t really close a lot of deals.” — Mike Lyon (16:30)

5. Timing: When to Engage a Bank

• Ideal Timing:
  • Up to six months before launching a process if no imminent inbounds or LOIs.
  • Early engagement gives time for market positioning and relationship building.
• If Already in Process:
  • Even if you have a term sheet or LOI, engaging a bank can still improve valuation and terms; never “too late.”
  • “For those that have inbound interest, it never is too late to engage a bank.” — Miles Lacy (17:37)

Notable Quotes & Timestamps

• On objectivity with bankers:
  “Bankers are really good at framing and positioning. Try to objectify your analysis of bankers as much as possible.” — Mike Lyon (05:19)

• On reference checks:
  “Everyone has two or three good references, right. The deal just went amazing. I think what you want to do is push for a list of like 10 to 15 and then maybe pick 2 to 3 at random.” — Mike Lyon (10:42)

• On conflicts of interest:
  “If you look at a bank's transactions and you see the same strategic buyer multiple times listed, there's a really good chance that's a buy side relationship...” — Miles Lacy (13:10)

• On retainer structure:
  “What you want to see is the vast majority, like 90% plus all of their revenue should come for success fees and the retainer should be a really small portion.” — Mike Lyon (16:30)

• On timing:
  “It’s a bit of a wide spectrum in terms of when to engage the right bank, but it’s generally never too late.” — Miles Lacy (17:37)

Timestamps of Important Segments

• [00:58] – Why you should hire a bank
• [03:26] – Importance of sector and product expertise
• [05:19] – How to objectively evaluate banker track records
• [07:18] – Why deal size matters when choosing a bank
• [09:41] – Due diligence on the deal team
• [10:42] – Conducting meaningful reference checks
• [13:10] – Assessing conflicts of interest
• [15:20] – How to negotiate the engagement letter
• [16:30] – Avoiding ‘retainer shops’ and fee misalignment
• [17:37] – Optimal timing for hiring an investment bank

Conclusion

This episode equips technology founders with actionable frameworks for selecting and engaging the right investment bank when selling a business. Key takeaways include prioritizing sector expertise, conducting rigorous due diligence on both the firm and deal team, aligning incentives and fee structures, thoroughly vetting references, and being alert to conflicts of interest. Timing your engagement strategically and insisting on aligned incentives are fundamental for achieving optimal outcomes.