Investment Banker

Finance There are several issues to consider when selecting an investment banker for an IPO. First of all, the respective bank (or the banker himself) needs to have an established track record that can be proven with concrete figures and performance thresholds. It is important to have relevant data to back assumptions that guarantee the bank's relevance in the industry, particularly in terms of previous successful IPOs and connections in the field.

Another important issue will be the investment bank's capabilities: does it have sufficient resources to properly handle an IPO? At the same time, it is important for the investment bank to match the profile of the company undertaking the IPO: it is useful to have an investment bank that understands the particularities of the business, not only of the financial perspective on things. It will thus also be able to build easier connections related to the IPO in case.

The key here is to have a good fit with the overall IPO company's case (Lainee, Plantier, 2006). Lainee and Plantier (2006) also point out that it is useful to analyze the motivation of the investment bank, so that is also something to be considered an issue in the selection process.

Likely, this is not only related to being able to evaluate how serious the investment bank is about supporting the IPO and to having an analysis of what the bank's strategy is likely to be, but also about how high the company launching the IPO will be on the bank's list of priorities. If the priority for the investment bank is to make money, then it will likely look at big IPOs, which would mean that it will focus less attention on the smaller IPOs it undertakes.

Another issue of interest in selecting the investment bank is that the bank should probably a keen analysis of different aspects of the market that will impact the IPO, things such as the liquidity of the market, the potential risks etc. This will help in the selection process because it will show whether the investment bank understands the IPO process in a particular situation. The bank should also be able to present a plan of going ahead, to include deliverables and timeframes.

The question is to decide between private and public placement. The issuing firm usually prefers a private placement, which implies that the IPO is offered to a limited and carefully selected group of investors who have previously agreed to support the IPO, sometimes within a process of syndication. The main advantage with this type of placement is that it reduces risks.

If the placement is public, there is a certain risk that the IPO will not be entirely covered if there is not sufficient interest on the market for the respective shares. In a private placement, as previously discussed, the individuals have usually already been selected, so the entire subscription processed has been discussed and clarified.