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Do You Know These Two Common Mistakes In Selecting An Investment Banker To Take You Public

by Smedley Artfield

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 consultant 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 Consultant  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 consultant between him and you.

Your Senior Consultant 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 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 consultant knows you need a complete team of
professionals, has connections in all these areas and doesn't
sell you short. A senior consultant 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 consultant 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 consultant 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.

Stan Medley is a consultant 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. <a
href="http://www.artfieldinvestments.com">Additional
information</a> on this topic is at
http://www.artfieldinvestments.com.

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