What companies actually look for in an investment bank
A company choosing an investment bank for a cross-border acquisition or merger is making a decision that will shape the deal's structure, timeline, and final price. The bank becomes the company's primary advisor on whether to buy, how much to pay, how to finance it, and how to navigate the regulatory systems of the countries involved. The choice is not made by comparing websites or fee quotes alone—it comes down to which bank has done similar deals in those specific countries, which bank's relationships with regulators and lenders matter in those jurisdictions, and which bank understands the target company's industry well enough to spot risks the buyer might miss.
Most companies narrow the field by asking three or four banks to pitch their approach. The pitch is not a presentation about the bank's size or history. It is a detailed walkthrough of how that bank would handle this particular deal: which regulators would need to sign off, what timeline is realistic, what financing sources are available, what price the bank thinks the target is worth, and what could go wrong. The bank that wins is usually the one that demonstrates it has closed similar deals recently, has relationships with the lenders and regulators involved, and can explain the deal's risks in a way that feels credible.
Key Takeaways
- Investment banks are chosen primarily for their track record closing similar deals in the same countries and industries, not for their overall size or reputation.
- A company typically asks three to four banks to pitch their approach, and the pitch focuses on regulatory timelines, financing sources, and deal-specific risks rather than the bank's general capabilities.
- Relationships with lenders, regulators, and tax authorities in the target country matter more than the bank's global ranking, because those relationships determine whether a deal closes on time.
- The investment bank's role extends beyond valuation—it includes structuring the deal to minimize taxes, securing financing commitments, and managing regulatory approvals across multiple countries.
- Fees are negotiated after the bank is chosen based on the deal's complexity and size, and the bank's ability to close the deal is a stronger factor in the decision than the fee percentage.
Track record in the target country and industry
A company buying a manufacturing business in Germany will not choose a bank based on that bank's strength in Asian tech deals. The bank needs to have closed acquisitions in Germany recently, ideally in manufacturing or a related sector. This is because German regulators, labor laws, environmental rules, and lending practices are different from those in other countries, and a bank that has navigated them before knows which steps take time, which regulators are strict, and which lenders will finance the deal.
When a company asks banks to pitch, the first question is usually "Walk us through a deal you closed in this country in the last two years." The bank will describe a comparable transaction—similar size, similar industry, similar structure—and explain what took longer than expected, which regulators were difficult, and how the financing came together. A bank that has closed three German manufacturing deals in the past eighteen months can speak to this with specifics. A bank that has never closed a deal in Germany cannot, and will lose the pitch regardless of its global ranking.
This is why regional and mid-market banks often win mandates that larger global banks lose. A smaller bank with deep roots in a particular country or industry can demonstrate more relevant experience than a larger competitor that has done fewer deals in that specific market.
Relationships with lenders and regulators
An investment bank's relationships with the lenders and regulators in the target country determine whether a deal can close on the timeline the buyer needs. If a company is buying a business in France, the bank needs relationships with French banks and the French financial regulator (the Autorité de Contrôle Prudentiel et de Résolution, or ACPR). If the bank has closed deals with those lenders before, it knows which ones will finance acquisitions, what terms they typically demand, and how long their approval process takes. If the bank has worked with the regulator on previous deals, it knows which issues that regulator will scrutinize and which it will wave through.
These relationships are not abstract. They mean that a bank's team has sat across a table from the regulator's staff, has negotiated with the lender's credit committee, and has a track record of delivering on commitments. When a bank tells a buyer "We can have financing committed in six weeks," that statement is credible only if the bank has actually done it before with the lenders involved.
A company will often ask a bank directly: "Which lenders have you worked with on deals like this, and will they commit to financing this one?" The bank's answer—naming specific lenders and explaining why they will be interested—is a major factor in the decision. If the bank cannot name lenders, or if the lenders it names have never financed deals in that country, the bank is at a disadvantage.
Understanding the target company's industry and risks
The investment bank advising the buyer needs to understand the target company's business well enough to spot problems the buyer might miss. If the target is a pharmaceutical company, the bank needs to know which drugs are coming off patent, which regulatory approvals are pending, and which competitors are launching similar products. If the target is a retailer, the bank needs to understand the lease structure, the real estate market in the countries where stores are located, and the competitive pressure from e-commerce.
During the pitch, a company will often ask the bank: "What do you see as the biggest risks in this business?" A bank that has advised on other deals in that industry can point to specific issues—supply chain concentration, customer concentration, regulatory changes, technology disruption—that the buyer should investigate. A bank that is new to the industry will give generic answers, and the buyer will notice.
This is why some investment banks specialize in particular sectors. A bank that has closed ten healthcare deals in the past three years will understand healthcare better than a generalist bank, and will be more likely to spot issues that matter. The buyer will pay a premium for that informed because the bank's insights can change the deal's structure or price.
Deal structure and tax efficiency
The investment bank's role includes structuring the deal to minimize taxes and regulatory friction across the countries involved. A cross-border deal can be structured in multiple ways—the buyer can acquire the target's assets, acquire its shares, merge it into a subsidiary, or use a holding company structure. Each structure has different tax consequences in each country, and the bank needs to work with tax advisors to find the structure that saves the most money while still satisfying the buyer's other goals.
During the pitch, a bank will often propose a specific structure and explain why it is better than alternatives. For example, a bank might propose that the buyer acquire the target through a newly formed subsidiary in the target's country, because that structure allows the buyer to step up the basis of the target's assets for tax purposes and defer some taxes to a later year. A bank that has structured similar deals before can explain this clearly and can estimate the tax savings. A bank that is new to cross-border deals will struggle to do this.
The bank's ability to coordinate with tax advisors, local counsel, and financing sources to implement the structure is also important. A bank that has worked with the same tax advisors and local counsel on previous deals can move faster and avoid mistakes.
Financing capability and lender relationships
The investment bank needs to find financing commitments from lenders before the buyer signs a binding agreement to buy the target. This is called a "financing condition"—the buyer's obligation to close is conditional on the bank securing the financing. If the bank cannot get lenders to commit, the deal will not close.
A bank's ability to find financing depends on its relationships with lenders and its track record of closing deals. If a bank has closed five similar deals with the same lender in the past two years, that lender will be more likely to commit to financing this deal. If the bank has never worked with the lender, the lender will be more skeptical and may demand higher fees or stricter terms.
During the pitch, a bank will present a financing plan: which lenders it will approach, how much each lender will provide, what timeline it expects, and what terms it thinks the lenders will demand. The bank will also explain what could go wrong—if interest rates spike, if the target's business deteriorates, or if the lender's credit committee becomes more conservative. A bank that has secured financing in difficult market conditions can explain how it managed those risks. A bank that has only closed deals in straightforward markets will not have that experience.
Regulatory approval timelines and strategy
Cross-border deals often require approval from multiple regulators: the competition authority in the buyer's country, the competition authority in the target's country, the financial regulator if the target is a bank or insurance company, the foreign investment regulator if the buyer is a foreign company, and sometimes industry-specific regulators. Each regulator has different rules, different timelines, and different concerns.
The investment bank needs to understand these regulatory requirements and estimate how long each approval will take. A bank that has navigated these approvals before can give a realistic timeline. A bank that is new to the jurisdiction will underestimate how long approvals take, and the buyer will miss its important date.
During the pitch, a bank will walk through the regulatory approval process step by step: which regulators need to approve, in what order, what information each regulator will request, and how long each step typically takes. The bank will also explain what could delay the process—if the regulators have concerns about competition, if the target has environmental liabilities, or if the buyer is a state-owned enterprise. A bank that can explain these risks credibly will win the pitch.
Fee negotiation and deal economics
Investment bank fees for cross-border M&A deals are typically structured as a percentage of the deal value, with the percentage declining as the deal gets larger. A deal worth $100 million might carry a fee of 1% to 1.5%, while a deal worth $1 billion might carry a fee of 0.5% to 0.75%. The exact fee depends on the deal's complexity, the bank's role, and the buyer's negotiating power.
Fees are negotiated after the bank is chosen, not before. A company will choose a bank based on its ability to close the deal, and then negotiate the fee. If the bank is the only one that can close the deal—because it has the only relationships with the lenders and regulators involved—the buyer has less negotiating power and will pay a higher fee. If multiple banks could close the deal, the buyer can negotiate a lower fee.
Some banks will also negotiate a "success fee"—an additional payment if the deal closes at a higher price than the bank's initial valuation. This aligns the bank's incentives with the buyer's, because the bank earns more if it negotiates a better price. Other banks prefer a flat fee that does not depend on the deal price, because they want to avoid conflicts of interest.
Frequently Asked Questions
Does the size of the investment bank matter?
Size matters less than track record in the specific country and industry. A smaller bank with five recent deals in the target country will often beat a larger bank with no deals there. However, very large deals—over $5 billion—often require a large bank because smaller banks do not have the capital or lending relationships to finance them.
Can a company use multiple investment banks on the same deal?
Yes. A company might hire one bank as the lead advisor and another as a co-advisor, or might hire different banks for different parts of the deal—one for financing, one for regulatory strategy, one for tax structuring. However, having too many banks creates coordination problems and slows the deal down, so most companies use one or two.
How long does the bank selection process take?
Most companies ask banks to pitch over two to four weeks. Each bank gets a few days to prepare, presents for one to two hours, and then the company makes a decision. Once a bank is chosen, it is usually hired within a week.
What happens if the chosen bank cannot find financing?
If the bank cannot find financing commitments, the buyer can walk away from the deal without penalty (assuming the financing condition was included in the purchase agreement). The buyer might then hire a different bank and try again, or might decide the deal is not worth pursuing. This is why the bank's financing capability is so important in the selection process.
Can a company change investment banks mid-deal?
Yes, but it is disruptive and costly. Changing banks means the new bank has to get up to speed on the deal, regulators and lenders have to build relationships with the new bank, and the deal timeline usually slips. Most companies stick with the original bank unless something goes seriously wrong.