Monday, August 22, 2005

Objectivity & Credibility

It’s critical to an investment banker’s credibility that he or she not push deals that aren’t in the client’s best interests. Indeed, the best bankers I’ve worked with will aggressively dissuade their clients from exploring combinations that don’t maximize shareholder value.

Likewise, I’ve found it critical to success in corporate development that one not be perceived as someone who is always pushing to do the next deal. Sure, corp dev folk are paid to do deals, but more importantly, they’re paid to do SMART deals. Again, it comes back to enhancing shareholder value. You must be perceived as someone who prizes shareholder value over all else. You’ve got to be unafraid to tell senior management that a deal under consideration should not be done (of course, if they’re fond of the deal you’ve also got to be exceedingly well-prepared to tell them WHY it should not be done).

In some ways, you've got to be even more objective than those running other functions, whose fights over turf are considered (within limits) healthy behavior. If senior management gets even a whiff that you are pushing a deal that isn't squarely within the shareholders' interest, your credibility is shot. Even a slight blemish on your credibility will make the work of getting internal buy-off on deals very, very hard.


Parkite said...

Shareholder value seems to be a recurring theme in corporate development. Here is a question. Are public companies today really run today for the benefit of shareholders? Or conversely, are they run for the benefit of senior mgmt? I know there are examples of each, but I would say, by and large, outside sharedholders have little to no influence on corporations today. Look at some of the recent shareholder proposals that are passed and then refused to be adopted by senior mgmt. Just some thoughts.


Josh King said...

Good question. I'd say as a rule corporations (particularly large ones) are run for the benefit of shareholders. There are, of course, a few egregious counter-examples. However, I can't recall any major instances of management refused to implement a mandate approved by a majority of shareholders.