Investment Banking – Why is It the Way It Is? Part 3 Marketing a High Priced Intangible Product

 

You'd Probably Find an IB Pitch
from this Duo Unconvincing

IB’s sell high priced professional services.

If you’re in the market for a car, you can nip down to the Maybach dealer and kick the tires. And then continue over to check out the latest offering from Geely. Take a test ride.

IB’s products aren’t hard physical items. 

Usually they act as intermediary between two parties in a transaction.

They help you to find buyers for that unwanted division of yours. 

Or help you find just the new division you’re looking for. 

And negotiate the “best” price.

Or investors for your debt or equity issue at the “fair” or “market” price.

By expanding the geographic or sector range of investors they may be able to lower the price. Or though nifty new instruments. 

That applies even if they underwrite because they don’t underwrite until they have a good sense of their ability to place the deal and a price range.

Success in these endeavours depends on their "smarts", experience, range of contacts as well as their ability to persuade other parties to participate in a transaction. 

So you’re looking for professional, competent, self-assured, experienced, persuasive bankers.

If they can prepare “flash” presentation materials (a “pitch book”), deliver a convincing (verbal) sales pitch to you, all the time maintaining a professional appearance, you're more likely to have confidence that they will be able to perform these same tasks with the transaction counterparties you need to have convinced.

Pin-striped suited bankers will make a better impression than the same presentation team in Hawaiian shifts. Thought the latter may make a better impression when pitching a movie idea to an entertainment conglomerate.

In other words: horses for courses.

McDonald’s pitches its offerings with a clown. IB’s don’t.

While past performance is no guarantee of the future, a track record of success (league table positions), a brand name, a team with documented experience are also selling points.

Often IB’s cut prices on megadeals – to garner market share stats. That’s why sometimes you see a plethora of banks on a deal even though they are not all really needed.

Not only is the cut of their jib important, but also the appearance of materials associated with the sale.

When you buy a Rolex, it doesn’t come in a cardboard box lined with plastic foam.

Nor is that pearl necklace you just bought at Mikimoto handed to you tucked into a handy Ziploc plastic bag.