There are two places where math is not linear in this world: banking and government.
Bankers have the ability to slice and dice and somehow always make money. That is, unless they completely mess it up. But they also seem to add value in our business.
Brokered deals are better than non-brokered deals. If we had to choose as a company to go brokered or non-brokered, we would go brokered every day. That being said, there are a few cases when brokers are not worth paying.
When is a broker not worth paying?
- If you are doing a micro deal in a weak market, getting a broker into the deal is not going to help you. It is only going to force you to pay fees on work that you, the management team, is going to be doing. The fact is, brokers do not help when they cannot dial for money and there is no point in paying them when they cannot lift.
- If you can do a strategic deal that cements your capital structure while really adding value to your long-term goals, do not get a broker involved. I can see paying finder’s fees, but I fail to see what a banker brings to the table on that sort of deal.
- If you know where every dollar is going before you start the process. I do not think you should do brokered deals when 80% of the book is spoken for before the broker even shows up.
- If you have to choose a weak broker for a strong deal. If you have a world-class asset, do not go with a fourth-tier broker vs. non-brokered. The fourth-tier broker is going to bring down your image. You are better off going non-brokered.
In conclusion, pick the right broker. If the right broker will not do the job, but you can do it without a broker, then do it non-brokered and understand that in bad market conditions all rules fail.