Community Bank CEOs: Why Investment Banker Choices Fail (and How to Win)
Here's a fact that will shock you:
Many community bank CEOs choose their investment banker the same way they choose lunch – by convenience.
The result?
Deals that fall apart, values that disappoint, and CEOs who realize too late they picked the wrong partner for the biggest transaction of their career.
Don't let that be your story.
The Failure Pattern That Repeats Everywhere
Consider this:
A CEO decides to sell, then calls the first investment banker they know, and simply hopes for the best.
Six months later, they're stuck with:
- Only one interested buyer (if they're lucky)
- A price below market value
- A process that drags on forever
- Deal terms that favor the buyer
- A transaction that may not close
Why does this happen?
Because most CEOs don't understand what separates a great investment banker from an average one.
The Three Fatal Mistakes CEOs Make
Mistake #1: Choosing based on personal relationships instead of track record
Liking a person doesn’t mean they will deliver results.
Mistake #2: Going with the cheapest option
Investment banking fees seem expensive until you realize the wrong banker can cost you millions in lost value. The cheapest option is rarely the best option.
Mistake #3: Hiring generalists instead of specialists
Bank M&A is completely different from other business sales.
It requires someone who lives and breathes community bank transactions, not someone who does a bank deal once a year between their other work.
And your general counsel may be familiar with banking, but there’s a difference.
Why "Good Enough" Isn't Good Enough
When you sell your bank, you get one shot.
One chance to maximize value.
One opportunity to get the terms right.
There are no do-overs.
No second chances.
No "let's try again next year with a different approach."
That's why settling for a mediocre investment banker is so dangerous.
They might get you a deal, but will it be the best possible deal?
The Signal Problem Many CEOs Miss
Here's something many CEOs don't realize:
The investment banker you choose sends a signal to every potential buyer before negotiations even start.
Choose a heavyweight with a strong track record?
Buyers know you're serious and prepared for competition.
Choose someone inexperienced or desperate for business?
Buyers smell opportunity—for them, not you.
Smart buyers actually prefer dealing with professional investment bankers because it means the process will run smoothly and the deal will actually close.
But they also know how to take advantage of weak representation.
What Winning CEOs Do Differently
The CEOs who get successful results follow a completely different playbook:
They build relationships years before they need them.
They don't wait until they're ready to sell to start meeting investment bankers.
They attend conferences, take meetings, and build relationships over time.
They focus on specialists, not generalists.
They want someone specifically handling community bank deals, not someone who juggles "banks of all sizes."
They understand the difference between sell-side and buy-side.
They never hire someone who might also represent buyers in the market.
Conflicts of interest matter.
They pay for quality.
They know that saving a few basis points on fees while losing 10% of deal value is terrible math.
The Questions That Separate Winners from Losers
Before hiring anyone, ask these specific questions:
"What percentage of your deals are community bank sales under $200 million?" (You want someone where this is their main business, not a side hustle)
"Do you also represent buyers in our region?" (Any "yes" answer is a red flag that requires additional scrutiny)
"How many deals have you closed in the past 24 months, and what were the average premiums?" (You want recent success, not stories from five years ago)
"Walk me through exactly how you'll create competition for our deal." (Generic answers mean they don't have a real process)
Note: While vetting investment bankers is critical, be careful about confidentiality. In fact, I would discourage it and encourage you to do your own due diligence, quietly. Calling around about investment bankers signals to the market that you're considering a sale. The perils of word leaking are significant. Your board could lose confidence in you, your management team could become distracted and begin seeking employment elsewhere, your competitors will begin calling more aggressively on your customers (and employees), all decreasing the value of your bank and damaging shareholders.
The Real-World Test That Matters
Here's how you know if an investment banker is worth hiring:
They want to understand your bank before they pitch you.
Great investment bankers ask hard questions about your strategy, your market, your challenges.
They want to visit your bank.
They do their homework.
Poor investment bankers show up with generic presentations and promise unrealistic valuations to win your business.
Which type has been calling on you?
The Control Factor Most CEOs Ignore
Here's the biggest difference between having the right investment banker and the wrong one:
Right banker: You control the process
Wrong banker: The buyer controls the process
Think about that.
Do you want the buyer running your sale?
The right investment banker creates urgency.
Buyers know that if this conversation doesn't go well, there's a list of other interested parties waiting.
That pressure works in your favor every single day.
The wrong investment banker?
Buyers know they're in amateur hour.
They can slow-play negotiations, make lowball offers, and demand favorable terms because they know you don't have other options.
Why Time Is Your Enemy
Our investment banker used to remind us:
"You never step in the same river twice."
Every day that passes during a sale process creates risk.
Markets change.
Your bank's performance might slip.
Buyer priorities shift.
Regulatory environments evolve.
The longer your sale drags on, the more likely something goes wrong.
Great investment bankers know how to keep deals moving.
They manage timelines, anticipate problems, and solve issues before they derail transactions.
Poor investment bankers let deals drift.
They're reactive instead of proactive.
They manage crises instead of preventing them.
The Hidden Costs of Poor Representation
When you choose the wrong investment banker, you don't just risk getting a bad deal, you risk not getting any deal at all.
Consider what happens when your sale process fails:
- Your board loses confidence in your strategy
- Your shareholders question your leadership
- Your management team becomes distracted and demotivated
- Your competitors learn you were trying to sell
- Your customers start worrying about the bank's future
Those costs can be devastating, even if you eventually find another buyer.
How to Win: The Smart CEO's Playbook
Start building relationships today.
Don't wait until you're ready to sell.
Attend investment banking conferences.
Meet bankers at your state association events.
Take meetings when investment bankers are in town.
Focus on specialists.
Find investment bankers who specifically do community bank deals.
They know your challenges, your buyers, and your market dynamics.
Check their recent track record.
How many deals closed in the past year?
What were the premiums?
How long did the processes take?
Verify their buyer relationships.
Do they really know the acquirers in your market?
Can they create real competition for your deal?
Understand their process.
How will they manage due diligence?
How do they handle multiple buyers?
What's their communication style?
Pay for quality.
The difference between a great banker and an average one can easily be 10% of your deal value.
On a $50 million sale, that's $5 million.
How much are you paying them again?
Your Success Strategy
The best community bank sales take place when prepared sellers work with experienced specialists who know how to create competition and close deals.
You only get one chance to sell your bank.
Make sure you have the right person to represent you when that time comes.
Your Action Plan
1) Audit your current relationships - Which investment bankers do you actually know?
2) Identify the specialists - Who focuses exclusively on community bank sales in your region?
3) Start attending their events - Conferences, webinars, local meetings
4) Take every meeting - When they offer to visit, say yes
5) Ask the hard questions - Test their knowledge, track record, and approach
Don't make the same mistake many CEOs make.
Start building relationships with the right investment bankers today, so when you're ready to sell, you'll have the best representation money can buy.
Your shareholders are counting on you to get this right.
There are no shortcuts or hacks in building the confidence needed for major strategic decisions.
Just proven approaches centered around preparation:
This approach will:
- Inform your strategic planning
- Guide your resource allocation
- Clarify your priorities
- Define your value proposition
This is how savvy bank leaders operate.
They build valuable institutions through preparation, allowing them to choose the optimal path forward on their own timeline – whether that's continued independence or a strategic transaction.
I’ll see you next week.
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