Inside the Corporate Boardroom

Investment bankers often promote their visits to boardrooms and presentations to company boards but why do boards want to hear from them? There are a multitude of scenarios but let us list a few examples and then focus on an important case.

Bankers may present to public or private company boards, the latter often consist of founders, family/private equity/venture capital or other owners and investors and independent board members. Public company boards generally consist of the CEO, significant shareholders and independent board members who are elected by public shareholders. Boards may ask bankers or other advisors, such as legal, public relations, investor relations, etc., to provide updates on markets or present to the board on a milestone company event, such as an IPO or sale of the company.

The most important role for a banker to play is formally advising on an IPO or company sale. In a public company sale, the investment banker's role is critical and has shareholder value and legal consequences for a company. When a banker is retained to advise a company on its sale, the advisory team will provide regular updates to the board and its committees on the process and expected outcome.

A board meeting somewhat resembles what we see in shows or movies, but generally with less fanfare! The CEO and/or chairman will typically call the meeting to order and ask for a roll call. Many companies have the same CEO and chairman but these roles are being split more frequently as shareholders expect more independent board decisions versus always aligning with management. Key management officers such as the CEO, CFO, General Counsel and Sales leader will present an update on company performance and key initiatives (such as cost savings, new products, key litigation/employment matters). Then key advisors such as the advising banker and company outside legal counsel will present their material updates. Unlike a pitchbook, these updates are generally 1-2 pages with high level takeaways and recommendations. They are also submitted ahead of a board meeting so the advisors are answering questions and providing detail versus making a full presentation.

Boards will often go into executive session to make key decisions afterward. In the case of a company sale, the banker will remain in the room but non-board management members will depart. The board will deliberate with their outside advisors close at hand and then come to a decision such as selecting a final buyer to acquire the company or choosing to delay a process. This session is where the advising banker truly makes their mark, relying on past experience and knowledge of counterparties to provide the board with the best recommendation.

Being in the boardroom is the pinnacle for an outside advisor - the company has entrusted that advisor with its most confidential information and relied on that advisor to guide company decisions that will affect hundreds of employees and thousands of shareholders. Bankers covet these interactions, and the best performing advisors may get asked by board members to assist with other situations with other companies, thus accelerating the advisor's dealmaking flywheel.