Finding opportunities to expand is a driving force behind many businesses, and it requires and consumes substantial capital. The current commercial environment includes some strong capital markets that are auspicious and seeking to invest in companies with aggressive growth strategies. For this reason, the hospital in this scenario should take advantage of these capital markets to expand successfully. The business can do this by hiring an investment banking firm to assist with the growth strategy (Wójcik et al., 2018). However, to ensure a fruitful outcome, the CFO should choose a qualified and experienced investment banker to represent the facility. Making a poor decision has crucial disadvantages as even well-qualified banking firms can derail the strategy with poor judgment, misrepresentation of skills, and irrelevant advice. This essay explains factors that the hospital’s CFO should consider before deciding if investment banking is the right approach.
Firstly, one should check if the company’s traditional bank account can keep up with the upfront capital requirements. The hospital’s expansion strategy requires an additional $20 million, which the existing firm stockholders cannot provide. The extra money is often dedicated to marketing, infrastructure, and related costs that should be incurred before booking the first service or sending initial invoices. Secondly, the selected investment banking firm is expected to act as both a matchmaker and an advisor of the hospital. The two roles are vital in robust capital markets as they help other companies raise funds, whether in equity or debt (Wójcik et al., 2018). In some circumstances, investment bankers help with the acquisition activity, which also supports aggressive business growth. As an intermediary, an investment banker should be linked to private equity and lending funds that are appealed by businesses in the medical sector.
Another critical consideration is focusing on the individual and not the company. Social media and technology are among the most effective marketing tools in the world today, and this has leveled the playing ground of both small and large investment banking organizations (Wójcik et al., 2018). Since everyone has access to the same information base and data, the CFO should select an individual who is good at leveraging social platforms to their advantage. The hospital should also consider the specific people who will be assigned to handle their needs. There should be chemistry and similar workplace styles with those individuals. An investment banker is an integral part of a company’s growth team. Therefore, communication and relationship with one another need to be regular, complete, and forthright. Lastly, the CFO should look at the compensation fees charged by the investment banker. In most cases, the bank charges a small retainer or deposit, together with a success fee deducted at the closing of the money-raising transaction. The success fee varies depending on the transaction type and size; it is more substantial for equity and smaller for debt.
To conclude, growing a business has its challenges that include acquiring the required amount of capital. Carefully studying and selecting the right investment banker who can help the company anticipate and proactively solve financial challenges will put an organization in a better position to meet its growth strategy. The best bankers have the necessary academic qualification and experience and adapt to the evolving market conditions and apply sophisticated methods to acquire finances for their clients. Therefore, despite the associated costs, the CFO should consider an investment banking firm with a unique combination of relevant industry experience, transaction skills, commitment, and trustworthiness. If growth is the goal, one should interview several investment bankers to know what the next step will be.
Reference
Wójcik, D., Knight, E., & Pažitka, V. (2018). What turns cities into international financial centers? Analysis of cross-border investment banking 2000–2014. Journal of Economic Geography, 18(1), 1-33. Web.