What Your Banker Isn't Telling You About the Deal Structure

A banker is paid to close a deal. Full stop. That is not a criticism — it's a description of the incentive structure. Understanding it is the most important thing a management team can do before entering a banking relationship.

The problem is that most management teams don't understand it. They treat the banker as a trusted advisor whose interests are aligned with theirs. They're not. The banker's interest is in getting the deal done, at a valuation that institutional investors will accept, on a timeline that works for the bank's pipeline. Your interest is in building a durable public company at the best possible valuation.

Those interests overlap sometimes. But they diverge at the margins — and the margins are where the real money is.

Here's what that looks like in practice: A banker will push for a pricing that clears the market. That means a valuation that institutional investors will accept without too much friction. If that valuation is below what your company is actually worth, the banker will still push for it — because a deal that closes at a lower valuation is better for the banker than a deal that doesn't close at all.

A banker will also push for deal structures that protect the bank. Lockup provisions, greenshoe options, stabilization mechanisms — these are all tools that protect the bank's position, not yours. They're standard, and most of them are reasonable. But you need to understand what you're agreeing to.

None of this means you shouldn't work with a banker. You absolutely should. But you should work with a banker the way you work with any specialist: you bring them in for the specific thing they're good at, you manage the relationship, and you don't let them run the entire process.

The management teams that get the best outcomes from banking relationships are the ones that come to the table prepared. They have their own view of valuation. They have a tested investor narrative. They understand the deal structures being proposed. And they have an advisor who is not the banker helping them evaluate what's on the table.

That's the difference between a deal that's structured for the banker to succeed and a deal that's structured for the company to succeed.