Any middle-market business weighing the merits of a sale or recapitalization needs to work with an outside expert. A reputable M&A advisor greatly increases the chances of completing the deal and selling for a higher value. Research even shows that people who use M&A advisors earn more from the sale. So how do you choose a reputable professional? There are many variables to consider, but these four are key.
When you hire an M&A advisor, you’re paying for their experience. Make sure they have a long track record of incrementally building value. Ask about deal experience, as well as specific experience in your industry. Ask about their plan for managing your transaction, as well as their history of managing transactions of a similar size and complexity. They should have references that can speak to this experience.
Every M&A advisor has a different approach. Some are intimately involved from start to finish, while others expect you to do quite a bit of legwork on their own. The process may partially determine the costs. So ask what you can expect. Advisors who cut corners may be too busy to oversee the deal, or may lack the experience and expertise to add real value.
Good advisors should have their standard processes documented. Detailed notes and a marketing plan point to an advisor who has thought deeply about previous sales, and who will deeply commit to yours as well.
Running an M&A process is immensely time-consuming. No single advisor can do it on their own. Instead, you need the dedicated focus of a skilled team. Make sure you meet the members of the advisor’s team. Get a clear breakdown of who will do what and when. You want to ensure you’ll have a partner’s time and expertise, not be left to rely on an intern or junior expert.
Consider asking how many deals of your size the advisor and their firm handle each year. Volume shops may cut corners, particularly if your deal is smaller than their average. It’s also important to ensure the team is sufficiently large to manage the transaction. Without a deep reserve of qualified team members, your sale might not get the attention it deserves. Be sure to ask references about personalized attention, and whether there were any areas which the advisor or their team neglected.
Your primary motive for hiring an M&A advisor is likely to increase the value of the sale. This makes fees a hard pill to swallow. You need to balance the potential extra value of an advisor against the fees they will charge. Ask for a clear breakdown of fee structure, then compare this to the experience of the team. Your goal should be to find an experienced team with reasonable fees, all while understanding that the best advisors—the ones who can drive deal values highest—typically charge more. Bargains are rarely what they seem, and may actually cost you more over the long-term.