If you’re wondering whether your business is large enough to justify retaining an M&A advisory firm, then stop agonizing over the choice. In almost all cases, you need to hire an advisory team. This is because the buyer will come to the transaction with more financial resources, and with significantly more experience buying and selling businesses. A skilled M&A team levels the playing field and gives you an advantage at the negotiation table.
If your goal is the highest sale price and the most favorable sale terms, you need as many offers as possible. A competitive bidding environment is unlikely to happen if you do it yourself. An M&A advisor has a deep understanding of the industry, and of what buyers seek. They get to know your business, too, and use this information to nurture a more competitive bidding process.
The advisor works with you to prepare a confidential information memorandum (sometimes known as a “book/CIM”) about your company. This includes historical financial data, information about customers and operations, and reliable financial projections. The M&A firm then contacts potential buyers with this information to solicit offers. From there, they work with a smaller group to reveal progressively more information about the business and begin negotiating terms.
An advisor who knows your industry well should have a shortlist of potential buyers ready to go, well before the process begins.
The best M&A firms do much more than this. They also:
- help you formulate reliable financial projections
- help with valuation
- assess the value of different transaction structures
- educate you about industry norms
- help you manage your expectations
- manage and organize the due diligence process, as well as help you plan for what to expect
- assist the seller and their lawyer for the duration of acquisition negotiations once you select a buyer
The negotiation process can be intense, and even heated. Both parties may feel frustrated and angry at times. A skilled M&A advisor helps buffer this process, keeping emotions out of the deal and enabling you to maintain a good relationship with the buyer. They defuse tensions, and play the role of “bad cop” when necessary.
A successful transaction depends on a good relationship with a buyer who trusts you and believes in your business. Having a dedicated, skilled team serve as the bad guy supports this goal. It’s particularly helpful if you will be working with or for the buyer after closing.
Running your business while managing a sale is a fool’s errand that can leave you stressed and result in a lower final sale value. Your business and the transaction itself will be much better served if you focus on managing your company and daily operations while an M&A advisor runs the sale on your behalf.
