How M&A Advisors Add Value for Sellers
Selling a business can be expensive and overwhelming, so owners often balk at the prospect of driving up costs by working with an M&A Advisor. Owners who do, however, almost universally believe their banker added value. The Value of Middle Market Investment Bankers, a study authored by Fairfield University Dolan School of Business’s Michael McDonald, asked 85 business sellers about their experiences working with M&A Advisors. The owners sold businesses for between $10 million-$250 million between 2011-2016. The owners unanimously agreed that their bankers added value, with 69% calling the value “significant.”
Participants also outlined eight critical functions of an M&A Advisor, ranking them in order from most to least significant:
M&A Advisors add to owners’ knowledge of their business market. They capitalize on their professional and personal networks, as well as databases and prior sales partners, to connect with buyers. Their experience also helps them ensure the buyers they find are the right fit for the business.
Negotiating a Sale
Negotiating the terms for your own business’s sale can be difficult and emotional. M&A Advisors take the lead, helping to secure a fair purchase price, favorable considerations and terms, and a timeline that works for you. They also address the process itself, and other major components of the transaction.
Managing the Sale
M&A Advisors are team leads for the entire transaction. They work to keep the process competitive, work with all aspects of the sale, manage a diverse team of advisors, and work to keep the sale moving toward final closing.
Boosting Seller Credibility
Working with a skilled banker shows all parties that you’re interested in a mutually rewarding transaction. An M&A Advisor conveys professionalism, making the deal more enticing to quality buyers.
Preparing the Company to be Sold
A sale triggers intense scrutiny of the business—scrutiny for which sellers are rarely prepared. The company will be reviewed by buyers’ skilled teams of advisors. Bankers help owners prepare for this investigation. This involves a range of tasks, from developing financial projections and customer data to helping management prepare for the intensive demands of the transaction.
Serving as an Owner Coach
Most business owners have never closed a large business sale transaction before. M&A Advisors have done it hundreds of times. They confer this experience on the owner, coaching him or her through the process.
Structuring the Sale
The considerations involved in a transaction may include equity, seller notes, cash, earn-outs, and other contingency considerations. M&A Advisors structure the transaction such that it addresses both buyer and seller needs. They offer creative solutions even when there are conflicting needs.
Freeing Owners to Run the Business
Selling a business is a full-time job in its own right. Owners who run the daily operations of their company can easily feel overwhelmed. M&A Advisors take on the daily tasks of managing the transaction. This allows owners to run their business, grow it, and maximize its value during the intensive and time-consuming transaction process.
People who don’t have significant expertise, a large network, or plenty of free time need M&A Advisors. Since most owners must manage the demands of daily business operations, it’s almost always in their best interest to hire an M&A Advisor. With potentially millions of dollars to lose—both in lost purchase price and lost productivity—it simply makes sense to hire an M&A Advisor who may offer a significant return on that small upfront investment.