No owner hoping to sell their business is eager to add yet another expense to their tab. But owners who hire investment bankers as advisors universally agree that the advisor added significant value, according to a study of businesses sold between 2011-2016. Sixty-nine percent assert that the value the advisor added was “significant,” emphasizing the important role these advisors can play in M&A transactions.
8 Functions of M&A Advisors
If you’re weighing the benefits and risks of retaining an M&A advisor, here are eight key functions of these important deal supporters:
- Sourcing buyers. Investment bankers draw upon their own extensive networks to attract qualified buyers. They can also create marketing materials that attract new buyers. By recruiting numerous buyers, they can help create a competitive bidding environment that increases the total value of the transaction.
- Managing deal negotiations. Negotiations can be stressful and time-consuming. They may also distract owners from the daily demands of running a company. The right advisor helps with negotiating purchase price as well as conditions, terms, timing, process, and other key deal components.
- Managing the sale. Investment bankers oversee the entire transaction. They keep it competitive, coordinating the many moving parts of each deal. They also manage a team of other deal experts, including lawyers and other advisors, so that the deal can quickly move to closing.
- Increasing the seller’s credibility. The involvement of an expert advisor lends credibility to the deal process. It shows that the seller is committed to the deal, ensures a professional presentation, and indicates to buyers that the seller plans to see the deal through.
- Preparing for sale. One of the most important aspects of selling a company is the pre-sale planning process. The advisor takes a critical look at the company, offering feedback and scrutiny that can help a seller improve operations and even increase value. This early scrutiny may help due diligence move more quickly, making the entire deal process less stressful.
- Coaching and educating the seller. Most owners have little or no experience closing a transaction. Advisors can help bridge this knowledge gap, drawing upon their experience selling dozens or hundreds of company. They educate the owner about what to expect, and ensure buyers don’t capitalize on an owner’s comparative inexperience.
- Structuring the deal. The deal structure is just as important as the total sale price. The right advisor helps owners structure the deal to minimize risk and maximize value.
- Freeing owners to run the business. If a business loses value during a transaction, this is a big red flag to buyers. It can even kill a deal. Advisors free owners to keep their focus on the business, continuing to grow it and keeping it competitive.
The Most Value From an M&A Advisor
According to the survey of owners who retained an advisor, owners said the biggest value advisors offered was in managing the deal process. Many owners do not anticipate how complex the process can or will be, but an advisor can help prepare them, and then walk them through to the other side when deal-making gets stressful.
Without substantial expertise and experience—something few owners have—no owner should put their business on the market without help. Hire an M&A advisor and watch the sale process become more valuable and more lucrative.
