Should you hire an M&A advisor when selling your company?

Feb 7, 2024

When the time comes to sell your business, you face a crucial decision: negotiate the sale on your own or hire an M&A advisor to facilitate the process?

While your industry knowledge and familiarity with your company may tempt you to handle the sale yourself, an M&A advisor/investment banker can significantly increase the deal's size and help you find the right partner for the future.

Deciding whether or not to run your transaction with an advisor

As a business owner, you may have a deep understanding of your industry landscape, potential buyers' interests, and your company's unique selling points. However, it's crucial to consider the significant benefits that a reputable M&A advisor can bring to the table.

Even if you have an attractive offer in hand, an experienced advisor can substantially improve the overall outcome of the deal. In fact, most companies that hire an M&A advisor already have an offer on the table when they make the decision to engage professional assistance.

On average, companies that choose to work with an M&A advisor ultimately receive offers from a structured bidding process that are 30 to 70% higher compared to the initial offer they received before hiring the advisor. Regardless of whether the success fee is 2% or 10%, the higher exit value achieved through the advisor's process will, in the vast majority of cases, if not always, significantly outweigh the advisor's commission.

How an M&A advisor helps with diligence, buyer relationships, and framing the business

Despite your extensive knowledge of your company and industry, an advisor can provide invaluable assistance with tasks that you may not have the time, resources, knowledge, or network to execute effectively.

As part of an organized deal process, an experienced M&A advisor is well-equipped to:

  1. Manage the due diligence process

  • Ensure all parties have access to the same data simultaneously

  • Set clear timelines for key activities to maintain a level playing field

  • Protect data from uninterested or unqualified parties

  1. Interact with buyers

  • Serve as an intermediary between sellers and buyers

  • Set a competitive tone for the transaction

  • Be tough when necessary to negotiate favorable terms

  1. Frame your business

  • Highlight your company's strengths and minimize deficiencies

  • Anticipate buyers' and investors' questions during diligence

  • Present a concise story around your company's trends

  1. Structure the transaction

  • Apply specialized knowledge to structure the deal in your best interest

  • Understand complex terms and their impact on your ultimate economic outcome

  • Provide expertise to counter buyers' advantages

  1. Dedicate the necessary bandwidth

  • Invest hundreds of hours to negotiate multiple term sheets simultaneously

  • Allow you to focus on day-to-day operations and improve your business's position

  1. Negotiate terms with multiple parties

  • Negotiate beyond the headline enterprise value

  • Address critical aspects of the term sheet, such as liquidation preferences, exclusivity periods, employment agreements, earn-outs, stock considerations, working capital targets, escrow terms, and more

  • See the full picture of the transaction and negotiate on all relevant terms for all parties in parallel

  1. Find the right buyer

  • Identify buyers with the right cultural or strategic fit

  • Focus on the most valuable buyers and investors based on their past experiences

  • Bring new buyers to the table to create more competition and better outcomes

  • Help determine alignment between your interests and the buyer's, including your future role in the company

While hiring an M&A advisor may not be necessary or appropriate in all situations, such as raising less than a few million dollars from a VC firm, in most cases, working with an experienced advisor can help you navigate the complexities of selling your company, achieve the ideal outcome, and find the right partner for the future.

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