The Do’s and Don’ts of hiring an M&A advisor when selling your business

May 14, 2024

Selling a business is an intricate process that demands extensive experience and specialized knowledge. Therefore, founders should engage the right M&A advisor, at the appropriate time, and with a suitable compensation structure to successfully sell their business.

Why you should consider hiring an advisor when selling your business

Even sophisticated players in the M&A markets, such as institutional investors and strategic buyers, rely on buy-side M&A advisors and investment banks for guidance, despite their vast experience. This is because they understand the intricacies involved in a transaction.

The process of buying and selling businesses is volatile and requires substantial resources to execute effectively. Founders who acknowledge this also hire advisors to steer the deal process in their favor and allocate the necessary resources to conduct a competitive process.

Reason #1 to work with an M&A advisor: Businesses are volatile assets

The price buyers are willing to pay for businesses is highly elastic and can vary significantly from one buyer to another. More often than you might expect, the value of the highest bid can be 5 to 10 times the value of the lowest bid.

Advisors leverage this elasticity to benefit founders by conducting a structured transaction process that includes buyers who are willing to pay a premium. Founders who attempt to handle their own transactions often miss out on attractive valuations due to their lack of experience in selling businesses.

Reason #2 to work with an M&A advisor: Selling a business requires significant resources

The best outcomes for founders result from running a competitive process with multiple buyers. Managing relationships with 20+ potential buyers is a daunting task, and founders who try to handle the transaction themselves often become distracted from business operations, settling for the first buyer who presents a term sheet.

M&A advisors can focus entirely on the transaction while founders concentrate on running their business, taking it to market with in a phase of continuous growth and strong performance.

Hiring an advisor will help you secure a better deal, but working with an exceptionally good advisor will yield you an even better outcome.

Evaluating an M&A Advisor

When assessing M&A advisors, consider the following:

  1. Sector & product expertise: Confirm expertise by reviewing the advisor's transaction history and inquiring about their role in each deal. Question the value of "relationship access" and examine the types of buyers an advisor typically closes deals with.

  2. Average deal size and firm size: Select an advisor that matches your deal size to ensure your transaction receives the necessary attention. Avoid advisors that are too large or too small for your deal.

  3. Advisors working on your specific deal: Verify which advisors will handle your deal through reference calls with the advisor's former/current clients. Consider including a “key man provision” in your engagement letter and evaluate how long the team has worked together.

  4. Potential conflicts of interest: Avoid working with advisors who represent both buyers and sellers, as they may make concessions to repeat buyers and investors at the expense of the founder they represent.

Negotiating Fees with an Advisor

Properly negotiating fees is crucial to the success of a transaction, as fees create incentives for advisor behavior. Evaluate how a fee structure can affect incentives beyond just valuation, considering non-valuation related objectives such as security structures, cash at close/earnout structures, and the founder's role post-transaction.

When to Hire an M&A Advisor

Hiring an advisor too early may not be optimal if your business is likely to undergo significant changes in the future. Engaging an advisor years in advance may result in wasted time or misrepresentation of your business.

Unless you're already in an exclusive agreement with a buyer, it's never too late to involve an M&A advisor. Until a transaction is closed, every negotiation, term, or dollar amount is non-binding.

The ideal time to engage an M&A advisor is approximately 6 months before your target close date, allowing sufficient time for the advisor to prepare marketing materials, gather and analyze data, and run a thorough process.

Hire the M&A advisor perfect for your needs

Selecting the right M&A advisor to represent you when selling your business will significantly impact your final outcome. An advisor with the right industry experience, deal size expertise, fee structure, and timing will help you transform a decent outcome into a great one.

This is exactly what we help founders with at ExitConnections.

Get in touch with us via email ( or by filling the form in our website and we will get back to you with 1 to 3 recommendations of sell-side M&A advisors that are the best fit for your company based on industry, company size, geography, growth trajectory, transaction type, etc.

Our service is totally free of charge for sellers so, if you’re the founder or the CEO of an established company, don’t hesitate to reach out to us for any curiosity you may have about this daunting yet intriguing world of M&A!

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