How does an M&A advisor add value to the sale process? There are many non-price issues that arise during an M&A process. An M&A advisor can keep the process running smoothly and ensure the post sale relationships are started on the right foot.
The following are three areas where an advisor improves the chances of a successful transaction:
Allows the business owner to concentrate on running the business
I noted in “How Do I Attract a High Multiple for My Business: The Sale Process” that the selling process is one that takes seven to ten months to complete and that performing below expectations during this time could lead to serious delays and potential difficult renegotiation. Creating the offering materials and contacting/informing suitable buyers alone is a full time job for the first several months. Working with an advisor allows the principals and management to stay focused on the business and its performance throughout the process – the process can be long and distracting but the business should remain priority one.
Shows serious intent to complete a reasonable transaction
Retaining an advisor demonstrates serious intent of the vendor, ensures objective expectations have been set during the planning phase and makes buyers aware that they will be participating in a competitive and professional process; something which can be leveraged during negotiations. The sale process is often an emotional one and having an objective advisor can provide independent advise and direction which otherwise might not be possible.
Creates a buffer during negotiations to ensure positive post-transaction relationships
Another role advisors play is wearing the ‘black hat’ during the process. Not only during potentially heated negotiations, but any time the process looks to be stalling, the advisor can shoulder the blame in order to put the process back on track. Keeping the principals one step removed during difficult negotiations allows them to maintain a positive business relationship as they work through a transition with the new owners.
The experience of having closed many transactions provides the benefit of a portfolio of workable alternatives available during negotiations and deep knowledge of structural pitfalls (for example, tying an earn-out to the lower end of an income statement) and last but not least, a network of strong deal-friendly lawyers and accountants.