How to Find the Best M&A Advisor for Your Transaction

January 23rd, 2020 Posted by Marla DiCarlo
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As your business grows, managing the operations becomes more complex.

Larger businesses require dozens, or even hundreds of people, and a large staff creates human resource and management challenges. If you add more products and services, you may have to address product liability, warranty, and customer contract issues. 

Selling a larger business is also complex. You have multiple stakeholders, including shareholders, creditors, regulators, vendors, and customers. Finding a buyer that sees the value of your business will take longer and require more effort.

To close a successful transaction, you need to find the right M&A advisor to guide you through the entire process.

What M&A Advisors Do

Finding A Buyer for Your Business 1

M&A advisors work on larger transactions than business brokers. If your business generates revenue of $5 to $10 million or higher, you’ll need an M&A advisor.

Assume, for example, that you own a $12 million furniture manufacturer, and that a larger firm wants to acquire your business.

An M&A advisor has a proactive focus regarding the structure and timing of a transaction, in order to add value. You may retain an advisor to help you consider options before you’re approached by a purchaser.

Advisors also have a focus on consulting, providing strategy and planning options for a potential seller. Your advisor will work to understand the buyer’s perspective of the transaction.

In this example, the potential buyer is a $50 million manufacturer that wants to add a furniture manufacturing division.

A strategic buyer purchases companies in order to grow an existing revenue source, or to diversify into new products and markets. These buyers are willing to pay a premium for a business that can help the combined firm increase profits. 

The buyer may purchase the business for vertical expansion, or horizontal expansion. In this case, the buyer produces lumber and roofing materials, and wants to add furniture as a new product line. 

You may consider selling a part of your business, rather than the entire company. If a buyer is interested in specific assets, you may sell those assets and still continue operating. In this example, the furniture business manufactures a unique line of coffee tables, and the buyer purchases the assets for coffee tables and not the remaining components of the business.

To manage the complexity of the transaction, both the buyer and the seller will typically have an M&A advisor. 

You may also work with M&A attorney, who can address the complex legal scenarios that make each M&A sale unique. The attorney will assess the potential legal issues of the various offers. 

Manufacturers have legal issues related to product liability and worker safety, and your attorney can help address those issues. An equity sale will have a different set of legal issues than an asset sale. Attorneys also negotiate letters of intent and the final purchase agreement.

Your next step is to find the right advisor for your business.

Selecting an Advisor: Factors to Consider

Finding the right advisor has a big impact on the success of the transaction. Do your homework in order to find an advisor that’s the right fit for your sale. 

Start by networking with attorneys, accountants, and bankers. These professionals are involved with business sales, and spend time interacting with M&A advisors. Ask them for referrals to advisors who work with firms of your size.

Business peers are also a good source for referrals. They may know of advisors who work in your industry. 

Prepare a set of questions before you meet with a prospective advisor. Ask them about recent transactions completed in your industry. An advisor who knows your industry will know how your business creates value, and is better positioned to identify buyers.

Ideally, you want an advisor who can create a competitive process among multiple potential buyers. Ask about deals that the advisor has closed with firms that are similar to your firm’s size. 

Fee structure is also important. The advisor will be more motivated to work on your behalf if the majority of the fee is based on a successful closing. Ask about the potential team that will work on the transaction and their experience level. A junior staff member can do analysis, but you need a veteran advisor to handle price negotiations with a buyer.

Most important, you need to develop a high level of trust with your advisor. Your business may be your most valuable asset, and the sale transaction will have a huge impact on your finances. Closing a sale will require hours of frank conversations, and that requires a high level of trust.

Work With Experts

Raincatcher is a full service company and has M&A advisors, along with a team of brokers to help you with a sale. Their experts have the background needed to work with large companies, and experience managing the complex issues of large business sales.

Work with Raincatcher to close a successful business sale with confidence.