ANSWERS TO KEY QUESTIONS
What’s the advantage of appointing an M&A advisor?
The process of selling a business and finding the right buyer can be extremely time-consuming, especially for someone who also has a full-time business to run. Therefore, there are several reasons why it is preferable to engage the services of a professional advisor to help sell your business rather than adopt a DIY approach.
Keep your business on track
The time has finally come: you’re ready to sell your business, and you might be wondering if you should appoint an M&A advisor. While you may think you can do it on your own, chances are that this is your first time selling a company, and you may not be aware of all the factors that can make or break a deal. There are many moving parts in a sales process, and all the preparation and planning takes time. It is a huge load to take on, and one that can make your business performance suffer due to the added pressure. Remember, when you are preparing for a sale, it is more important than ever to make a profit and run your company well.
Therefore, you can't be too distracted by the sales process as this can damage the perceived value of your company and, consequently, the sales price. By appointing an M&A advisor, you can concentrate on keeping your business on track and profitability ticking over. This will ultimately strengthen the value of your company. In addition, beginner mistakes are extremely costly in a business takeover process.
An M&A advisor will help you juggle all the work involved with selling a business – from conducting due diligence to finding potential buyers and closing the deal. They will run the process for you end-to-end, so that you can do what you do best – manage your company – as this will ultimately strengthen the value of your business.
Timing is everything
Identifying the right time to sell your business is key to achieving a premium price for your company. But how do you know when the time is right? An M&A advisor can help you answer this question. While you may know your business inside out, an M&A advisor specialized in preparing companies for sale has a strong understanding of the M&A market: for example, if it’s buoyant, it may be a good time to sell, and if not, it might be better to wait.
Knowing when to bring in help
It is understandable that some business owners feel that they could and should sell their own businesses. After all, they know it inside and out, and have an excellent grasp of their industry. However, while you are an expert in your area of business, it is likely that you do not have the time, connections or expertise that are required to put your company on the market and to identify the opportunities that will result in the best strategic M&A solution.
There is a lot to consider when selling a business, and the answers and choices are not always clear. A good advisor will be able to spot and steer you away from any potential traps or weaknesses in a deal, as well as identify anything in your business that might affect the sales price.
An M&A advisor can help you reach your goal by providing crucial guidance at every stage of the sales process, including the preparation of your Confidential Information Memorandum (CIM), marketing materials and financials. This support and preparation is crucial for ensuring you get the best sales outcome for your company.
What’s more, an M&A advisor will do the heavy lifting when it comes to producing and organizing the necessary data and financial documentation. They will exhaustively review all aspects of your business to ensure everything is in order, and identify any skeletons that could derail the deal and define strategies to neutralize them. This is key as even simple mistakes can be costly.
With a seasoned professional in your corner, you don’t have to worry about an oversight hurting the sales outcome. An M&A advisor will be able to counsel you on what actions need to be implemented to make sure your business is in the best shape possible. These changes, however big or small, can make a big difference to the final purchase price.
The perfect match
An M&A advisor will help you see the true value of your company from a potential buyer’s perspective. While you are likely to be aware of how your business is seen by your customers, suppliers and staff, you may be less sensitive to the synergies and strategic values your business could offer a specific buyer. With this perspective in mind, you can strengthen these areas to make your business an even more attractive acquisition opportunity.
More importantly, when it comes to finding you the right buyer, an M&A advisor will use their expertise and connections to source good-fit buyers. While you may have an idea of potential buyers, a good M&A expert has a much wider network of financial and strategic connections within different industries and geographic regions. An M&A professional will use their resources to put your business in front of the most competitive interested parties. This will create a more competitive bidding process, which in turn will drive up the value of your business.
Keep it close
Selling a business is a delicate matter. You need to be careful about how much information you disclose to potential buyers – especially those that are your competitors. On the one hand, you want as many quality offers as possible, but on the other, you don’t want to spook your customers and employees with news of a sale, which can negatively affect your business in the process. Refusing to provide certain information may come off as evasive, whereas an M&A advisor is more likely to be seen as prudent and discreet. Therefore, an M&A advisor is in a better position to market your business via a process of phased disclosure, approaching potential buyers on an anonymous basis to reduce the risk of any confidentiality breaches.
An M&A advisor adds value at the negotiating table as they will interact with prospective buyers and negotiate on your behalf. Negotiations are not always straightforward and can sometimes become heated. With an M&A advisor as your intermediary, this enables you to maintain a good working relationship with the purchaser, which is important, especially in situations where you are remaining with the business post sale. An M&A advisor knows how to deal with these situations and keep the deal on track. They will be able to draw on their experience to find workable alternatives and solutions that keep all parties happy.
In addition, mistakes are extremely costly in a business takeover process. If you have never negotiated enterprise values, it is better to engage an experienced party. Maintaining momentum is also key to a successful sale. If the process lags, the buyer may succumb to so-called “deal fatigue.” To prevent this from happening, an M&A advisor keeps close track on progress, and makes sure that no one drops the ball and that all pending issues are addressed in real time.
The best deal possible
More importantly still, hiring an M&A advisor can help drive up your company valuation and enable you to achieve the maximum value for your business. This is due to a number of reasons. Appointing an M&A advisor shows that you are serious about going through with the deal. An M&A advisor also knows how to make your business a more attractive acquisition opportunity as they are professional negotiators. They know how to spot the weakness of a deal, what to compromise on and what to defend to ensure you get the best deal possible – not only with respect to price, but also in the finer points of the terms and conditions.
Remember you only have one opportunity to get it right. Selling a business may be the biggest decision of your life – you don’t want to cut corners and jeopardize all your years of hard work. When selling your company, you want to know that you have the strongest and most experienced team on your side. This is the best way to make sure that you achieve an outcome that reflects the true value of your business.
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Articles in this this six-part series on ‘Answering key questions when selling a business’
5. What’s the advantage of appointing an M&A advisor?