How to Choose the Right M&A Advisor
As a business owner preparing for an exit, one of the most important decisions you will make is hiring a business broker. Selecting the right advisor to facilitate the sale of your business requires a great deal of consideration and is pivotal to a successful exit.
With so many advisors to choose from, and a variety of claims and promises being made, it might feel impossible to identify the right option. Before making a decision, look for an advisor who embodies the traits below to assure they are the right fit and will represent your best interests in a sale.
Finding an advisor who focuses exclusively on transactions in your industry can make a big difference. Industry expertise gives advisers a profound understanding of your market and services, as well as the ability to quickly identify companies looking to acquire businesses with your specific service offering.
Working in one specific industry also translates to a well of valuable connections. A firm with relevant connections is more likely to generate more bids, which is very likely to drive up the final price. Furthermore, they’ll be familiar with what potential buyers look for in their due diligence, and how to highlight key selling points to maximize value.
Selling a company takes time, patience, and constant communication. It’s important to find an advisor who is invested in the process and understands the value of your time. Seek out representation that will provide you with a dedicated advisor to answer your calls and address frequent questions or concerns.
However, it’s important for you to stay involved in the process; just because you’re paying them a fee does not mean they should do all of the work or make all of the decisions. A good advisory firm will want constant engagement and involvement from the client. Do your best to avoid hiring a “leave it to me” advisor.
Make sure this isn’t their first rodeo. Ask them about comparable deals their firm has facilitated in the past. Learn about any legal, operational, or financial challenges they faced during those processes, how they addressed these challenges, and more importantly, how they overcame them.
Also ask about their experience working with companies similar in size, revenue and service offering to yours. If they have extensive experience in those areas, their industry connections are more likely to be interested in acquiring companies of your size.
Cost should not necessarily be the most influential consideration when choosing an advisor. There are a few ways to avoid sticker shock with broker fees when the sale is complete:
- Consider choosing a success-based fee structure. The selling process doesn’t always go as planned; with a success-based fee your advisor only gets paid if you do.
- Find an advisor with a history of working with companies similarly sized to your own. Their fee structures are more likely to fall within your expected price range.
- Understand the scope of work, and exactly what they’ll be doing to earn those fees. Make sure everyone’s role is communicated clearly from the get-go – including your own.
- Ask where extra fees may occur. Some quoted services may come at additional charge.
Everyone wants to sell their company for the largest amount possible, but be wary of advisory firms that promise a big payout that seem too good to be true. During initial discussions, listen closely to the explanations provided for the estimated go-to-market price you’re presented. It’s critical that both you and the advisor are realistic when it comes to the selling price.
Establish a firm understanding of your company’s financial situation before speaking with an advisor. Compare valuations and talk through any differences. Again, listen closely to their justifications and make sure you go to market with an acceptable and reasonable selling price. Approaching a potential buyer with an unreasonable asking price can derail negotiations before they ever get started.
Find Out More
Contact NEFCAP today and schedule a call to determine if we’re the right fit for you and your business. Our industry-specific experience can give your company a unique advantage in the selling process and help you achieve the greatest value at closing.