The Value of M&A advisors

The process of selling a business can be time-consuming, especially for someone who has a full-time business to run. Identifying and managing interactions with potential acquirers, managing due diligence and handling negotiations to obtain the best deal possible while keeping the business running smoothly can be too much to juggle at times. 

Hiring an M&A advisor allows you to focus on running your business and affords you the peace of mind in knowing that you have a competent partner that will get the job done. In this article, we will explore the roles of M&A advisors, the value they can bring and offer some advice on how to choose the right one for your business.

The Roles & Responsibilities of M&A Advisors

M&A advisors are professionals whose expertise is to provide guidance when selling or buying businesses. Their services include buy-side and sell-side advisory and capital raising services. Sell-side (representing the seller of the business) and buy-side (representing the buyer) advisory services are the cornerstones of M&A transactions. Advisors assist companies and handle M&A transactions end-to-end, offer suggestions on the valuation of your business, identify the most suitable buyer, facilitate due diligence while maintaining a competitive atmosphere in the bidding process.

Generally, the roles and responsibilities of M&A advisors are: (1) gather relevant data and prepare information materials, (2) shortlisting and engaging with potential acquirers and (3) handling due diligence and negotiations.

M&A advisors will typically first seek to understand the inner workings of their client’s business before venturing into the market to source for suitable potential acquirers. They collect relevant information which includes the ownership structure, financial performance, legal and operational details of the business and put together information materials like financial forecasts, management presentations and business plans. They usually also set up a virtual dataroom to keep the materials organized and allow for a more seamless due diligence process. At this stage, advisors work with their clients to develop a plan and agree on target sale value, timeline and account for other preferences.

Next, advisors begin the outreach process by forming a shortlist of potential acquirers and categorizing them based on the client’s strategic preferences and the likelihood of striking a deal. Advisors circulate the information materials, solicit interest and facilitate due diligence and meetings to provide the necessary information required by a potential acquirer to make an offer for your business. Once due diligence is complete, advisors support negotiations to arrive at an optimal win-win deal for both parties and finalize the sales and purchase agreement.

The Value of M&A Advisors

From the very beginning of the journey, you have always ensured that your business gets the very best support possible: the most reliable suppliers and vendors to supply quality products, the most promising and dedicated talent to help run your operations, the most trustworthy clients to be associated with. Your business is the culmination of a lifetime of vision, determination and hustle. Now the time has come to enter a new phase of your life: you are ready to sell your business.

You have worked hard to make your business what it is today, therefore when it is time to sell, you deserve no less than the best possible deal from the best possible acquirer. You may think that you can accomplish this on your own, after all, no one understands the nitty gritty of the business more intimately than you do. But chances are this may be your first time selling a company and you may not be aware of all the factors that can make or break a deal. How sure are you that you are receiving an offer that truly reflects the value of your business? Are the terms in the proposals favorable or are you getting the shorter end of the stick? Are you able to present your business in the best light possible? 

Selling a business involves a lot of moving parts: the preparation, planning and execution require a significant commitment of time and effort. You may think that you are capable of handling the workload yourself. Even if that is the case, we encourage you to consider the following proposition: handling M&A transactions by yourself entails a non-negligible and substantial opportunity cost.

It typically takes many months to successfully close an M&A transaction, that is a minimum of six months in the most ideal scenario and can stretch to over a year in many other scenarios. Can you walk away from your business for so many hours to manage the interactions, due diligence and negotiations? It can be a huge responsibility to take on and one that can severely affect the performance of your business. This is especially crucial when trying to sell your business, it is more important than ever to keep the business as profitable as ever and maintain or even increase the value of your business. The best entrepreneurs have the highest opportunity cost of dedicating months away from their business.

Lastly, it may not be a good idea to reveal to stakeholders and competitors that your business is for sale. It may introduce a sense of uncertainty in the minds of your employees, suppliers and customers. Employees may quit to find a more stable job, suppliers and lenders may demand higher payments and more stringent terms and customers may switch to your competitors altogether. Confidentiality is key during a sale process. M&A advisors can approach prospective acquirers on an anonymous basis, maintain confidentiality and help conceal your intentions to eliminate the indirect costs of representing yourself.

This is where M&A advisors step in to maintain the equilibrium and maximize your chances of securing the best possible outcome. M&A advisors bring with them a wealth and breadth of experience in successfully closing M&A transactions. They have overseen hundreds of transactions and thoroughly understand the dynamic flow of deals. They have fostered meaningful relationships with prospective investors and strategic acquirers and are able to leverage these connections to garner as much interest in exploring an acquisition as possible. A good advisor can save you months of time, money and a multitude of issues down the line. They have connections, expertise and experience that you may not be able to replicate.

Things to Consider when Hiring M&A Advisors

Finding the right M&A advisor is a critical decision that can impact the success of a transaction and therefore it is a decision that should not be taken lightly. When appointing M&A advisors, it is important to assess their credibility, track record and fee structure.

M&A transactions are guaranteed to be lengthy and complicated. In navigating the tumultuous journey, you want to be accompanied by a reliable advisor who you can trust and enjoy working with. When talking with potential advisors, you want to get a sense of the advisors’ interest in understanding your circumstances and overall comprehension of the competitive landscape that you are operating in. You want to work with advisors that are proactively looking for ways to make your life easier and that you are keen to engage with, because there will be plenty of back and forth between you and the advisors throughout the transaction process.

You want to make sure that the advisors you eventually choose to work with are worth their salt and are knowledgeable of the ins and outs of an M&A transaction. Experienced advisors know how to position your company, find the most suitable buyer, optimize your chances of a higher valuation and better deal terms in a shorter period of time, unlocking the value you receive in a more systematic manner. You will also want to work with advisors with an extensive network that will enable a superior sourcing of prospective investors and acquirers.

Conclusion

Just like you would not represent yourself in the court to defend your case, having a credible advisor by your side when sitting at the negotiating table across investors and acquirers who have exceptional knowledge and experience in executing deals will equip you with a balancing force and confidence that you will walk away with the best possible outcome. Selling your business is one of the biggest decisions you would ever make in your life, it may not be a good idea to cut corners and jeopardize all your years of hard work. You do not want to look back and wonder whether you have obtained the best deal possible or whether you have left money on the table. Hiring the right advisors will stack the odds in your favor and maximize your chances of success.

When selling your business, you want to be very sure you have the strongest and most experienced team on your side. At Alehar, we're deeply passionate about Fundraising and M&A, equipping us with the expertise and extensive network needed to carry out transactions efficiently and represent the interests of our clients effectively. Our unique approach enables us to manage transactions with a higher probability of success, at a faster pace, creating more clarity for stakeholders.

Feel free to check out our services and schedule a free call so we can explore how we can leverage our expertise to support your objectives.

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At Alehar, we're deeply passionate about M&A and fundraising, equipping us with the expertise and extensive network needed to carry out transactions efficiently and represent the interests of our clients effectively. Our expertise is particularly valuable for transactions ranging from USD 3m to 200m, as we guide companies through every step of their M&A and fundraising journey (including both equity and debt transactions)