Value of an M&A Advisor
By: Tyler Clement
Choosing to go down the path of mergers and acquisitions is a big decision for any business owner. Whether it’s a company looking to grow via acquisition with a buy-side M&A transaction, or business owners selling their company that has long been in their family – embarking on an M&A journey is a substantial undertaking for companies. Having an experienced M&A advisor to guide companies through the unknowns of a process can be the difference between a successful and unsuccessful outcome.
What is an M&A Advisor?
First, let’s define an M&A advisor before we shed a little light on some of the roles and responsibilities an advisor takes on with an M&A transaction. M&A advisors are financial professionals who routinely execute transactions, guiding businesses along the way through the complicated process. These transactions are commonly the acquisition of a company or the sale of a business, and advisors represent either the buyer or the seller in any transaction. On both sides of the table in a transaction, advisors give their clients back something extremely valuable – time to focus on running their business. Transaction processes can be time-consuming work, and good advisors limit the time owners and key management team employees will have to be tied up with transaction-related activities. That’s not to say there won’t be work for these key stakeholders of the business during the process. At various points of the process, there will be at time spent by these key stakeholders on transaction-related tasks. With the demands present in any transaction, an M&A advisor taking as much off the plate of the key stakeholders as possible is just one of the many reasons business owners should consider having an advisor on their side with any transaction.
Sell-Side Advisor
Many business owners that find themselves exploring a sale are often doing so for the first time. The unknowns of a transaction can be daunting to face on their own. M&A Advisors bring expertise even before the decision is made to explore a sale. A key point that is often unknown to owners is what their options are for a sale transaction. One example of options available to a seller are the potential equity outcomes that owners can seek from a buyer – whether that’s a total exit from the business or a partial exit to then maintain ownership for future potential upside. Another unknown can be the various types of buyers. We have touched before on the main buyer types and the preferences that can vary between them. With these different options present in the market, it is critical for owners to not only know the options, but also to pre-define what their preferences are in an exit. M&A advisors will dig-in before a process to fully understand the post-transaction goals of the owners, and then will craft a process strategy around those goals. At the end of the day, one of the key roles for an M&A advisor is to bring numerous options to the client options that are aligned with the client’s transaction goals. Furthermore, an M&A advisor should be a resource for determining which is ultimately the best option to choose.
Additionally, the decision the sell the business is an emotional one. Owners have often put their blood, sweat, and tears into their companies, and are at a key transition phase of their lives. Having a steady advisor to lean on can help owners navigate successfully through the ups and downs of what can be an emotional M&A process. Advisors can provide objective advice to clients as a steady hand during the emotional process. M&A advisors execute transactions regularly, while most business owners will only get to do it once. This experience helps through the emotional ups and downs as well as the ability to ultimately negotiate the best deal for the client. The negotiation expertise in a deal is another value-driver of an M&A advisor. A well-run sell-side M&A process is designed to drive competitive tension among potential buyers to achieve maximum leverage and a premium outcome for clients.
Buy-Side Advisor
A buy-side advisor brings back a theme we discussed earlier – giving time back to the client. An M&A advisor on a buy-side engagement will do the vast majority of the legwork: scanning the market, identifying potential targets, and performing outreach and due diligence on eventual targets. The advisor is allowing the client to continue to perform their day job, and will bring in the client once meaningful targets have been connected with and show interest to meet the client. An M&A Advisor once again will bring options to the table for the client.
Additionally, once a target has engaged in discussions and ultimately agreed to an offer from the buyer, an M&A advisor will quarterback the diligence process from the signing of a letter of intent to closing. The M&A advisor will be there to guide the client on the customary process of due diligence on the path to closing. It will also coordinate with the additional types of advisors that come into play for a successful M&A process.
Other Types of Advisors Involved In M&A Transactions
The below table shows the various advisors involved on a business owners’ team within an M&A transaction, all of which can be vitally important for a successful outcome for the client. The M&A advisor will be quarterbacking the process from start to finish but will direct the client to lean on these professionals in areas in which the M&A advisor is not an expert.
Conclusion
An M&A Advisor can bring a wealth of value to a client who is looking to execute an M&A transaction. The value can come in many different forms and can occur well before a transaction process even kicks off. An M&A Advisor will manage a transaction from start to finish with a focused, disciplined, and tenacious process. Having the right M&A advisor can go a long way in determining whether the most successful outcome can be achieved for a client.