By Scott Bushkie
Every middle-market company considering a sale or recapitalization needs to engage an M&A advisor. The right advisor increases the likelihood of completing the deal, and can also be a major driver of value. One recent study found that advisors significantly increase sale value, and that 100% of owners said their advisor added real value.
Not all M&A advisors are the same. You need a reputable advisor if you want to get the most out of the advisory relationship. Here are the most important factors to continue when assessing M&A advisors.
Experience
The role of an M&A advisor is to add value to each stage of the process. They need to demonstrate a long track record of doing so—ideally in your specific market sector. Ask them about their work in your industry, and their experience with your type of business. Do they consistently work on deals of a similar size, and have they handled similar issues to those your business faces?
Process
The process governs the end product. The right advisor should have a clear process in mind for selling your business, including a detailed marketing plan and a strategy for protecting confidentiality. Be wary of advisors who make big promises without specific details to back up those promises. Advisors who gloss over important steps, especially due diligence, can also erode value and slow the sale.
Fees
A skilled M&A advisor should deliver much more in value than you lose to fees. So don’t just focus on the number itself. Consider the value the advisor adds, and what specific services they offer.
Team
Running an M&A deal is an intensive, focused process that demands more than just one expert. The right advisor should lean on a skilled team of experts. Ask who will be working on your deal team, and what experience they have. But don’t let the advisor getting away with outsourcing your deal to junior staffers and interns. You need an expert senior partner on your team.
Ask the advisory team how many deals they handle each year, and the average size of each deal. Volume operations tend not to offer intense personal service. And if your deal is smaller than the firm’s average deal, it might be a low priority.
Fees
Fees are always a key consideration. The ideal M&A advisor confers more value on a transaction than they take in fees. So don’t just focus on the raw numbers and choose the team with the lowest price. Look instead to value, experience, and service. Ask what you’re getting in return for the fees you pay. Then get clear details about the fee structure.
In most cases, a combination retainer/success fee ensures both that the advisor is fairly compensated and that they are properly incentivized to see your deal through to completion.
Asking questions about these key factors can help you learn a lot about what to expect. The best advisors are willing, and even eager, to answer your questions and display their expertise. Steer clear of anyone who seems offended by a detailed interview process, since they may not have the necessary professionalism or skill to pull off the transaction.
