What To Look For When Choosing An M&A Advisor

Selling your business is a paramount moment in your life. It’s something you absolutely want to get right so that you can extract the most value out of the deal—and so that you are protected from being swindled by a savvy buyer. It also takes a great deal of time and energy to sell a company, which can be rather difficult to spare when you are trying to focus on running a business. Most people simply do not have this time, energy, connections, or expertise that is required to put their company on the market. This is where the importance of an experienced M&A advisor comes in. By partnering with an M&A expert, they handle all the details of a deal, including due diligence, negotiations, marketing, vetting, and ensuring that you get the most value for your business. They also know how to navigate bumps in the process, and manage the expectations of all parties involved.

Choosing an M&A expert is a pretty important decision. Making the wrong choice can cost you money in a sale or even blow the completion of a deal, while choosing the right advisor can be a total game changer for you and your company. So, how do you know what to look for when choosing an M&A advisor?

1. Experience & Reputation

Obviously, you want your M&A advisor to have a proven track record of successful deals. It is even better if they have experience dealing with businesses similar to yours in size and sector. Look for references and testimonials from real clients that have sold real companies. Don’t be afraid to ask for references that the advisor has worked with to ask if they would work with them again.

You will also want to make sure that the advisor’s experience is recent, so that you may rest assured that they have a current grasp on the market in your industry, and the knowledge required to navigate it.

Be sure to learn about the experience and training of the individuals you will be working with. What are their educational backgrounds and professional qualifications in areas such as corporate finance, law, real estate, etc.? Do they have passion for what they do? Also, it can be valuable to work with M&A deal team members that have walked in the shoes of a business owner facing a sale. This means they are likely to have first-hand compassion for how emotional the sale process can be for an owner—something that shouldn’t be underestimated in the process.

Accolades are also a pretty good testament to a company’s character. Look for awards or formal recognition that indicates that you are working with a stellar company.

2. The Team Members

M&A representatives come in all shapes and sizes. The M&A firm or broker should be able to show examples of similar size engagements that they were successful with.

You’ll want to work with an M&A advisor that is best suited to your company size. And you will want to be familiar with all the members of the team that will be working on your deal, and comfortable with their level of involvement and attention. Take the time to understand the role of each team member for the transaction process, especially the more senior advisors. In some cases, it can also be a good idea to consider how many companies the firm typically represents in a year. This will give you a sense of how many of their resources will be dedicated to representing you, or spread around to other clients.

Additionally, look at the talent employed by the advisory firm and if they appear to be passionate and enjoy what they do. It may not seem like a big factor, but when the people in your corner are “all in” when it comes to getting you the best deal possible, the outcome is likely to be much more rewarding.    

3. Fees

A huge mistake can be to choose an M&A advisor that charges the lowest fees because you think you will be saving money on getting a deal done. You should view this decision as an investment in your company, and you want to get the biggest return. Enlisting the right advisor can get you the highest sale price for your business, and that should be your priority.

M&A advisors usually charge a combination of retainer fees and success fees that will vary between firms. Smart sellers try to seek out a structure that is balanced. Firms that charge a big retainer upfront but not much in the way of success fees may have less motivation to close the deal. At the same time, firms that only charge success fees may not actually close a larger percentage of their engagements.

Your M&A firm’s fee structure should align your interests with theirs. If their profit comes out of their success fee, they will be driven to make your deal as successful as possible, and if the deal doesn’t close, they do not make any money. You will also want to be clear on whether they charge you for incidentals or any hidden fees. The clearer and simpler the fee structure is, the better.

Also, be sure to verify the length of your contract with an M&A firm and whether or not services will be bundled. The contract should also permit you to accept or reject any offer that they put on the table, and that you can terminate them at any time. If your M&A advisor cannot keep you satisfied, you should have the option to fire them.   

4. Strategy

Your M&A advisor should have a specific strategy to achieve your goals. They should be able to show you full timelines with milestones earmarked in the process, as well as a detailed description of what they will do at each stage. The best firms will have a model in place that follows the firm’s strategy and is built on proven practices that lead to positive results.

A quality M&A firm should also be able to help you identify growth opportunities that you can implement several years leading up to a sale in order to increase the value of your company. You may not be ready to exit your company just yet. Many M&A advisory firms will gladly consult with you on how you can add value to your business. They understand that building a solid relationship with you today could be beneficial down the road. And this will give you plenty of time to be sure you trust them and are comfortable with them representing you when the time comes to sell.

5. Chemistry

Your M&A advisor will be representing you with buyers so you should be comfortable that they understand your company and your aspirations, as well as you as an individual.

Every sale process comes with its share of obstacles and challenges. You will want your advisor to anticipate any issues and proactively address them. They should take the time to get to know you and your company, and you should feel completely confident that their interests and vision are aligned with yours. If they aren’t working towards your goals, but rather what they think your goals should be, then they may not be the right advisor for you. The bottom line is that you should feel that you have a great relationship with your M&A advisor, believe you can trust them, and know that they truly have your back.