Do I Really Need an Advisor When I Already Have a Buyer That Has Approached Me?

An ever-increasing number of businesses receive unsolicited approaches from buyers yearly, yet a significant difference exists between being accidentally bought and purposefully sold. 

The fundamental circumstance is that most mid-market business owners have not experienced a transaction before, whereas most buyers are “fit” for acquisitions - making it an unfair contest. 

With more extensive deal experience and even dedicated M&A teams, acquirers are typically positioned to claim stature by their size and experience. They proactively assume the lead to define the process that enables them to take control of negotiations, and where this manifests itself is that they can lean on their deep experience to define what they have determined to be “industry standard valuations.”  

A further consideration is that a genuinely active acquirer will likely negotiate with multiple targets simultaneously. Yet, sellers in these circumstances typically only consider the one available buyer and don’t set out to actively explore and engage the right acquirer. It is impossible to understand whether their offer is good if you have nothing to compare it to.    

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Even if a buyer has already approached you to purchase your business, engaging an M&A  advisor can be crucial for several reasons:

Managing the Hidden Decision Makers: In any transaction, there are as many parties on one side of the transaction as the other, not just the buyer and the seller. The parties that have influence over a deal range from advisors to auditors, lawyers, boards, banks, anti-trust or competition commission bodies, shareholders, boards of directors, wealth managers, managers, staff, suppliers, customers, W&I insurers, and sometimes even spouses. Each party will have its fears and motives that require consideration and alignment.

Valuation Expertise: An M&A advisor helps ensure you receive a fair price for your business. They have tangible insights based on actual market conditions and can assess your financial performance and potential growth, which assist in accurately determining value.

Negotiation Skills: Advisors bring experienced M&A negotiation skills to the table. They can negotiate on your behalf to achieve better terms, whether the sale price, payment structure, or other deal terms you might be aware of are even available to you.

Market Knowledge: Even if you have a buyer, an M&A advisor can help identify additional potential buyers, creating a competitive environment. This ensures the price is right and could lead to a better deal or provide a fallback if the current deal falls through.

Deal Structuring: The deal's structure is as important as the sale price. M&A advisors can help you understand different structuring options, such as earn-outs, share/stock options, seller financing, or earn-outs, to understand the risk and reward and how these might impact your financial outcome.

Managing the Process: Selling a business is a complex process involving legal, financial, and operational considerations. An M&A advisor can manage the entire process, ensuring that all aspects are handled professionally and promptly, reducing stress and allowing you to continue focusing on running your business.

Confidentiality: M&A advisors know how to maintain confidentiality throughout the sale process, which is crucial to prevent any potential negative impact on your business, employees, and customers.

In short, an M&A advisor acts as your advocate, working to get the best possible deal while managing the complexities of the transaction, which can be overwhelming if handled alone, enabling you to run the business and ensuring the distraction of a deal does not undermine performance.

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