The Value Of Hiring An M&A Advisor

Forbes recently published an excellent article delving into The ROI of Hiring an Investment Banker, supporting what we at Benchmark International have been shouting from the rooftops for years. The article discusses how study after study has proven that hiring the right M&A firm results in a high financial payoff for those who are selling a business.  

For example, a study by the University of Alabama and Portland State University of 4,468 transactions over 20 years estimated that sellers who enlisted the guidance of an M&A advisor garnered valuation premiums of around 25%, depending on their methodology. This study also found that approximately 99% of the 1,727 company sales conducted by sophisticated institutional sellers involved an M&A firm. That is quite a significant finding, considering that most private equity investors were once investment bankers and had profound buyer connections. They already know how to sell a business, but they also know that bringing in an outside advisor results in a far better return on investment. Additionally, a study by Northern Trust’s Business Advisory Services group found that, in 4,316 transactions, sellers that an M&A firm represented raked in an average EBITDA multiple 1.5x higher with lower risk. 

As the Forbes article points out, advisors are not created equal. Different firms offer varying degrees of quality and negotiating skills, which is why it is important to find the advisor who best fits your needs.  

The article reinforces everything we have been saying for years, such as that while business owners may be experts in their industry, M&A advisors and investment bankers are experts at selling businesses, which results in getting the most value in a deal. It also increases the likelihood of an agreement successfully closing while you get to stay focused on running your business. Selling a company is a big deal and a highly complex process that requires much attention to matters that distract you from your day-to-day operations. The article points out how the due diligence process, running a data room, negotiating, and other demanding tasks require an extensive time commitment that averages 1,200 to 1,500 hours throughout the whole undertaking of the sale of a business. That’s another reason why enlisting an expert can keep your stress levels from going off the charts. 

Another value driver is that buyers know that when they deal with a knowledgeable and sophisticated advisor, the seller is not only committed to a sale but also prepared to drum up a competitive bidding process to get the best deal possible. Simply put, they know you’re not messing around. 

What’s the Difference Between an Investment Banker and an M&A Advisor? 

The short answer is not much. They offer similar services but to different degrees. M&A advisors typically bridge the gap between deals valued at less than $2 million and deals over $250 million. Investment bankers often work with public companies that require licensing and SEC compliance. But they are still essentially the same. M&A advisors are known to serve as deal partners and experts on exit planning and succession planning. This brings even more value to the process because they are focused on your future even after the deal is done. 

M&A advisors and investment bankers create a competitive selling process designed to complete a deal in a certain amount of time and can be more aggressive than when working with smaller business brokers. You are going to get more value from a deal when working with an M&A advisor or investment banker. They both bring value to any deal and are worth being given a seat at the table. They are similar, with the vital distinction being that they differ from business brokers. Learn more about the difference between a business broker and an M&A advisor here. 

At Benchmark International, we have not only been named Investment Bank of the Year, but we also offer all the personalized, value-added services that our seasoned teams of M&A advisors are known for around the world. 

Take a deeper dive into why you should hire an M&A advisor to sell your business in these articles that we have posted in the past: 

The Value In Hiring An M&A Advisor 

The Value Of An M&A Advisor Firm 

Should You Hire An M&A Advisor To Sell Your Business