A recent survey explored company owners after selling their companies. A few data points from the survey may help you assess whether and to what extent an M&A advisor can add value to the transaction.
The summary included 63 participants whose companies were sold between 2010-2014. It represented 18 industries, and included lower middle and middle market participants, with companies ranging in value from a few million to almost $250 million.
One of the most important revelations of the survey was the extent to which M&A advisors added value to the transaction.
How M&A Advisors Add Value
All survey participants agreed that engaging an M&A advisor added value to the transaction. Data from the study revealed several areas in which M&A advisors added value. They include:
- Seller credibility. This was the highest rated factor. Sellers felt that buyers viewed them as more credible based on their use of an M&A advisor. Hiring an advisor led the process, and created a more professional deal-making process.
- Sourcing buyers. Finding a buyer can be difficult, and sourcing buyers was on the lost, but did not top it. Advisors implement a solid process for identifying target buyers, and then they contact buyers on the seller’s behalf. This may be another avenue through which advisors improve seller credibility.
- Buffering and Preparing. Preparing for the sale process directly affects the seller’s credibility. IT can also help eliminate unpleasant surprises that erode value. The right preparation strategy may even drive deal value. Respondents agreed that advisors were helpful at preparing them for the transaction. They also saw advisors as helpful buffers, who could remove emotion from the transaction and ensure the buyer and seller had good communication.
- Negotiations and communication. Negotiating the deal can be a stressful, emotionally fraught process. Management must preserve and build a solid relationship with the buyer. A sale inevitably includes some challenging moments. An advisor can help smooth over these issues, and anticipate ahead of time when they might arise.
M&A Advisors: A Key Driver of Value
Sellers consistently offered feedback indicating that hiring an M&A advisor conferred significant value, and that the additional value almost always outweighed the extra costs. Some value is less visible, and difficult to quantify. For example, an advisor can free owners to run the business, alleviating owner stress and freeing owner time. This prevents the business from falling into decline during the sale process.
One thing is clear from this data: hiring an advisor consistently adds value, and does so across several domains.