How M&A Firms Add Value in a Business Sale

Being a business owner isn’t the same as being an expert in selling a business. And not all advisors are equal in knowledge or experience either. That’s where mergers and acquisitions advisors come in. These professionals have years of experience focused on brokering business sales. Working with an M&A advisor should save you headaches and put more money in your pocket.

What do M&A advisors do?

An M&A advisor does more than tell you where to sign on the dotted line. Here are some of the tasks your advisor will handle:

• Provide a structured process for the sale – A business sale is complex. An M&A advisor knows the ropes and will outline what needs to happen and when. They get to know your business and will do research on the current state of your industry. Your advisor will get you and your business ready for the sale and set expectations.
• Identify opportunities to enhance the business– If you haven’t gone through a formal exit planning process, good advisors will begin to make recommendations to enhance the business as soon as they are engaged. The advisor can identify simple things that can be done to increase the value during the selling process and make the business better overall.
• Work with you to prepare materials – Any sale requires a lot of homework and paperwork. An M&A advisor will help recast financials and prepare an accurate description of your business in an offering memorandum. They’ll document operations, staffing and management teams, facilities and other practices. Your advisor will also compile data and analysis about your competitors, industry trends, and your business outlook. Valuation assessments and financial summaries are covered, too.
• Market your business confidentially to qualified buyers – Reaching the right buyers requires legwork. An M&A advisor will develop a targeted list of hundreds of prospects, make lots of phone calls, send mailings and emails, and answer countless questions in a confidential manner. By building on their network of buyers, your advisor can create a more competitive environment for your business. Plus, your advisor will screen out shoppers who might just be curious. An M&A advisor will protect your time and sensitive information, making sure it’s only shared with the most serious buyers.
• Manage and schedule calls, meetings, and presentations – Your M&A advisor confidentially represents you to potential buyers. That means handling the logistics of meetings, communicating professionally, and using their experience to negotiate. Working with a pro also gives your business – and the sale – greater credibility. Plus, delicate parts of a negotiation can call for a third party to play the bad guy. Your advisor is familiar with that role and will continue to represent you in the best way possible.
• Create a limited auction – If the business is suited to do so, the M&A advisor will add significant value by getting numerous buyers to present offers to purchase the business at the same time. He or she will respond back to the group of buyers to make a higher offer if they want to have a chance at buying the business, with the ultimate buyer paying more for the business with better terms and fewer contingencies.
• Let you focus on your business – While your advisor is juggling all the details of a sale, you are free to do what you do best: run your business. It might not sound like a big deal, but many owners take their eye off of the business during the selling process and the business slows. No buyer wants a struggling organization. Buyers review financials right up until closing and may alter the price or terms if things have changed. Working with an M&A advisor enables you to keep your business in prime operating condition – making it attractive to potential buyers.

What can you expect working with an M&A advisor?

Like many aspects of business, the decision to work with an M&A advisor often comes down to the bottom line.

A study at the University of Alabama examined more than 3,200 private sellers. About half used an M&A advisor when they sold their business. Researchers found that the owners who used advisors received higher premiums at the sale. These premiums ranged from 6 to 25 percent.

Another study by High Rock Partners looked at how owners who worked with M&A advisors felt about the experience after the sale. Owners said their advisors added particular value in these areas:

• Negotiating the deal
• Driving the process
• Enhancing credibility
• Improving the value received

It’s hard to argue the value of someone who will manage the sales process and could net you a higher price. The research backs it up: working with the right M&A advisor can make the sale process easier and more profitable.

Learn more about how an advisor can help you make the most of your business sale. Call O’Keeffe & O’Malley at 913-648-1085 for a confidential meeting.