The Role of an M&A Advisor: Do You Need One?
Mergers and acquisitions (M&A) are among the most significant moves a business can make.
They can also be among the most complex.
Whether you’re looking to acquire a competitor, merge with a strategic partner or sell off your company, the stakes are high, and the process is often anything but simple. But that’s where M&A advisors come in: These professionals specialize in helping companies navigate the maze of buying, selling and merging businesses.
Today, we’re going to discuss exactly what these advisors do, and lay out a few situations in which a business might consider bringing one on board.
What Is an M&A Advisor?
An M&A advisor is a financial professional (or more commonly, a team or a whole firm) that provides strategic advice, financial analysis and hands-on support throughout the M&A process. Their role is multifaceted, but among other things, they help clients:
- Identify and evaluate potential targets or buyers
- Value businesses
- Structure deals
- Negotiate favorable terms
- Manage the various financial, lega, and operational hurdles that can arise along the way.
These advisors sometimes come from specialized M&A advisory firms, though investment banks, law firms, and other types of businesses may also have M&A advisors. Some may focus on large, publicly traded companies, while others may specialize in private middle-market or small-business deals. Certain advisors might only deal in specific industries and/or deal types, too.
What Services Do M&A Advisors Provide?
The work of an M&A advisor touches every stage of the transaction lifecycle. Here’s a closer look at some of the most common services they provide. Just note that some M&A advisors might provide different combinations of the below, as well as other services not mentioned here.
Deal Sourcing and Communication
Whether you’re looking to buy or sell, advisors use their extensive networks, market research and industry connections to identify and approach prospective buyers or acquisition targets, many of which may not be publicly listed or actively marketed. This kind of access to “off-market” opportunities can give you a competitive advantage and increase your chances of finding a partner or opportunity that aligns with your goals.
Valuation Services
Knowing what a business is worth — whether it’s your own or a target company — is critical in dealmaking. Advisors use a variety of valuation techniques to assess a company’s fair market value, taking into account factors such as revenue, earnings, assets, liabilities, growth potential, even market trends.
Negotiation Support
Meanwhile, deal negotiations can be delicate, especially when it comes to price, structure and contingencies. An experienced advisor brings objectivity and negotiation expertise to the table, helping ensure your interests are protected and that you secure favorable terms.
Deal Structuring
Advisors assist in determining the most advantageous way to structure the deal — whether through asset purchase, stock purchase, merger or other formats — while considering tax implications, regulatory compliance, financing and post-closing requirements. A well-structured deal can mitigate risk, improve cash flow and align incentives between buyer and seller, making it a crucial element in a successful transaction.
Due Diligence Support
Due diligence is a critical phase in any M&A transaction. It involves a deep dive into the financial, legal, operational, and commercial health of the target company. M&A advisors help coordinate this process by compiling and reviewing key documents, identifying red flags and working with attorneys, accountants and other professionals to ensure nothing is overlooked. The goal is to uncover potential risks or liabilities that could affect the deal so you can enter any transaction with your eyes wide open.
Preparing a Business for Sale
If you’re selling, an advisor can help you position your business to attract the right buyers and maximize value. This help might include cleaning up financial records, identifying areas for operational improvement, developing marketing materials and/or crafting a compelling pitch to potential acquirers.
Post-Deal Integration Support
Of course, M&A success depends in part on what happens after you close. Integrating two companies — which includes their cultures, systems, operations and people — can be challenging. Some advisors offer post-deal support to help ensure a smooth transition and maximize the long-term value of the transaction.
Do You Need an M&A Advisor?
M&A advisors are extremely helpful in a number of situations, but in truth, your deal might not require professional assistance. Here are a few scenarios where you should strongly consider hiring an advisor:
- You’ve never done an M&A deal before. The learning curve of M&A can be steep. By hiring an M&A advisor, you’re immediately tapping a well of specialized knowledge that can help you make informed decisions, avoid costly mistakes and meet your timeline.
- You’re focused on running your business. Selling or acquiring a business takes a lot of time and attention. An advisor can manage the process so you can stay focused on day-to-day operations, which is especially important if you’re trying to maintain (or improve upon) a certain baseline of performance during the deal.
- You need a better understanding of company valuations. M&A advisors help ensure you don’t undervalue your business — or overpay for someone else’s. An inaccurate valuation can have all sorts of negative effects, including saddling you with unnecessarily high debt in an acquisition, or receiving a lower offer for your company than you otherwise could have negotiated.
- You need help finding acquisition targets or buyers. Advisors have networks, tools and resources to help you identify the right counterparties. They might also have relationships with private equity firms, strategic buyers or other business owners that you wouldn’t be able to access on your own.
- You’re worried about tax or regulatory implications. M&A transactions often have significant tax and financial reporting implications. Advisors can help you understand and plan for these impacts, including coordinating with attorneys and tax professionals to develop the most advantageous deal structure.
- You want to negotiate the best deal. Even seasoned entrepreneurs can benefit from having a skilled negotiator at their side. Advisors bring objectivity to the table and can guide you through the emotional ups and downs of a deal. Remember: The team on the other side of the table is likely bringing their “A” game. You should bring yours.
Choosing the Right Advisor
If you decide to hire an M&A advisor, be sure to choose one with experience in deals of your size and complexity, as well as familiarity with your industry. Look for someone who listens to your goals, communicates clearly and offers a transparent fee structure.
Ask for references, review past deals and make sure the advisor will be hands-on — not just in the planning phase but throughout the entire lifecycle of the transaction.
Need Help Navigating a Merger or Acquisition?
McManamon & Co. provides a variety of M&A advisory services to help you buy or sell a business with confidence. Our professionals support you throughout the entire transaction lifecycle, from finding buyers or potential targets to negotiating terms to making post-acquisition purchase price adjustments.
Whether you’re preparing for sale, searching for the right target or need help closing the deal, we’re here to help you make the M&A math work in your favor. Call McManamon at 440.892.8900 or contact us online today.
Tags: business valuation, McManamon, McManamon & Co., mergers and acquisitions, small business | Posted in McManamon & Co., mergers & acquisitions