Once you understand the different types of buyers, the next step is identifying which specific buyer is best for your business. The right buyer isn’t just someone who can offer a fair price — they should align with your goals, values, and vision for the company’s future. This week, we will explore how to identify, […]
When we speak with prospective clients, a common refrain is, “Why should I hire someone to sell my company? I know my company better than anyone and can handle the entire process internally. Why should I pay someone to do what I can do myself?” While this is certainly an understandable perspective, it often overlooks some of the value (or “lift”) the right advisor can bring to an M&A process. Here are a few ways hiring an advisor can be a smart investment rather than an unnecessary expense.
Expertise and Experience
An M&A advisor is in the business of getting M&A deals across the finish line. Accordingly, they have many years’ worth of experience navigating the complexities of a business sale. The best advisors will thoroughly understand deal structures, accounting and legal nuances, and negotiation tactics. This expertise can be a difference-maker when a deal hits a rough patch.
For example, if due diligence uncovers an environmental issue that threatens to kill the entire deal, an advisor may be able to draw on similar experience from a prior deal to reach a solution agreeable to all parties. The business owner, while savvy to the operational nuances of their industry, will likely not have the requisite knowledge to structure the deal to overcome that environmental concern.
Access to a Wider Buyer Pool
M&A advisors typically have extensive networks and relationships with potential buyers, including private equity firms, strategic buyers, and family offices. This network can often broaden the pool of potential buyers for a given deal, increasing the chances of getting the best value for the company while simultaneously finding the best partner – one who will respect and add value to the underlying culture. Furthermore, M&A advisors are trained in the art of marketing companies and know how to present a given business in the best possible light, highlighting its strengths and growth potential to attract top-tier buyers.
Time and Focus
Selling a business is a full-time job that requires undivided attention. As a business owner, you should focus on running and growing your company, not managing the sale process. An M&A advisor takes on the heavy lifting, allowing you to maintain business performance and avoid disruptions that could devalue your company.
For example, many business owners are unaware of the voluminous demands involved when conducting due diligence (explored in a future article). As a result, they are unprepared for the massive time and resource demand put on their staff by the buyer. An M&A advisor can mitigate this strain in two ways. First, they act as a filter for due diligence requests, understanding why the buyer is asking for a piece of information and pushing back on requests that are unnecessary to the closing of the deal. Secondly, the M&A advisor’s internal financial analysis team can act as an extension of your internal accounting team to organize and disseminate due diligence items in a timely fashion.
Strategic Negotiation
Negotiating the terms of a sale is a delicate and strategic process. M&A advisors are skilled negotiators who advocate on your behalf to secure the best possible terms. They know how to handle tough negotiations and can balance the needs and expectations of both parties to reach a favorable agreement.
Organization of Financial Information
As alluded to above, due diligence is usually the most complex period in the M&A process. Depending on the buyer, due diligence can often be a confirmatory practice – the buyer is looking to make sure that what they think they know about the company is, in fact, correct. However, there are often cases in which the buyer is looking for a reason to re-trade the deal and either lower the purchase price or change some other element of the deal structure.
One thing that buyers will typically look for is inconsistencies in the information being provided for due diligence. Some will use these inconsistencies (even minor or inadvertent errors) to revisit aspects of the deal. An M&A advisor can prevent this by working with your internal team to ensure that every piece of information provided to the buyer is (a) correct and (b) consistent with the rest of the information provided.
Managing Emotions
Selling a business is often an emotional journey for business owners. M&A advisors provide an objective perspective and a buffer between you and the buyer. They help manage emotions, keep the process on track, and ensure that decisions are made based on logic and business acumen rather than emotional reactions.
Conclusion
While it might seem cost-effective to sell your business on your own, the reality is that the complexities, time commitment, and potential pitfalls of the process can significantly outweigh the perceived savings. The right M&A advisor can bring indispensable value, expertise, and strategic insight to enhance the final sale price and ensure a smoother, more efficient transaction. Ultimately, investing in an M&A advisor is an investment in your business’s future success and legacy.
Next Steps:
- Explore the Western Perspective page for more articles like this.
- Explore the Western Testimonials page for stories of business owners Western has worked with.
- For more information on how to explore selling your company, visit https://western-companies.com/sell-side-ma/ or contact Western’s Chief Commercial Officer Rick Groesch at rick@western-companies.com.
Additional Reading:
- Introduction to Selling Your Business
- Common Motivations for Selling a Business
- Initial Steps in Preparing to Sell Your Business