If you’re thinking of selling your business, one of the first things you’ll need to do is put together a strong M&A advisor team.
Your choice of advisors is a critical factor to attract the right buyers and get a compelling offer on the table. This deal team is your mastermind for the acquisition and can make or break the entire process.
While it can seem daunting, in this article we’re going to demystify the process and provide clarity around which professionals you should select for your M&A advisory team.
M&A Advisors: Why You Need Support from an M&A Team
The answer is simple: because the process of selling a company is both complicated and time-consuming. Selling a business is a specialized activity with a significant number of legal and accounting considerations and nuances.
One of the most important things you can do when preparing to sell your company is to assemble a top-notch team of M&A advisors.
As a business owner, often times this will be your first time sale, so it’s prudent to tap into professionals who do this on a regular basis.
These advisors will help you navigate the complex world of mergers and acquisitions, and they can make all the difference in getting a good deal for your business.
Your Acquisition Team
The end-to-end sales process requires a variety of diverse skills – early on you’ll need to get clear on roles and responsibilities.
Before you dive into the process, give some thought to how much of the work you are prepared to do yourself versus delegate to others. Depending on the size and complexity of the deal, you may be able to perform certain basic tasks yourself, while tapping into professional expertise on an as-needed basis.
Beyond the essentials you’ll need from legal and accounting professionals, the rest of your team ultimately depends on your confidence and level of understanding with the process of selling a business.
I recommend leaning much more on seasoned professionals if you’ve never sold a business before, are planning to sell to a sophisticated buyer, or have any sort of financial and legal complications.
While an accounting firm and legal representation are mission critical, we’ll cover other optional advisors as well.
Accounting Advisor
Accounting professionals can help you the most in the following areas:
Exit strategy advice
- Help you best position yourself for a sale and understand the strategic value and potential of your business
- Review the investment criteria of the buyer
- Contemplate integration issues
- Arm you to be ready for the negotiation and due diligence process
Reviewing financial information
- Ensuring your financial exhibits are prepared appropriately and presented in a conventional format
- Investigate any abnormal year to year changes
Referrals and Introductions
- Accounting firms frequently take part in deal transactions and typically have strong connections with potential buyers (and prior sellers) they can introduce you to
- Often can open up the pool of potential buyers during the process
Analyzing tax implications
- Help you understand the consequences of selling different aspects of the business
- Review business processes for reporting, tax collection, and compliance
- Assess best format for the sale (sale of shares vs. assets) and whether the corporate structure of the business is suitable for an outright sale (compared to earn-out)
- Structuring the deal to minimize your tax liability
Reviewing deal structure, purchase terms and conditions
- Review and negotiate key commercial terms of the deal (i.e. price, payment terms, and conditions of the sale) and act as a buffer between you and the buyer
- Coordinate with other advisors on key issues such as post-closing covenants
Due Diligence
Due diligence is the process of investigating a potential deal to identify any risks or red flags. During the buyer’s due diligence process, they will request a large volume of information related to your business.
Once the terms are agreed upon, the buyer will undergo an extensive deep dive into your business to uncover any discrepancies or risks.
Your accountant will help you:
- Organize and prepare the requested documentation in an efficient manner
- Review your financial statements and tax returns to make sure they are accurate and up-to-date
- Do a trial due diligence in advance to ensure you are ready
- Ensure that the information is accurate and complete
- Respond to requests in a timely fashion
Legal Advisor
You’ll need an attorney to protect your interests throughout the entire process. They will help you with wide range of activities: everything from negotiating the sale agreement to reviewing the legal documentation.
Here are some of the areas they’ll help you with:
Review documentation
- Deep dive into corporate documentation including shareholder agreements, contracts, and board minutes
- Ensure that all necessary corporate documents are in order and up to date
- Review warranties, representations, and indemnities
- Prepare or update any required filings with the state
Review the purchase agreement
- Ensure that the agreement meets your objectives and that you understand all the terms
- Negotiate key terms of the agreement, such as earn-outs, escrow, indemnification, and post-closing covenants
Prepare disclosure letter
- The disclosure letter is a key document in the M&A process that discloses any and all material information about the company that could be considered important to a potential buyer.
- Your legal representation can guide you on the types of disclosures and ensure the wording protects you if things don’t go as expected.
Review non-compete and employment agreements
- Ensure that key employees are bound by non-compete and employment agreements
- Review any confidentiality agreements
- Update or prepare new agreements as needed
Represent you during closing
- Prepare closing documents
- Coordinate with other parties involved to ensure that all conditions of the sale are met
- Attend the closing (when the transfer of ownership takes place) and represent your interests
- Provide post-closing support and help with any issues that may arise, such as earn-out disputes or buyer default.
Other Professionals to Consider
Depending on your particular situation, you might want to consider working with the below advisors during the sale process.
Business Broker
- Specialize in sourcing buyers for businesses that are up for sale
- Can assist with marketing your business
- They can use their industry knowledge and networks to connect you with potential buyers who may be interested in acquiring your business
M&A Deal Coach
- Objective sounding board who can provide insight, perspective, and advice throughout the deal
- Provides coaching and support throughout the entire process—from pre-sale planning all the way through post-sale integration
- A deal coach can help maximize your sales price and ease some of the stress that comes with selling a business
- Ideally this is a former business owner who has successfully sold their company or someone who has advised multiple transactions within different industries
Valuation Advisor
- Provides an independent value determination and assessment of your business
- Helps to ensure that you are pricing your business correctly and not leaving money on the table
Steps to Assemble a Great M&A Team
1. Prioritize Advisors With Experience
When selecting your M&A advisors, it’s important to choose professionals who have a lot of experience with the sale of companies. Look for advisors who have worked on similar deals in the past and who understand the ins and outs of the M&A process. Although its possible, I wouldn’t automatically assume that your current lawyer or accountant has the requisite expertise.
The best advisors have experience with businesses similar to yours in terms of size, industry, and type of sale.
They should also be familiar with the M&A market in your industry and region, and have the skill set to position a business for sale based on its strategic value and potential (not strictly relying on conventional valuation frameworks).
2. Do Your Homework
It’s also important to choose M&A advisors who are a good fit for your company. You want to work with professionals who understand your business, industry nuances, and who you feel comfortable working with.
It’s worth taking time to do some of your own due diligence to investigate the advisor’s firm to ensure they have a strong track record of success.
Keep in mind that larger professional firms have the advantage of having specialists geographically spread out across the country. While they are typically more expensive, larger firms usually have more familiarity with the end-to-end deal process, including negotiations and due diligence.
These firms also have the benefit of seeing a large volume of complex transactions, and can often minimize your downside risk.
3. Get Recommendations from Trusted Sources
If you know someone who has recently sold a company, ask them for recommendations on M&A advisors. It can be helpful to ask around for independent advice around which firms are best equipped to handle your transaction.
You can also check with your personal lawyer or accountant to see if they have any recommendations.
4. Narrow Down Your List & Interview Potential Advisors
Once you have a list of potential advisors, set up meetings to interview each one. I recommend interviewing at least three of each type of advisor.
This is your chance to get to know the professionals and to find out more about their experience and qualifications.
During this process, I recommend asking for a list of past transactions of the firm with some specifics around the work involved on each.
Are these past transactions similar to your deal? Ideally, you’ll want to get an advisor with extensive personal experience in a strategic transaction similar to yours.
5. Ask for References
This is arguably the most critical step, so please don’t skip it. Contact every reference you receive.
You’ll want to find out who has worked with this advisor before and how they felt about the experience (ensure it aligns with what you’ve heard already). This will provide valuable intel and a preview into what it would be like to work with them.
When you’re speaking with references, I’d recommend asking about:
- How well the advisor communicated throughout the process
- Whether the advisor was accessible when needed
- How the advisor handled difficult situations
- If the advisor was able to get them the best possible outcome
If you’re not happy with the feedback shared from the references, cross this firm off your list and move on.
5. Make Selections
If everything checks out, select the firms you believe best align with your needs.
Take your time and don’t rush to a decision.
Conclusion
By following these tips, you can assemble a great team of M&A advisors who will help you navigate the process of selling your company. From sourcing buyers to negotiating deals, these professionals will ensure you avoid common pitfalls and help you shortcut the learning curve.Â
With their guidance, you can maximize the value of your business and get the best possible price.
So, don’t go it alone – put together a strong M&A advisory team and get started on the path to selling your business today.
