Insights
Benefits of An Advisor: Beyond Finding a Buyer
1. What if, as a company owner, you’ve already been contacted by a buyer who seems ready to make an offer—why hire and pay an intermediary, if the buyer’s already in the picture?
- Negotiating with a single buyer puts buyer in the driver’s seat, and seller in the back seat. You have no ready alternative to that buyer. Their offer is the only offer—and they know it. The further you get into negotiations with a single buyer, the harder it is to back out and start over again from square one—and the buyer knows it.
- Even if the buyers are acting in full good faith, transactions without good intermediaries often self-destruct in the course of negotiations—which leaves sellers starting over from scratch, after months of wasted time and costs.
- To avoid this situation, AdvantEdge has the methods and the experience to quickly assemble a group of well-qualified buyers; to do this confidentially (without the fact that you’re for sale becoming common knowledge); and to manage a controlled competition among the buyers, to get you the best price and terms available.
2. Beyond that, and beyond just “finding a buyer,” there are direct benefits to the sellers, from retaining qualified merger & acquisition advisors.
- At AdvantEdge, we estimate that only 20-25% of our effort and “value-add” is in locating a buyer. 75%-80% of the benefits we deliver to sellers come from generating price competition between buyers, negotiating terms and conditions other than price, intermediating between the parties in the “due diligence” process, and guiding the project to a successful close.
- From studies of the M&A field, hiring a professional advisor increases price (by 20% on average), improves seller’s terms, and increases the probability of successful closing. M&A advisory services deliver gains that far exceed the costs.
3. Why and how can M&A advisors accomplish that?
- Levelling the playing field. Business owners typically sell a company they own just once. Buyers usually have repeated buying experience, and employ staff who specialize full-time in acquisitions. Their job is to buy at the lowest price and best terms—and they are good at what they do.Most professional buyers will put up at least a show of resistance to a seller getting representation by an M&A advisor / investment banker–because they know they do better when dealing directly with owners.
- Making the buying process competitive. A seasoned advisor uses research and market knowledge to assemble not just one or two, but a field of well-qualified, interested buyers—then manages a qualification, offering and negotiation process. Competition among buyers gives leverage to the seller, and almost always results in higher price, more favorable terms, and quicker and more certain closing.
- Avoiding emotional “land mines” in head-to-head negotiation.
- Sellers especially—but also buyers—have a great deal at stake in the negotiations. The long, tough and complex process of closing a business sale offers many chances for an angry word or ill-considered email to “blow up” months of hard work on both sides. Good advisors are practiced at intercepting these missiles, reacting calmly and creatively, and finding ways to defuse situations that could be fatal to the deal.
- It’s been said of business acquisitions that “it’s not a real deal until it’s been in the ditch at least 5 times.” In truth, it’s a rare transaction that doesn’t appear to die one or more times on the way to closing. Experienced advisors can manage emotions—their own, the buyer’s and the seller’s—and have the patience, tenacity, and hard-earned optimism to work through these inevitable “near death” episodes.
- Managing due diligence, and keeping closing on track.
- In these complex transactions, time is not our friend. The more delay, the more opportunity for something—from a family problem to a business setback—to derail the transaction, on either the buyer or seller side.
- Experienced advisors work with and coordinate among the sellers and their other professional advisors to conduct “pre-diligence.” We review the items that the buyer’s advisors are going to scrutinize. We assembling and organize an electronic “data room” which buyers who have signed our confidentiality agreements can access. Having everything reviewed, corrected if necessary and organized in advance saves precious time, sustains forward momentum, and builds credibility for the sellers and their business.
- Experienced advisors also set and enforce “hurdle dates” to keep the buyers performing on their obligations and moving on a scheduled path to closing. We also recognize and avoid accepting at early stages (such as the Letter of Intent) deal conditions or provisions that can lead to serious conflict at later stages (final purchase documents.)
- Setting the stage for success after closing.
- Most sales provide for involvement of the seller after the closing—at least, helping to buyer to manage through a transition period; and often, management responsibility extending from one to several years after close.
- When the purchase is negotiated directly between buyer and seller, the disagreements, struggles and emotional baggage of the negotiation attach directly to the parties. The seller must go directly from opposing and sometimes antagonizing a prospective buyer in negotiations, to working for that buyer as the new company owner. Having a professional advisor to take on the “slings and arrows” of negotiation makes the post-close transition far easier, and more likely to succeed.
- Providing professional support, to let Sellers focus on running their business.
- Time is usually a business owner’s most precious and over-used resource. Handling all the aspects of selling a business is a full-time job—and the seller already has one of those.
- It can be a fatal mistake for the owner to become distracted by the sales process from keeping a clear focus on running the business, and maintaining the keys to success which make it attractive to buyers. If the business begins to deteriorate during the due diligence and closing process, those facts will come to light. That can be devastating to sale price and terms; and in many instances, can derail the transaction altogether.
