When selling your business, it is wise to be assisted by an external adviser. A merger and acquisition advisor helps, guides and supports you during a sale or when you want to expand through a business acquisition. But what is his or her added value and when should you engage an adviser?
Your adviser will take work off your hands so that you can remain focused on the business
The acquisition process is an intensive and complex process. Not only in terms of time but certainly also in terms of emotion. Afterwards, we often hear from entrepreneurs that they underestimated the process and would not have succeeded without a specialized adviser. An adviser takes a lot of work off your hands. This relieves the pressure on you as an entrepreneur so that you can remain fully focused on the performance of the company. After all, disappointing results during the sales process are disastrous for negotiations.
Your adviser can make the process more rationalized
Entrepreneurs often have to deal with emotion in the sales process. This is logical, as it is one of the most important decisions in the life of the company. Nevertheless, it is important to ensure that emotion does not take over. An adviser plays a crucial role in this by resolving difficult situations in an objective and careful manner.
Your adviser knows the process and always prepares you for the next step
The adviser has indispensable specialist knowledge and experience of the transaction process. Thus, you will know exactly which steps to take and which information can best be shared at which stage. This will put you in a stronger position in the negotiations and you will usually achieve the most optimal deal structure.
Your adviser has specialist knowledge necessary for conducting negotiations
Many negotiation points during an acquisition process are financially related, such as: price, normalized EBITDA, working capital and net debt. Then it's nice when you can rely on a specialist who has knowledge of the jargon. And who will assist the M&A lawyer in putting the financial aspects of a transaction correctly in the purchase agreement.
Your adviser can broaden the buyer field
Merger and acquisition advisors also tend to have a broader view of the number and type of buyers, for example through a large international reach or a network among investors. By approaching multiple potential buyers during the sales process, you create competitive tension among buyers which often leads to better bids.
Your adviser can act as a buffer in negotiations
Often buyers find it important that the selling shareholder stays on for some time to ensure a good handover. It is then nice if you can use your adviser as a buffer during the negotiations when the negotiations become more difficult.
Timing of approaching an adviser
The timing of approaching an adviser remains a tricky moment for entrepreneurs. In retrospect, entrepreneurs who sold a business prefer to have spoken with advisers earlier. Approaching early and sparring with an adviser helps to make your business sale ready [link to exit ready] and maximize value. By the way, this does not necessarily mean that the sales process will start right away. But it does provide new insights that you can get started with.
Costs of an adviser
Merger and acquisition advisors charge for their services in different ways. The most common are:
- Based on hours spent times the fee;
- on the basis of a monthly fixed amount plus a success fee. The success fee varies between 1-5% of the acquisition price and depends primarily on the size of the company.
'An adviser pays for itself at the negotiation table'
