Specialty Services Require Specialized Professionals
If you are thinking about selling your privately held business, it’s natural to question the need to hire specialized M&A experts. After all, you could pull together a team of attorneys, business valuation experts, tax advisors, and real estate agents from the people you have met through your everyday business operations.
That’s impractical for a number of reasons. For example lawyers and accountants without M&A experience may not have the knowledge to get you the best deal possible in the time frame the buyer expects. When facing off with private-equity professionals who have closed multiple multi-million dollar acquisitions, your inexperienced team could make costly oversights or leave millions of dollars on the table.
“If I find myself sitting across the table from a family attorney representing a prospective portfolio company, I know all of us – including the seller – are in for a wild ride,” said entrepreneur/ private-equity group leader Sunny Vanderbeck of Satori Capital. Even though the private-equity group will almost always get a better deal when inexperienced attorneys and accountants are involved, he says,“The process is going to be very painful, and both sides will waste time on what should be standardized terms.”
Consider these five factors when assembling a team of advisors to help sell your business.
1. Recent deal-making experience.
Has the advisor been involved in buying or selling companies in the past 3 years or so? Laws, regulations, and best practices continue to evolve. For example, advances in data analytics and artificial intelligence (AI) are reshaping how the M&A process is conducted.
You can’t be confident you’re getting the most up-to-date advice if the professional was involved in a single transaction that occurred more than 10 years ago..
2. Industry knowledge.
Even though AI is making it easier to research various industries, an AI-generated report may lack the unpublished insights that M&A pros in a specific industry gather through face-to-face meetings with other business owners, financial professionals, and private-equity groups.
3. Integrity.
A trustworthy advisor is ethical. They won’t just tell you what you want to hear; they will tell you what you need to hear.
That doesn’t necessarily mean you always have to follow the advisor’s recommendations. It simply means that the advisor is looking after your best interests by giving you their unfiltered best advice.
If it seems that an advisor is primarily interested in making a deal that will maximize their own financial returns, listen to your gut. If the advisor isn’t taking into account your objectives and the needs of your employees and family, that advisor may not be right for you.
4. Communication skills.
An experienced M&A advisor often acts as an intermediary between the seller and the buyer during the negotiations phase
A trusted advisor helps the seller minimize risks and maximize value by understanding how a buyer typically reacts at each stage of the negotiations. For example, an experienced advisor knows that potentially good deals often fall apart when the seller emotionally reacts to a buyer’s proposal that is common practice in M&A deals.
5. A strong network.
The best advisors are always learning. They focus on knowing what’s new in the industry, who’s looking to buy companies within their industry, and why some deals failed to achieve financial or strategic goals after the sale. Their clients benefit from this knowledge..
Good advisors also network with experts who can help sellers increase the valuation of their businesses, accurately tell the founder’s story in an impactful way, and minimize taxes and post-sale headaches.
An M&A coach with a strong network can also recommend experts who can help owners prepare for the next chapter in their lives..
Easing A Grueling Process
Unless you have sold a business before, it’s hard to fully appreciate just how exhausting the process of selling your business can be. The potential buyer will thoroughly examine every single data point about the business – not just its past performance but also the potential for growth.
Some business owners do sell their businesses without hiring M&A experts. But they are often plagued with post-sale doubts about whether they made the right moves.
Many confess that if they had to do it all over again, they would bring in M&A experts who could save them time and energy on the details while encouraging them to focus on maximizing the value of their business.
At LaManna Consulting Group, we have helped dozens of business sellers and buyers navigate the ever-changing complexities of making good deals.
To help owners avoid the most common mistakes, we have published a free guide, Code Red:12 Seller Mistakes.
As someone who participates in business transitions every day, I can tell you that is a long, arduous process. Trying to run your business while also trying to sell your business could mean spending at least 20 hours a day for well over two years – if you get lucky and find the right buyer.
There’s nothing wrong with being a “can-do” entrepreneur and a self-learner. But apply those talents to building the next chapter of your life. Trying to sell a business without the aid of experienced M&A advisors can be a very expensive mistake.