by Paul Donnelly
Few business owners have the necessary experience, connections and free time available to effectively orchestrate the purchase or sale of a firm. That's why an M&A advisor plays such a key role in this process. By partnering with a professional dealmaker, business owners can minimize the risk of errors occurring and help ensure the sale or purchase process runs as smoothly as possible.
It's not enough to simply hire an advisor, however. You also need to make sure you're partnering with the right person, as the wrong one can easily kill your deal.
How the Wrong Advisor Can Kill Your Deal's Momentum
Great dealmakers share a number of the same attributes. By the same token, ineffectual advisors also tend to suffer from the same deficiencies. By identifying these characteristics early on, you can help ensure you're paired with the right partner.
Advisory Capabilities and Value Added Capabilities
Some of the key questions to consider when evaluating an advisor include:
Does my advisor have the experience, skills and resources to run a deal process? Deal processes combine art and science. Should you run an auction or a negotiated vs. preemptive deal process? Is your advisor skilled at developing and communicating the proper set of deliverables (i.e. confidential information memorandum, management presentation, virtual data room, business analytics, financial model, et al.)? Your advisor’s ability to manage the art and science of a deal can materially affect the outcome.
How well does my advisor know my industry? In today’s information access world, industry expertise is important but can be overvalued relative to the overall capabilities required for a deal process. As or more important is knowing how to position the client to the right buyers who will assign value to the client’s solution to a buyer’s problem, or see an opportunity the client provides the buyer that can be quantified. The right advisor should know how to tactically position your company, access buyers and quantify the overall value proposition underpinning the transaction.
Does my deal align with my advisor’s capabilities and fee structure? The larger “bulge bracket” advisors and smaller investment banking boutiques each have different infrastructures, deal size and fee size requirements. The bottom line is this: larger transactions tend to be more process oriented which often requires more resources, while smaller deals – which do require good process skills – often rely on more relational capabilities and hand-holding of the owner operators, who may be doing their first and only M&A transaction.
Some of the value added capabilities to consider when evaluating an advisor include:
How in tune is my advisor to the social issues of a deal? More deals lose momentum or die based on social issues. Social issues are the human, emotional and relational factors in a deal. Getting to know the client’s members and leaders is critical in helping all parties to understand each player’s value and role (or lack thereof) during and post transaction.
Is my advisor a skilled negotiator? Dealmaking is an art; a great advisor knows precisely when to push and when to parry, when to demand and when to concede. A great advisor can jumpstart a stalled deal through skilled negotiation. A poor advisor can kill a deal that benefits all parties by alienating the other side or by being intractable, apathetic or unreasonable.
Is my advisor willing to negotiate with me? It is rare in the deal process not to experience a gap in value between the seller and buyer. Experienced, value added advisors understand that this often requires separate negotiations with both the buyers and the client (seller) to close the “expectation gap.” Competence, experience, expertise and trust are key factors in these discussions. Do you trust your advisor to be forthright with deal expectations or will your advisor avoid the tough conversations until the final stages of the process, where you have the least leverage with your position?
By asking core questions such as these, business owners can ensure they are paired up with a knowledgeable and experienced partner with the deal-making chops to close.
Reach out and find the right M&A Advisor:
Paul Donnelly and the Coil Partners Team offer corporate finance advisory and investment banking services for emerging growth and middle-market firms. We have a demonstrated record of deal-making success, closing more than $3.75 billion in transaction value.
If you have any questions about finding the right M&A advisor, we urge you to contact us today.