In recent times, we’ve found it disheartening to see good-quality businesses that partnered with advisors years ago still struggling to sell. These businesses often face a frustrating situation where their advisors are not delivering results and there appears to be “no way out”!
We see many M&A advisory firms that can tell a compelling story and persuade business owners to sign binding contracts, but they lack the crucial skills needed to find the right buyer and convince them to see the opportunity. While some advisors may find potential buyers, they often fail to effectively convey why the business is a valuable investment. Some advisors also take on too many clients, stretching their resources thin, preventing them from ultimately concluding a deal – the reason why they were signed up in the first place.
This article aims to highlight the essential qualities to look for in a successful M&A advisory partnership because the decision on which M&A firm to go with can literally make or break a deal.
Facilitating a successful deal is complex and requires much more than just analysing numbers on a spreadsheet. Even what looks like a great, logical process, can be derailed by poor implementation. A successful deal demands a diverse set of skills, a deep understanding of the market, a global buyer network and a combination of thoroughness and tenacity.
Here are 10 key factors to consider when selecting the right M&A advisory firm to guide you through the sale of your business for optimum success.
Industry Expertise
Look for an advisory firm that either has experience in your specific industry, or a strong research capability to build a knowledge base in that/your sector. An advisor with industry expertise or exceptional research skills will be more attuned to the unique challenges and opportunities within your market.
Track Record and Experience
Investigate the firm's history of successful deals. A company with a strong track record will have proven methodologies and strategies that can increase the likelihood of a successful transaction. There is a big difference between an advisor who takes on 30 clients a year and closes 5 deals, and an advisor who takes on 10 clients and closes 5 deals. Be wary of advisors who are reluctant to share real information about their experience and capabilities.
Quality of Offers, Not Quantity
Be cautious of advisors who guarantee offers. In this field, guarantees often indicate a misunderstanding or misrepresentation of the complexities involved. The process is highly variable and emotional, and an honest advisor will communicate the uncertainties rather than offer false assurances.
The ability to convert an offer into a good deal is also often overlooked. Deal-making is the critical skill, not just an ability to generate offers.
Understanding of Business Valuation
Proper valuation is essential. The advisory firm should provide a thorough and accurate valuation of your business, taking into account all financial and operational aspects. Misrepresenting or oversimplifying valuations can lead to potential buyers overlooking the true value of your business, resulting in a lack of interest. And of course, what is the use of a valuation if you are not able to convert that into a deal, and ultimately cash in your pocket.
Tailored Approach
Choose a firm that offers a tailored approach rather than a one-size-fits-all solution. Every business is unique, and the advisory firm should customise its strategy to meet your specific needs and objectives.
A good advisor will invest the time to understand and properly position your business in the market. Beware of advisors who simply list your business among many others without a tailored strategy, as this can lead to failure to sell and difficulty re-entering the market if unsuccessful the first-time around.
In our experience there is nothing that deters a quality buyer like receiving long lists of opportunities with no positioning or differentiation to direct their focus.
Reputation and International Network
A reputable firm with a strong brand and international network can provide an added layer of credibility and trust. The firm’s reputation in the market can significantly influence the perceptions of potential buyers.
Ensure that your advisor has strong relationships with potential buyers globally. This network can significantly influence the success of the sale, as it increases the chances of finding a buyer who truly understands and values your business.
If you want to get a true reference on your advisor, speak to the acquirers in the market, not those clients who have been sold by them.
Comprehensive Skill Set
Ensure the advisory team possesses a diverse range of skills beyond financial analysis, such as negotiation, business strategy and market insights. The analogy of opting for a cardiothoracic surgeon over a GP for open heart surgery highlights the importance of specialised expertise when it comes to complex transactions.
Transparent Fee Structure
Understand that advisory fees are an investment in securing the best possible outcome for your business. Avoid the temptation to minimise costs at the expense of quality; the right advisor will add value far beyond their fee.
Be wary of advisors who only work on risk. They are known to rush the process to secure quick results over the best possible deal. This approach can expose your business and brand to unnecessary risks, leaving you vulnerable if the advisor fails to deliver. Buyers are put off when they believe a business has been “flogged around town”.
Communication and Support
Effective communication is key throughout the M&A process. The advisory firm should be accessible, responsive and provide regular updates to keep you informed and involved in every step of the transaction. Ideally the firm should have good systems for managing and tracking activity on their projects, underpinned by very strong data protection and management of confidentiality.
Specialisation and Focus
Choose an advisor who specialises solely in sell-side transactions. Advisors who represent both buyers and sellers may face conflicts of interest, which could compromise their commitment to achieving the best outcome for you.
Choosing the right M&A advisory firm involves careful consideration of various factors. By focusing on these key aspects and being aware of potential pitfalls, you can select a firm that will not only facilitate a successful deal but also ensure that the offer is the right fit for you and the future of your business.
Deal Leaders International prides itself on embodying these qualities and delivering exceptional value to its clients.
About Deal Leaders International
Deal Leaders International is a professional, exclusively sell-side advisory firm, helping business owners achieve their growth or exit strategies.
As part of an extensive global M&A network, we have unparalleled access to a pool of high-net-worth acquirers and strategic partners. With a proven track record of high success rates, we have assisted numerous businesses in achieving their objectives, resulting in optimal outcomes for our clients.
We typically recommend companies with an annual profit of R15m+ (up to R300m) to attract good acquirers. However, we welcome businesses of all sizes as we can assist in developing a roadmap to saleability.
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