by Larry Fontillas, managing director of the Americas for ansarada
For a young entrepreneur, the mergers and acquisitions process can be exciting and potentially lucrative but it can also be the source of considerable stress. When the company you are selling is your “baby” that you created and nurtured over time, it’s important to make sure that every part of the deal process runs as smoothly as possible. And, at the conclusion of your company’s sale, that you have achieved the post-deal involvement that you wanted, without leaving money on the table.
During a transaction, company owners and founders are often bombarded with countless questions and requests for information under a strict timeframe. They are trying to balance helping potential buyers get to know their business – analyzing perhaps mountains of data – with simultaneously running their business.
This is where a good advisor is absolutely essential. An experienced M&A advisor is more than an “industry expert.” He or she is skilled at managing the deal’s tenor and flow, and makes sure negotiations happen without a hitch to both improve the transaction process as well as the end result for the seller.
When reviewing potential M&A advisors, consider their background and approach to deal making. Here are four areas to look at in your assessment that can help you to determine if a particular advisor is right for your deal:
Your own valuation of your business might not be correct. Look for an advisor who lays out the details for you when it comes to determining appropriate market value. Not all personal accountants are accustomed to working on an M&A transaction, so make sure to hire someone expert in determining the valuation that makes sense for your particular company. Having a clear and realistic expectation of price at the beginning of a deal goes a long way to both parties achieving a successful close at the end.
A history of (relevant) success.
Make sure the advisor has had success in managing M&A processes for other companies in your industry. Utilize media outlets and trusted online sources to learn more about an advisor’s experience and the types of deals they’ve worked on – and if those resulted in successful outcomes.
It’s also important to review the advisor’s fee structure during the interview process. Make sure you know ahead of time exactly how much you are expected to pay for each service, including for any due diligence and post-closing activities. You may not choose the cheapest advisor, but you should know in advance what you are signing up for.
Despite major advances in technology around the M&A process, some advisors are still using spreadsheets and email to handle important aspects of M&A interaction, including Q&A between bidders and sellers. M&A is intense. Inefficiencies in deal execution will put stress on you and your business. Check that the advisor is getting the most from technology, including the use of a made-for-due-diligence data room (not an FTP site or Dropbox-style sharing solution) to ensure deal security and speed of execution.
Ultimately, the most important criteria for selecting the right advisor is a good cultural fit for your organization. He or she should understand your business, the industry in which it operates, and have a good grasp of your company’s culture. The advisor should respect your wishes for the outcome of the sale process and act as if the company they are helping to sell is their own. It is your baby, after all, and you want to see it land in good hands.
Larry Fontillas is managing director of the Americas for ansarada, an M&A specialist virtual data room that supports the due diligence process for deals of all sizes in the U.S. and abroad. Based in Chicago and managing offices in New York and San Francisco, he advises corporate financial executives and M&A analysts on how to present and manage the review of sensitive data that is relevant to a company’s purchase, sale or divestiture. Fontillas has been quoted on dealmaking and due diligence in industry publications including Buyouts magazine and Credit Union Times.