Should you hire an advisor for mergers and acquisitions? Some companies execute acquisitions on their own and are successful. In fact, there are entire corporate development divisions whose primary focus is to pursue external growth initiatives for the company. On the other hand, many companies do engage an M&A advisor to guide them through the process. If you have thought about hiring an M&A advisor, but are unsure of the benefits, consider the below:
- Augment internal resources – Most middle market companies and first-time buyers do not have a corporate development team. This means that the one who oversees acquisitions like the CEO, CFO, and other executives, are also busy doing their day jobs. Acquiring another company takes a significant amount of time and attention so it makes it difficult for your employees to split their time. A third-party advisor can augment your internal resources.
- Provide expertise – When pursuing M&A the first time, a common challenge is that you don’t know what you don’t know. There are many steps and nuances in the M&A process from developing initial strategy to contacting the target to negotiations and due diligence. An advisor can guide you through the process, help you avoid common pitfalls, ask the right questions, and execute a successful deal. An advisor will negotiate a deal, which will maximize value beyond price.
- Protect the buyer-seller relationship – Especially in the world of not-for-sale, privately-held companies, the business is the owner’s baby. Selling is an emotional process and an experienced advisor understands how to approach the owner, assuage fears, answer questions, and act as a buffer during negotiations. In many cases you, as the buyer, want the seller to stay on for some time after the deal closes, so protecting your relationship is critical. Acquiring a company is not like buying a used car where you negotiate with the salesperson for the lowest price and never see them again after you close the deal. Instead, imagine driving off the lot with the salesperson in the car!
- Properly evaluate the opportunity – Companies often hire advisors for acquisition for some of the same reasons they hire accountants to do their taxes. A professional instills confidence and ensures everything will go smoothly. If an issue does come up later, you will know you did everything in your power to properly vet the opportunity. This may be especially important for those who answer to a board or shareholders.
The expertise and experience that comes with a seasoned M&A advisor is invaluable.