The Vital Role of Advisors During M&A

Tags: , , ,

The role of a competent advisor is intrinsically delicate. Especially when it comes to mergers and acquisitions. Nowadays, selling a business is one of the most complex sales processes that exist due to the numerous levels of responsibility, rounds of valuations and corresponding actions that must take place at the right time, in the right place. Therefore, almost every successful merger and acquisition in history has referred to a professional advice of a third party.

Essentially, selling a business can affect several key groups of interest, including employees, customers, suppliers, community, financial institutions. For this reason, we advocate that you equip yourself with the most experienced advisors in the field to maximize the value of your company while ensuring that all counterparts are satisfied with the deal.

Some, usually smaller and privately-owned entities have managed to perform mergers and acquisitions without asking advice from third-party professionals, but in a prevailing number of times have learned the hard lesson. M&A performed without a third-party opinion leads to unnecessary delays, mismanagement, misevaluations, and complicated negotiations between counterparts. So how exactly are advisors help solve these nuances? Let’s have a look.

Who Knows My Own Company Better than I Do?

This is a vital question every business owner asks himself when it comes to selling a company and is commonly answered as ‘no one’. This common misconception is the one that draws a big cross on the success of a future deal.

Think of it as a classic example from game theory, an event called ‘prisoner’s dilemma’. If company A (Selling Company) doesn’t employ professional advice while company B (Buying Company does employ professional advice, then company A will receive a payout of 0, an equivalent of an undervalued price in our example, while company B will receive a payout of 1, a corresponding equivalent of a ‘good’ price for the deal. This leaves the selling company off at a disadvantage. The exhibit below portrays the game as a table.


As evident from this example, both companies are better off being prepared for the deal with a team of professional advisors if they want to maximize the value of the deal. As Enrique Quemada Clariana puts it in his How to Get the Best Price from My Company, “just as you shouldn’t face an IRS audit without the help of a tax advisor or build a house without the help of an architect, you shouldn’t sell your company without the help of an M&A advisory”. It’s as simple as that.

The Rationalization Process

Another way to rationalize having an advisor is by looking at the numbers. Statistically speaking, without an M&A advisor, even if the Memorandum of Understanding has been signed, the failure rate of such cases is over 60%. Expectedly, the rate drops to only 15% when an advisor is present.

Another brazen advantage of having an advisor on your side is having more time to make necessary amendments to maximize the value of the business. Time is one of the most valuable resources any business has, and it must be used wisely. In case of not referring to professional advice of an advisor, the owner can be easily overwhelmed with the number of different obligations and responsibilities that must be addressed simultaneously, leaving the business undermanaged and hence undervalued in the end. Advisors win time, advisors win money, that’s the bottom line.

In case you want to find out more about the ins-and-outs of Corporate Finance, please feel free to visit our website and blog to find information about us, our service, and only the most interesting articles on mergers and acquisitions. We are professionals in the field of mergers and acquisitions with over ten years of experience. You can also find us on social media! Links below.


Artículos relacionados

Disruptive Industry Forces: What are they and how to eat them. In the everchanging business world, corporate strategies inevitably fall to sudden turbulence in the competitive market environment. The often answer to market volatility are mergers and acquisitions. New opportunities emerge because of continuous...
8 Things Private Equity Firms Look for in Companies Private equity isn’t for all types of companies. They look for businesses that show clear growth potential in sales and profits over the next five years. If your company can’t offer this then they won’t be interested in investing in it. If the mar...
Leadership Post M&A: Ensuring Stability, Synergy & Success The often volatile process of M&A is a time that requires steadfast leadership, which is able to create a sense of stability whilst everything around the company is changing. In fact, it has been reported that aside from financial results themsel...

There are no comments yet

Write a comment


Most popular

Subscribe to our Newsletter:

We recommend:

Now is the Time to Sell Your Business

It may have taken you a lifetime or even generations to create substantial value for your business, but with the right planning and advice, it may take only a year or two to double that value. Succession issues, retirement, technology, globalism, scale, etc. are all viable reasons to be thinking about selling your business. But […]