When a businessman decides to sell his company, he is most likely facing the most important business decision of his life. It is the moment where all the value that has been created throughout the company’s life can finally be appreciated.
The buyer usually has very prepared advisors who have lots of experience in business, finance and negotiation. Needless to say, there is a clear disadvantage which will ultimately be reflected in the final conditions of the contract.
The complex selling process involves many little tricks, especially with regard to the financial and negotiating side. Normally, it will be the first time that you are selling a company- you will be inexperienced, which is a problem as the stakes are high. Here, experience is undoubtedly vital.
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 advisor.
Without an M&A advisor, many conversations with buyers fail to succeed due to a lack of proper advice. If there is no advisor, even when the Memorandum of Understanding has been signed, the failure rate is more than 60%. In our experience, this rate drops to 15% when the seller uses the help of a professional advisor.
As experienced advisors, our past experience of other sales processes allows us to think of imaginative solutions when negotiations go stale and our financial knowledge helps us think on our feet during price negotiations.
Advisors are experts in negotiating the sale of companies. We know how to frame the negotiation and we guide our client through what is appropriate to say and when to say it. Having a professional advisor stops you from making mistakes. They will greatly increase your chances of selling your company and get you a much higher price.
And don’t forget that if you pay peanuts, you get monkeys. There is a wide selection of “pseudo M&A advisors” ranging from facilitators, brokers, consultants, intermediaries, etc… trying to participate in a deal.
When you are thinking about looking for an M&A advisor, make sure that what you find is a true and profesional M&A advisor; it isn’t uncommon to find lawyers or tax advisors working on the financial aspects of a deal. Just because they are specialists in drawing up contracts doesn’t mean that they also know how to advise on all other aspects.
Nor is it uncommon to find consultants, auditors or mere intermediaries acting as advisors in these processes. Inevitably, consultants will turn the operation into a complex and painstaking study of synergies or an integral strategic plan. Auditors will do the same, treating all the operation like an omnipresent due diligence.
Select wisely as you might be facing the most important deal of your business life.
Written by Enrique Quemada, president of ONEtoONE Coporate Finance.
