If you own a company and you are thinking of selling it, you may have wondered whether you can face the process on your own. Who can you trust? Where can you seek advice? Who can you rely on? Is it worth investing in giving exclusivity to an advisor for the sale of your company?
Below, we are going to explain why it is necessary to have a professional advisor for sell-side and buy-side advisory, and how the exclusivity you grant them will drastically influence the sale time of your company and, above all, the price you will obtain for it.
Difference between advisors and brokers
Exclusivity is giving a single advisor – or a single advisory firm – exclusive control over the negotiation, the search for potential buyers, and the overall process of selling a company.
Within the world of commercial sell-side and buy-side advisory, there are different types of advisors. You can find either brokers or professional advisors.
A broker is a person you hire to sell your business in exchange for a percentage of your business. In this case, you will not give any exclusivity and the process will not be confidential. The broker will spread the word that your company is being sold because that is what you have commissioned them to do, and very quickly the whole market will know about it.
You may even think that by having more than one broker you will get more and better offers, but this is a serious mistake. Two brokers may claim that they have found the buyer, creating an unresolvable conflict.
The broker is in charge of indiscriminately launching the sale offer to the market. They look for a buyer, and they will find one, but not necessarily the best one or the one who can pay the most for your company. It is in the broker’s interest that the transaction proceeds as quickly as possible so they can collect their percentage.
«Remember that a broker will look after their profit more than yours.»
Professional advisors in sell-side and buy-side advisory of companies
Professional advisors bring enormous added value that directly benefits you in the sale of your company. They carry out a properly planned, organized, and structured operation from start to finish, with confidentiality assured.
Granting them exclusivity means that they contact not the first buyer that comes along, but those who are interested in buying your company and can pay the best price, while assuring you that they can afford to pay. A professional advisor has the necessary knowledge to recommend to you not to sell at a certain moment if they believe that the offer is insufficient and that they can obtain a higher price.
Their mission is to protect the business owner and prevent the possible loss of value of the company during the sale process, which can happen if the sale process is disclosed indiscriminately. A professional Advisor will ensure complete confidentiality, as this can have a positive impact on the final sale price.
Likewise, an Advisor will not contact anyone you do not want them to. A broker cannot guarantee that, as their offer is indiscriminate.
«A professional advisor will always try to get the best price for the sale of your company, even if that means waiting for the right offer.»
The importance of confidentiality in the sale of a company
As we have said, granting exclusivity to an advisory firm has a major benefit for you: it guarantees confidentiality.
But why is confidentiality so important? For the simple reason that if word gets out that the company is being sold, it could reduce its value. This will hurt the final sale price. You may also not want your competitors to know about the sale of your company.
If you do not grant exclusivity you cannot enjoy confidentiality. You can not expect several brokers to compete to find a buyer and at the same time do so confidentially.
Ensure the confidentiality of your advisory team by signing a Non-Disclosure Agreement (NDA).
Find out more about the processes advisors use to ensure confidentiality: Confidentiality in the sale of a company.
The benefits and value of having an advisor in the sale of your business
Once you have contracted a firm specializing in the sale of businesses, they will assign a team of between four and six people to the sale of your company. This team could be bigger if the process is carried out at an international level and the firm utilises offices in other countries.
The Phases of the sale then begin.
This is where you will see the value of giving exclusivity to an advisor and the time they dedicate to:
- Carry out a company analysis.
- Prepare documentation: information memorandums, blind teasers…
- Carry out a company valuation.
- Conduct a database and market analysis.
- Find companies across the world that could have synergies with yours. This involves analyzing their financial statements and past acquisitions.
- Discard those that don’t fit: Determine the decision-makers in those corporations and find their contact details, a job that takes hundreds of hours.
- Contacts: The heads of businesses interested in purchasing your company are contacted. The opportunity is explained to them and they are sent all the necessary documentation: blind teaser, NDA and Information Memorandum.
- Negotiation: Here begin the requests for a host of information about your company in all different formats, a cross-checking of data, meetings, and visits that can last for weeks and culminate in an Indicative Offer. This process is repeated depending on the number of companies being dealt with.
We are still at the halfway point. The advisory team will have committed more than 1000 hours of work across analysts, managers, database teams, search teams, directors, and partners. At least 50% of the work remains until the transaction closes.
The sales process can take time and the end of the operation comes with the closing of the transaction.
Professional advice on the sale of your company
A professional firm specializing in sell-side and buy-side advisory, with trained and experienced advisors, cannot take on the project of selling your company and making such an investment into it without a reasonable expectation of getting paid for it.
«For your professional advisor, your profit on the sale of your company is their profit. Their incentive is that the more you earn, the more they earn.»
To ensure this optimal outcome, all serious advisors require a period of exclusivity. In return, they will work with the tireless commitment of their teams of experts in accounting, finance, negotiation, strategy, legal, and tax, including advisors across international offices.
All this dedication deserves your loyalty to your advisors in return. Your relationship with them should be based on trust and transparency. They will work exclusively for you so that you get the maximum benefit. 90% of their remuneration will come from the closing of the transaction. Therefore, maintaining a relationship of trust and reciprocity until the closing of the sale is vital, both for your interests and theirs.
Avoid risks by giving exclusivity to an advisor who specializes in sell-side and buy-side advisory
If you are considering the sale of your company, the best option is to give exclusivity to an advisor with real experience and work with them professionally.
They will help you prepare the company for sale, and decide on the best way to approach and which candidates to contact. They will devise the best strategy for your interests:
- Taking the process seriously.
- Preparing robust documentation.
- Valuing the company.
- Identifying which companies would fit as buyers.
- Finding the ones that can pay the most.
Giving exclusivity to an advisor who works for you as part of your team, and has a commitment on both sides, prevents you from making mistakes. It also substantially increases the chances of selling the company and getting you a much higher price.
«Only professional advisors can create a competitive process and negotiate the different offers for the sale of your company, guaranteeing you the best result.»
When you start the process of selling your company different kinds of profiles. You may encounter brokers who will tell you that they can work with you on a non-exclusive, success-only basis and that you will only pay them if they succeed in selling the company. This is a serious risk. This type of broker will work only to close the deal at whatever price, as quickly as possible.
You will sell your company only once. Turn that transaction into a reward for a lifetime of job and wealth creation. You only need patience and the best professional advice.