MarshBerry is often asked by potential clients “Why do I need an M&A adviser or investment bank to help me sell my business?” After all, acquirers often put a lot of effort into direct negotiations with prospective sellers, citing the savings they will see by handling deals on a one-to-one basis. This might be true, but hard to quantify, considering other factors such as final terms of the agreement and how maximum value is determined. This also doesn’t consider overall cultural fit of the two firms.
A recent client engagement might help answer this question in a better way. MarshBerry was engaged by a client after they were close to signing an agreement with a potential acquirer, only to see it fall through due to a technical issue. The company felt let down by the deal and process – but were recommended to MarshBerry by their lawyer.
MarshBerry produced a short information memorandum about the seller’s business and sent it to a very select list of alternative buyers that felt like a good fit for the client. This list included the original acquirer.
Shortly after the memo went out – that original acquirer phoned and offered a 23% increase over their original offer, on the condition that the business would come off the market.
There is an acute shortage of quality businesses to acquire – and pricing reflects that scarcity. Active buyers in this industry often say that the firms MarshBerry represents are invariably of higher quality than what they generally see. One of the reasons for that? Quality businesses recognise the value of their own advice to clients – utilizing the expertise of a specialist adviser like MarshBerry, when selling their business.
For acquirers – seeing MarshBerry across the table may not always be the best news. At a minimum, it signals that the seller is serious and can’t be taken advantage of, and they will need to pay fair market price or better. But it also means that the deal will ultimately get done.
Benefits of working with an adviser
There’s no argument that many owners could (and do) sell their business on their own. After all, owners know their business the best and are experienced advisers themselves. But for many, this may be the first time (and only time) they will go through this type of transaction. Working with an experienced M&A adviser gives a seller the best chance for finding the right partner and achieving the maximum value for their company.
In addition to “best fit” and “maximum value” there are other ways the right adviser can enhance the selling process for a client. A lot of the process involves stressful or time-consuming tasks, like analysing detailed financial reports, creating timelines, firming deadlines, or pushing back on perceived unfair offers or transaction terms outlined in the Letter of Intent (LOI). LOIs can be complicated and nuanced, and it is not advisable to sign one without an adviser involved.
Perhaps the most critical aspect of having an experienced adviser comes during the due diligence stage which can expose potential pitfalls (i.e., culture clashes, HR issues, strategic misalignment, pro-forma disagreements), saving time down the road and avoiding a potential bad deal.
The right adviser will remove the stress and uncertainty and ensure the process runs smoothly and professionally, while increasing the likelihood of closing the transaction in a timely manner.
Business owners have worked hard, making many important decisions to build and grow their company. This often leads up to making perhaps the most important financial decision of their life – a decision that might only be made once. Owners hire experts all the time to help them with much more low stakes decisions. Why would anyone go it alone for the most important one?
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