Selecting the right M&A team

Most entrepreneurs engage in M&A only once. An acquisition can give you the new platform you need through retirement. A sale can bring a different kind of closure. Both can be cumbersome. It can be difficult not only choosing the right transaction, but also making the right decisions along the way. So, how to make the most of a once-in-a-lifetime opportunity?

The key to every great deal is having the right team. Big companies have a posse of M&A specialists, administrators, researchers and analysts, not to mention bankers, attorneys and other consultants. Their knowledge matters. M&A transactions are complex and require an understanding of how to negotiate all the issues. As an entrepreneur, you too need such expertise to maximize your move. While some argue that it’s more cost-efficient to have a single advisor, this results in components being overlooked and owners walking away from opportunities. During my career as a CEO as well as an advisor, I’ve seen this happen often. Believe me, good advisors are worth their weight. Most entrepreneurs net out a great deal more – even after consultant costs – than they would have if they had done it through just one.

That said, there are three types of advisors that should be on every M&A team: transaction advisors, financial advisors and legal advisors. Each one functions in its own specific capacity, and each offers loads of potential.

The transaction advisor is essentially your quarterback. They champion your company and call the plays. They help you find your best targets (acquisitions or acquirers) and assess a realistic value for the exchange.

While some people compare transaction advisors to realtors, this is exactly opposite. While a good realtor maximizes the number of people aware of your listing, a good transaction advisor ensures your highest value by pitching your business to the fewest possible – and most highly suitable – contacts. The better they understand your company, market, customers and industry growth possibilities, the more valuable they are. Plus, they also must have a great network (buyers/sellers and other strategic advisors) to ensure you get the focus and support you need.

These people stay with you every step of the way, and the best ones can guide you through implementation/integration to ensure your maximum return on investment.

Financial advisors fall into three categories: the lenders, the tax specialists and the auditors.

Your lender or banker will be your partner in determining your funding type, cost and availability depending on your position. The ability to leverage what you’ve built through an acquisition requires an advisor who can envision the opportunities of your proposed direction. So it’s important to work with practitioners who have experience in our industry – and particularly with similar-sized deals in your specific segments. You may be able to find these on your own through colleagues who have recently closed good deals, or your transaction advisor can connect you.

The tax specialist will help you understand your obligation based on the particular transaction structure and minimize tax consequences now and in the future. This can be tricky. Different avenues can have significantly different outcomes. A good tax specialist ensures you have the knowledge to achieve your best results. Keep in mind that this person needs proven M&A expertise. Your CPA and CFO may be helpful, but they don’t have the training and insight to truly support you here.

The auditors, then, ensure the earnings you submit or receive are favorable, and that they accurately represent the business you’re buying or selling.

The legal advisor, finally, is critical. These are the people who protect your sale or purchase with binding documents that limit liability and risk. They will craft special clauses and parameters for your unique situation, and make sure that you attain your objectives. They’re also helpful in your start-up considerations, in that they can advise you on what to expect for various types of transactions.

Not only is it important that these individuals are specialists in all aspects of the M&A process, but they also must bring extreme attention to detail and masterful contract drafting skills.

With a good advisory team, you can be sure you’re making the very best deal for your company.

This opinion piece was published in L&L issue 5, 2017, and is available here