Who Are M&A Advisors And What Do They Do?
M&A advisors work for a wide variety of firms, from boutique firms with one or two senior advisors to mid-sized regional banks with a pyramid structure of partners, senior bankers, and junior associates. As the number of M&A transactions continues to grow, so too does the importance of experience and a deep understanding of industry best practices.
Choosing the right M&A advisor
When looking for an M&A advisor, it is important to find someone whose style and approach fit with the size and type of your business. For example, a global firm will require a different M&A advisor than a mid-market one. Also, make sure that your advisor has experience working with companies in your industry. A good way to gauge their strengths and weaknesses is to read testimonials from their former clients.
Choosing the right M&A advisor in Dallas is critical to the success of your deal. A good advisor has industry knowledge and can offer transaction options that align with your company’s objectives. However, it is common for emerging growth companies to be attracted to big-name investment banks, which may be overkill for their needs. Bigger firms tend to have a large number of connections and significant resources, which can speed up the transaction process. On the other hand, boutique firms are often more specialized in specific industries.
Before choosing an M&A advisor, it is important to evaluate the firm’s history in the market. A firm that has been in business for at least 10 years is likely to be productive and experienced in similar transactions. The firm’s long-term experience provides access to best practices, a track record of success with similar transactions, and an awareness of market trends.
Working with an M&A advisor
Working with an M&A advisor can help you understand the complexities of the sale process. A qualified advisor will explain the various stages of the sale, from the valuation to the exit strategy. Your advisor will help you craft a marketing strategy to attract potential buyers and develop a buyer list. The advisor will also help you understand the Definitive Purchase Agreement, the key document to the sale.
Advisors can also be beneficial when dealing with international companies. Advisors are usually the middleman between the buyer and seller, and can help negotiate the most tedious issues. They can also mediate tense conversations. However, unlike the buyer and seller, advisors are usually out of the picture after the deal is closed. An advisor should work to maintain the positive relationship between both sides.
A local advisor is also invaluable for finding potential targets that are not publicly advertised. Often, local advisors will conduct “door-to-door” outreach and search “below the radar” for companies that may be an ideal fit for a transaction.
Fees for M&A advisors should be transparent, with a set fee structure. This fee structure usually includes upfront and monthly fees, LOI/signup fees, and success fees. The fees should be tailored to the size and scope of the deal. After all, M&A deals are an important part of a company’s corporate strategy, and they are not a time to skimp.
While fees can vary depending on the size of the deal, it is common for them to charge at least half of their total fee. This fee structure helps to offset investment bank costs for running the M&A process. Investment banks invest a lot of time into understanding the business, preparing promotional materials, reaching out to prospective acquirers, and facilitating the closing. These efforts take time, and they are repaid in advisory fees.
Big investment banks generally broker large deals, and don’t represent smaller to mid-market companies. Regulatory scrutiny is often lower in smaller deals, and the costs of book-building are less intense. However, a human touch is essential when it comes to smaller transactions.