Entrepreneurs excel at figuring things out independently, whether building a team, opening a new office, or launching a product. So when it’s time to sell their businesses, many entrepreneurs attempt to do it themselves. However, before you decide to go it alone, consider the following benefits M&A Advisors provide:
M&A Advisors increase valuation. A Portland State University study involving ~4,000 transactions found that sellers who hired M&A advisors received 25% valuation premiums. A Northern Trust study found that sellers who hired advisors received an incremental 1.5x EBITDA with reduced post-closing risk and noted that private equity firms utilize M&A advisors in 98.7% of their sales. Why? M&A advisors negotiate higher valuations and more favorable terms.
M&A Advisors bring deep experience to properly frame opportunities. While entrepreneurs are experts in their businesses, M&A advisors are experts in selling companies. Most business owners have never sold a company, whereas advisors and professional buyers have likely completed hundreds of deals. Having experts manage the process reduces stress and increases the probability of success. Experienced M&A advisors properly position your company and educate buyers, crafting compelling growth stories while positively spinning potentially negative deal attributes, work that ultimately increases demand and boosts valuation.
M&A Advisors improve your negotiating position. A buyer interfacing with an advisor sees they’re dealing with a committed, sophisticated seller with multiple potential buyers. This keeps pressure on buyers to act and bid aggressively. Your advisor will also negotiate on your behalf with limited authority, giving you the chance to “walk back” concessions or commitments—a luxury you don’t have when you lead negotiations. Their experience and objectivity make advisors less emotional than the principals, but they can also push hard without damaging your post-closing relationship with the buyer.
M&A Advisors manage the process so you can run your business. Before going to market, your advisor performs due diligence on your business and prepares to anticipate buyer questions. They screen and educate buyers, as well as quarterbacking all communications across the deal team. Given the significant time required (1,000–1,500 hours per deal), it’s common for entrepreneurs attempting to sell on their own to see their businesses decline. Any decline hands buyers an opportunity to reduce their offer before closing, forcing you to either sell at a discount or wait to restabilize, wasting hundreds of thousands of dollars in legal and accounting fees on a lost deal. Further, the market commonly interprets businesses that fail to sell as “damaged goods.” If your sale falls through, you’ll have to take the business off the market for an extended period before you try again.
In short, unless you have substantial expertise, a broad buyer network, and 1,000+ hours of free time, you should hire an M&A Advisor. You might be able to complete a deal alone, but you’ll leave significant cash on the table and may close a transaction with heightened risk after closing (e.g., representations, warranties, indemnifications, etc.).
Considering selling your business? We encourage you to speak with an experienced
M&A Advisory firm that can maximize value and increase the odds of completing a successful transaction. Kinected has an 81% success rate on our transactions (well above the 20–30% industry average), and we offer a tailored, bespoke approach for businesses generating $1M+ EBITDA.