Many new obstacles and questions come into focus when you decide to sell your business. Where do you find firms interested in buying? How much is your company worth? How do you find a good partner? The questions are often overwhelming for clients, most of whom have never been through a transaction before.
The best decision a company can make is to put together an experienced M&A team to guide them from start to finish. Not only does this reduce the internal team’s time commitment, but it also usually increases the value of the deal.
Retaining an M&A team may seem counterintuitive to businesses who already have close partners on their side. A common question is why they cannot use the banker, accountant or attorney that has been on their team for 20 years. The answer is that unless they have significant experience in similar transactions, they won’t be able to see what their M&A expert counterparts can. The potential downside is a decrease in valuation.
Private equity firms responsible for most acquisitions in today’s market have veteran teams with decades of expertise. Bringing on your own experts can turn the table.
Here are three key members of any M&A team, and the value they bring to a transaction.
Due diligence is the main task of the accountant on any M&A team. Carefully reviewing a company’s financials allows the entire team to prepare for any potential problems and ensure credibility. Accountants are also responsible for financial aspects of the transaction. This includes net working capital analysis, tax issues, risk related to receivables and inventories and quality of earnings, all of which determine the ultimate success of any deal.
2. Legal Counsel
The primary objective of M&A lawyers is to guide the selling party as they prepare for the transaction. Once the deal comes into focus, they help document and negotiate the purchase agreement. M&A lawyers also provide counsel on letters of intent and public or private market documentation. Lawyers with M&A expertise will catch provisions that discount the seller’s position, often more so than in-house counsel. The other function of legal counsel is to bring in other subject matter experts during the transaction to offer neutral advice on best practices in niche fields.
3. Investment Bankers
As experts in valuation and the buyer market, investment bankers serve as offensive coordinators on the M&A team. They function as the gatekeeper between sellers and buyers, recruiting firms and companies interested in acquiring a smaller business. Working with other members of the team, investment bankers offer insight on whether a business is ready to be sold. They also help sellers understand what parts of their business can be improved to maximize value.
Mergers and acquisitions are uncharted territory for most clients. Bringing on an M&A team is the best way to ensure you get the full value of the company you’ve built.
Contact us today to learn more about how our transaction services team can help you successfully buy or sell a business. We look forward to speaking with you soon.