Hiring an Advisor when Selling
Considering selling your business? One crucial decision to make is whether to work with an advisor during the process. Hiring an M&A-specific advisor can provide numerous benefits, including expertise, experience, and an extensive, specialized network. They can help determine the accurate value of your business, maintain confidentiality, structure deals, and negotiate on your behalf.
However, there are also drawbacks to consider, such as the cost, potential loss of control, and time commitment. Finding the right fit and assessing the size and complexity of your business are also important factors. At Peninsula Road, we understand the importance of an operator-friendly approach to divestitures, leveraging our experience to provide practical and tailored guidance to meet your needs.
Here are some pros and cons of working with an advisor to sell your business:
Pros of Hiring an M&A Advisor:
Expertise and Experience: M&A advisors specialize in navigating the complexities of buying and selling businesses. They possess extensive knowledge, experience, and connections in the field, which can be invaluable during the sale process.
Valuation and Pricing: M&A advisors can help determine the accurate value of your business based on market conditions, financials, and other relevant factors. They can provide a realistic assessment of your business's worth and having a formal sale process can ensure that you receive fair pricing during competitive negotiations.
Confidentiality: Selling a business requires a high level of confidentiality. M&A advisors can maintain confidentiality by managing communications with potential buyers, screening inquiries, and ensuring that sensitive information is disclosed only to serious and qualified buyers.
Marketing: An M&A advisor should work with you to create optimal transaction marketing material for your business. This could include anonymous teaser presentations, in-depth Investment Memorandums, financial data books or other material as required to best position the Company to the market. Advisors will frequently offer to take on the bulk of the initial buyer screening conversations to reduce the amount of time you need to commit to the process.
Deal Structuring and Negotiation: M&A advisors have the expertise to structure deals that meet your goals and objectives. They can negotiate on your behalf, ensuring that your interests are protected and maximizing the value of the transaction.
Network and Reach: Advisors have an extensive network of potential buyers, investors, and industry contacts. They can leverage their connections to identify suitable buyers for your business and broaden the pool of potential acquirers, increasing the chances of finding the right match.
Cons of Hiring an M&A Advisor:
Cost: Hiring an M&A advisor can be expensive, and their fees are typically based on retainers and a percentage of the deal value. This cost might not be feasible for all small businesses, especially those with limited financial resources. However, an advisor should be able to more than exceed their fee in improved deal terms, whether that’s money or other value.
Loss of Control: Involving an advisor invites another voice into the process, someone outside the ownership group who may have different views on the transaction. Some entrepreneurs prefer to have complete control and handle negotiations themselves, which might not be possible with an advisor, although a good partner will advise and guide you while still looking for you to make decisions.
Time Commitment: Selling a business is a time-consuming process, and working with an advisor adds a layer of coordination and communication. This is typically front-loaded and ensures that the advisor is best briefed on your business, so they can advocate on your behalf in meetings. Owners might prefer to manage the sale process themselves to maintain flexibility and control over their time.
Compatibility and Fit: Not all M&A advisors are the same, and finding the right fit for your business can be challenging. It is crucial to thoroughly vet and select an advisor who understands your industry, aligns with your goals, and has a track record of successful transactions.
Size of the Business: The size and complexity of your business can impact the need for an M&A advisor. For smaller businesses with straightforward operations, it might be possible to handle the sale without external assistance. However, larger, or more complex businesses can benefit significantly from professional guidance.
At Peninsula Road, we take an “operator-friendly” view of divestitures. Leveraging our years of experience buying Companies, we are uniquely positioned to bring a practical, straightforward approach. We ensure that we tailor the process to meet a Purchaser’s need for information and disclosure in sufficient detail so that the buyer will be able to understand the business rapidly and come to a decision on a transaction as quickly as practical.
Ultimately, the decision to hire an M&A advisor when selling a small business depends on various factors such as the owner's expertise, available resources, the complexity of the sale, and desired outcome. Is it time to have the conversation? Reach out below to learn more about what we do.