3 Reasons an M&A Advisor Is Worth the Cost

A 2016 study asked CEOs who had recently sold their businesses with the help of an investment banker whether their advisor added value. For a full 100% of respondents, the answer was yes, with 69% reporting a “significant” impact.

 

Eighty-four percent of the owners achieved a final sale price equal to or higher than the initial estimate provided by the advisor.

With these kinds of outcomes, one would think hiring an advisor would be a no-brainer. But many would-be sellers are skeptical of the cost of bringing in outside help. Part of the problem is that the specific value-add of an advisor can be opaque until you actually start working with him or her.

Here are three specific ways a good advisor will help you rethink your business to increase valuation and improve terms before a sale.

A successful advisor will…

1) Identify weak links in your management team.

Everyone has blind spots. This is particularly true for founders who have run their companies for decades and built the business from the ground up. There are almost certainly processes that only you have institutional knowledge of, and there are probably management team members you hired years ago who aren’t equipped to handle the company’s current scale.

Both weak management teams and over-involved founders scream risk to potential buyers — leading to lower valuations and/or unfavorable terms (e.g., earnouts as opposed to all-cash deals). It’s easy for owners to understand this risk theoretically, but much harder to spot it in your own business. An advisor can provide the outside perspective CEOs need to identify these blind spots and execute on an action plan before bringing the company to market.

 

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