A large, publicly traded technology company would never consider an M&A transaction without representation from one of the large investment banking firms. They know how complex deals can be and the myriad number of ways that they can run off the rails. They also understand the immense amount of work that goes into a transaction and the skill needed to shepherd a deal through to closing.
Companies in the $3M to $50M bracket typically fall under the radar of the large investment banks, but it is just as imperative for companies at this level to have adequate representation and skilled advisors. We often engage with owners whose transaction to sell represents the culmination of years (or decades) of work, sacrifice, and investment, and it can be the most transformative event in their lives. Their buyer, on the other hand, may be highly skilled at acquisitions and have a team devoted to this task. Without representation, the seller can easily make costly mistakes, become overwhelmed by the process, or get out-negotiated by a more experienced M&A team.
If you’re considering the sale of your tech company, here are 19 ways that experienced M&A advisors will add value to your transaction:
1. A good M&A advisor recognizes that different profiles of buyers may need different presentations to highlight your company in a way that enhances your value. They identify the strategic fit between buyer and seller and their synergies, presenting you appropriately.
2. Deals almost collapse numerous times in the process. Good M&A advisors know how to revive them and get discussions back on track.
3. When you are in a need-to-sell quickly, or distressed situation, they can accelerate the process without giving up value.
4. Most deals are not for 100% cash. The M&A advisor’s creativity finds ways to make deals happen so that both parties can compromise and reach agreement.
5. Having an advisory firm to manage the process (meetings, presentations, and calls) saves you time so that you can keep your focus where it needs to be – running and growing your business.
6. Their marketing, database and personal network bring you more buyers, which creates competition. This improves the value and quality of offers and your ultimate transaction.
7. Engaging an M&A advisory firm to represent you in the process adds instant credibility to prospective buyers that the seller is serious. This saves time and improves your offers. Experienced buyers know the deal will close easier; inexperienced buyers need the help of the advisor to short-cut the process.
8. Advisors are an intermediary that buyers may speak freely with, without getting an emotional response from the owners. They can float ideas which may help in crafting the successful transaction.
9. They are the designated “bad guy” to handle the tough parts of a negotiation, so that afterwards the two parties can retain a working relationship. This is particularly important if key shareholders are staying after the transaction.
10. They have made or watched their clients and buyers make hundreds of mistakes. This experience is invaluable and can save your deal from experiencing the same problems.
11. They have proven processes, infrastructure, people, templates and technology that help you polish, package and market your firm so that buyers’ first impressions are first rate.
12. They help prepare information for the sale. This may include restating financial results and creating Key Performance Indicators to highlight successes and trends in the business. They unwrap revenue recognition or other accounting issues before they become a problem in the sales process. They identify hidden value.
13. They help you manage the costs of other advisors that may be needed in the process (tax, legal, accounting, etc.)
14. They know great professional advisors (and the not-so-great) and can bring in resources to handle unique or complex situations.
15. They know other brokers who may have clients seeking out particular transactions.
16. They protect you from divulging too much, too soon.
17. They screen out shoppers without the ability to close a transaction.
18. They’re a trusted coach, mentor, sounding board and teacher on perhaps the most important financial transaction your shareholders will ever make.
19. They help keep the process aligned with the shareholders’ objectives.