How a good advisor adds value to the M&A process

I have often been challenged by potential clients who are looking to sell their business. “What value do you really add?” they ask.

From where I am standing it is obvious, but new clients, or anyone that has not been through a sale process, are unlikely to see things in quite the same way. I can think of a host of deals where we have greatly increased the offer a potential client already had on the table when we’d first met:

Example 1: Offer increased by 65%. ROI on Shaw & Co fees of 16x.
Example 2: Offer increased by 100%. ROI on Shaw & Co fees of 16.6x
Example 3: Offer increased by 175%. ROI on Shaw & Co fees of 21x.

This is also discounting the value we add in getting any offer over the line (there is a huge amount of work to be done following any offer before you get to completion). What’s more, these are deals averaging £25m in value, so we are talking about very big numbers to have left on the table if the client had mistakenly gone with that first offer.

‍Confidence is Key
If you have a good business and are looking to sell then you must be confident, assured and patient enough to decline that first offer. Business valuation is a very subjective matter, and a buyer is extremely unlikely to make their best offer at the first time of asking. One of the greatest tools at your disposal is the chance to create a ‘Fear Of Missing Out’ amongst potential buyers, persuading them that this is a huge opportunity that simply cannot be missed. It’s only when you have created a competitive environment that you will find out what your business is truly worth.

You want many suitors for your hand, and this takes advisory skills that business owners cannot be expected to possess. As in life, you should not accept your first proposal simply because it is a solid, safe, vaguely attractive option that your family have a lot of time for (and besides all your friends sold their businesses ages ago). This is your business and whoever wants it should be passionate enough about it to whisk you off your feet and pay the right price for it.

Packaging Your Business
So how does an advisor help? A good advisor will start by packaging up your business and making it as attractive as possible to a range of potential buyers. They will seek to draw out the value proposition to catch the eye of your potential audience which takes a level of analysis and real marketing skill that few advisors possess. Your advisor should be able to identify and privately contact buyers eager to snap up your company for a strategic premium. It’s worth noting that, realistically, there are only ever 15-20 real potential buyers for a business based on factors such as sector, location, size and, importantly, strategic rationale.

But perhaps the most important word here is ‘private’. You just can’t dive in and put up a ‘For Sale’ sign as this will cause a commotion amongst your hard-earned clients and polished supply chain, not to mention the fact that you are likely to have loyal employees clambering for the door. Privacy and subtlety are key.

The Right Partner
It then takes a considerable amount of hard work to whittle down interested parties into a feasible shortlist. Don’t forget, it is important to remember that if you have a good business, you are choosing them. You want a buyer who shares your goals in terms of the business, the culture, the employees and its future, with the right price being the proverbial cherry. You therefore need a specialist advisor who is going to host an intensive process, poring over any potential deals and analysing their structure in terms of what you are actually being offered, any liabilities, and, ultimately, when you can expect to get your money.

Just make sure you get the right advice to make the most of what is a once in a lifetime transaction.

To find out how we can help buy, sell or fund the growth of a business, please book an informal chat via our website or email me via rob.starr@shawcorporatefinance.com