It is shocking how often we hear this from Sellers. Nothing could be further from the truth for all three of these ideas, and this is what a buyer WANTS you to believe. Let’s take a closer look at each of these fears.
An M&A Advisor will scare away my buyer. The answer here is, only if your buyer is trying to steal your business by paying a sub-market price (read: bottom fisher). Remember, a buyer wants to catch you at a weak moment and isolate you from talking to other buyers. This way, the buyer can say things like, “If you run a sale process, I won’t participate,” or “This is the way we (buyer) do deals like yours,” or “All an M&A advisor will do is cost you money, you won’t get any more from us.” These are all threats because the buyer knows he or she is trying to buy the business below market, and a qualified M&A advisor will never let that happen. Don’t fall for this one. A real buyer (one who is not afraid to pay a market value), will willingly participate in a process. Such a buyer knows that a qualified M&A advisor will often help collect the information the buyer needs to make a bona fide offer and facilitate the path to closing.
An M&A advisor will complicate things. This one actually may be true if you want to accept a value well below what your business is worth, but if you are looking for a market value, this is hogwash. If your business has any meaningful size, a certain amount of information about the business will need to be gathered, compiled, and presented to potential buyer(s). Qualified M&A advisors are experts in this area and will streamline the process. After the M&A advisor compiles the information needed to sell a business, why not show it to more than one buyer, just to check the price. There is only one way to see if you are getting a market price for your business, run a process and check the values being offered.
An M&A advisor will cost me a lot of money. It is true - investment bankers charge a fee. However, in nearly every instance (very closely approaching every), a qualified M&A advisor will get you between 20-50% more than if you act as an isolated seller. This is precisely why buyers that get a seller’s attention will do whatever they can to keep an M&A advisor away and say things like the threats in paragraph one. The rule in this case should instead be, if you, as a seller think you know who the best buyer is without running a process, you will leave 20-50% of your value in the buyer’s pocket and will have your business stolen from you. Remember, for most buyers, this isn’t the first business they have bought. They are as skilled as a first-time buyer is naïve. The skilled buyer will always use his or her skill to the detriment of the inexperienced seller. Think about it this way, if your business is worth $15 million and you sell it to a buyer for $10 million, make no mistake about it, you have transferred $5 million of value to that buyer. On top of that, that buyer will likely use your inexperience to extract favorable terms and a structure.