Why Would you Hire a Sell-Side Advisor?

A Second Bite of the Apple

January 5, 2022

Who is going to buy your business?

February 22, 2022

Decisions, decisions. As a business owner, you make them every day. But when it comes to the decision to sell your business, you may find yourself overwhelmed by the sheer magnitude of this undertaking. This can be a once-in-a-lifetime event.

Where do you start on a project this important?

As a successful business owner, do you file your own taxes, draft a legal trust, or manage your own 401k? Most business owners seek the advice of their accountants, lawyers, and investment advisors, professionals who specialize in these areas. Navigating the shifting waters of a business sale is an adventure you may not want to take alone. Experienced mergers and acquisitions (M&A) advisors already know how to steer a negotiation through the rapids, where to avoid turbulence, and how to bring a good sale home. A professional sell-side advisor will create a market for your company via a competitive process that can boost the value of your business
and, consequently, the sale of your company.

When the time comes to step away from the business that has consumed so much of your energy and attention, consider what that means for you. The good news? You won’t have to worry about all those demands and pressures anymore. The bad news? Your importance to the business and your industry will be far less than it was, except perhaps in a legacy role. For some business owners – maybe you – this could be extremely difficult.

MORE IS BETTER.

You’ve made lots of contacts over the many years you have been in business and, among these, you may recognize a couple of promising potential buyers. If you want to make the most of this selling opportunity, however, having more options is always better. Sell-side advisors create more options by bringing in more qualified buyers.

An experienced M&A advisory firm knows how to employ a tailored marketing plan for your business that targets strategic buyers nationwide with the financial wherewithal to be the best buyers for your business. Your M&A advisor will detail the opportunities inherent in your business and those buyers who grasp your company’s favorable circumstances will usually pay the most for it. The rubber hits the road when you and your M&A advisor uncover that “right” buyer.

You may have post-transaction concerns about the well-being of both your business and employees. One way to alleviate this anxiety is to have access to multiple buyers. In this way you can select and sell your company to the suitor who makes you feel most comfortable while ensuring you also get the best price.

OVERCOMING OBSTACLES.

The transaction process can be fraught with obstacles that can slow down and delay the sale. Barriers that include legal, environmental, financial, employee, due diligence and more, can easily overwhelm self-representing business owners who lack the experience to overcome these hurdles. Knowledgeable M&A advisors who have seen it all before will help you navigate these challenges and successfully guide you to the finish line.

NEGOTIATING A BETTER DEAL.

Is deciding on an asking price for your business the best way to get what you want? Experienced M&A advisors know that actually, the opposite is true. Value is ultimately in the eye of the beholder and setting a high-water mark for a business can be detrimental to achieving the highest price and best terms.

If two or more people at an auction want an item, that piece could sell much higher than its estimated selling price. In the same way, your sell-side advisor can run a competitive process involving dozens of potential buyers to make sure the final price meets or exceeds your
expectations.

ACCELERATING THE PROCESS.

There are lots of cliches about time: it flies, its money, it waits for no one. But you only need to remember one: for the M&A business, time kills all deals. Your experienced sell-side advisor won’t let the sale get bogged down in roadblocks, and the timeline an M&A advisor sets will be advantageous to the business owner, not the acquirer.

ABILITY TO FOCUS ON YOUR BUSINESS.

Selling your business is not a walk in the park. It’s a potentially life-changing process that can take many months and requires daily attention to find the right buyer and manage the process. But you still need to run your business during this time. When you hire a skilled sell-side advisor, you can keep an eye on essential operations rather than marketing your business to potential buyers – that’s your advisor’s job. Attempting to market your business while running it can result in an unfortunate performance stumble – the last thing you need during a sale. Many deals die when that happens, or a buyer may seek to renegotiate the deal. An experienced advisor can keep your deal from going off the rails.

UNCERTAINTY ELIMINATED.

Selling a business is like other major life transactions. Settling for a bad deal can bring on “seller’s remorse,” as you wonder what might have happened if you had entertained multiple offers rather than selling to the first buyer who came along. Without the help of a professional M&A advisor, a business might be acquired at a below-market price, or under unfavorable terms, by a buyer who sees it as an under-valued opportunity. The assistance of an advisor helps ease your worries about the “what ifs” and turns them into a “well done!”

CREATING A SAFETY NET.

The deal is almost sealed when, suddenly, your buyer backs out of a transaction during the due diligence phase. If the problems that led to this can’t be resolved, a self-representing seller may have to go back to square one. But a sell-side advisor will create a safety net for you and still salvage the sale by revisiting previously interested parties – a far better alternative than starting from scratch. You may need buyer #2 and even buyer #3, and your advisor will re-engage other interested parties in the knowledge that having backup buyers can keep your primary buyer in line and even bring them back to the table.

KEEPING CONFIDENTIALITY.

It’s vital to keep confidentiality when selling your business, and professional M&A advisors know how to do this. They are meticulous about not divulging the business name and other sensitive details until a confidentiality agreement is signed. Advisors usually work with the buyer’s CEO or legal team who are accustomed to entering into
confidentiality agreements and understand the legal ramifications if they are broken.

So, revisiting the question “Why would you hire a sell-side advisor,” let’s summarize. An M&A advisor:
Will bring in more qualified buyers

Helps to overcome transaction obstacles
Can negotiate a better deal for you
Will speed up the selling process
Keeps you focused on your business
Helps to eliminate uncertainty
Creates a safety net for you
Provides confidentiality

We all know that selling a business isn’t easy. It’s a confusing, time-consuming operation strewn with minefields, requiring the ability to navigate the many obstacles blocking the way to a successful sale. As a business owner, you invested your “blood, sweat, and tears” to make your business what it is today.

When it’s time to sell, you should get no less than the very best deal from the best possible buyer. Sell-side advisors take the confusion, stress, and uncertainty out of the selling process. They are your key to negotiating and unlocking that Best Possible Deal.

Steven Pappas

PARTNER, M&A MI M&A ADVISOR

spappas@touchstoneadvisors.com

Direct Line: 860.669.2246