LUTZ BUSINESS INSIGHTS
4 Benefits of Hiring an M&A Advisor
dani sherrets, financial analyst
Unlike their publicly traded counterparts, private businesses are much less liquid. Public companies’ stock is traded daily on an exchange through order books that track bid and ask prices to match up buyers and sellers. In a competitive M&A process, advisors are hired to create a market for the private entity being sold. Benefits include:
1. PRICE MAXIMIZATION
At Lutz M&A we have worked with a number of clients who had received unsolicited buyout offers. Some decide to entertain these bids
as a path of least resistance. Others chose to engage our team to run a process. In those cases, the financial results were vastly different. In one example a Lutz M&A client sold for over 70% higher than a competitor’s unsolicited bid.
2. ELIMINATING THE “WHAT IF” FACTOR
Selling to the first buyer that comes along without entertaining other offers can leave an owner wondering what may have happened
if additional suitors were involved. After all, unsolicited bids are submitted for a reason. Buyers that see an attractive opportunity are
most likely trying to acquire the business at a below market price or on unfavorable terms.
3. TALKING TO MORE THAN ONE BUYER
Most owners are concerned about the business and their employees’ well-being post-transaction. Having more than one buyer involved
allows sellers to select not only the best price but also the suitor they feel most comfortable selling their company to. In a lot of cases
selling shareholders remain owner-employees post-transaction so selecting someone they can work with for the next handful of years
is critical. Lutz M&A has had several clients choose buyers based on “fit” over price.
4. THE SAFETY NET
It is not entirely uncommon for buyers to back out of a transaction in the due diligence phase and/or attempt to renegotiate the purchase price. if issues that lead to the rise of these events are not able to be resolved, having other buyers that showed strong interest earlier in the process to go back to can save time and money compared to starting back at square one. At Lutz M&A we have been able to salvage transactions for clients by going back to other interested parties after the initial buyer backed out.
Competitive processes for selling businesses involve many steps and much time and work. For the reasons mentioned, we feel the cost to benefit trade-off of using an M&A advisor weighs heavily into the seller’s favor.
ABOUT THE AUTHOR
DANI SHERRETS + FINANCIAL ANALYST
Dani Sherrets is a Financial Analyst at Lutz with over three years of relevant experience. She specializes in merger and acquisition advisory services and business valuation.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- National Association of Certified Valuators and Analysts, Member
- Certified Valuation Analyst
- BBA, Academy of Economic Studies, Bucharest, Romania
- MBA in Finance, Bellevue University, Omaha, NE
- How is COVID-19 Impacting the M&A Industry?
- M&A Transactions + Seller Equity Roll
- EBITDA Adjustments + 5 Expense Categories You Should Review
- The M&A Process + Timeline & Milestones
- 4 Common Reasons Why M&A Deals Fall Apart
- 3 Misconceptions of Selling to Private Equity Firms
- Types of M&A Buyers: Strategic vs. Financial
- 4 Benefits of Hiring an M&A Advisor
- What is an M&A Advisor?
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