WHY YOU NEED AN M&A PROFESSIONAL
You’ve taken the risks, you’ve made the sacrifices, you’ve invested the sweat equity, the buck “has always stopped here” – but now it’s time. Time to take your chips off the table, time to pass the torch, time to sell your company. You’ve got one shot and the stakes are high. What to do?
To capitalize on the once-in-a-lifetime opportunity to significantly increase the return you’ll receive from the sale of your company you need to use a professional M&A team. Not every seller and certainly not every M&A professional can realize the potential of this one-time event. But, when the right M&A team is chosen, the reasons for employing their services are unmistakeable.
Return on Investment
Independent studies have shown that sellers who did not engage an M&A professional ended up with 30% less for the sale of their business. Why? The answer lies in the maxim “Whenever you create competition for something you possess, the possession increases in value.” Maximizing your return is reason enough to use an M&A professional, but here are some additional things you need to consider.
Buyers are More Sophisticated than Sellers at M&A
Our clients' companies are typically sold to strategic buyers and sometimes private equity firms. These entities are the “bigger fish” in the food chain and are experienced in the process of acquiring companies like yours. Wading alone into uncharted waters is dangerous and extremely expensive.
Selling is a High Stakes Game with No Second Chance
Selling a business is unique. It is a complex mix of critical responsibilities including guarding confidentiality, engaging key employees at critical junctures, precisely timing the release of information, selling strategic value, negotiating to balance the interests of the seller and the success of the transaction, among many others. The uniqueness is compounded by the fact that when a company goes on the market and the sale doesn't close, it becomes “damaged goods”. Potential buyers have long memories which means the current market value of the company will remain depressed for many years to come. With no second chance, getting it right the first time is paramount. Choose carefully your M&A team to execute a proven process to successfully sell the most valuable asset you possess.
Every Deal Dies a Thousand Deaths
During the sale (that lasts for many months) facts emerge, situations arise, and positions change; many of which threaten the basis for completing the transaction. The prospect of the sale collapsing is a burden most sellers cannot withstand on a repeated basis and usually results in capitulation to the buyer’s demands. M&A professionals are trained to be “committed but not attached” to the transaction’s success, enabling effective out-of-the-box problem solving.
He Who Represents Himself has a Fool for a Client
Related to the parable of a thousand deaths, this saying borrowed from the legal profession is unequivocally applicable in the sale of a company. Sellers have a huge financial stake in the outcome of the transaction. When acting alone, the seller's emotional attachment to the sale outcome does not afford the space and time during negotiations needed to consider proposals and advance positions.
Too often the instinct of the seller acting alone succumbs to the pressure of the deal and looks for a quick close...they see a small light at the end of the tunnel, and want to get the transaction over quickly. Invariably, the quick decision surrenders value and many other important terms which could have been preserved through objective negotiations.
When sellers act alone in the sale of their companies, more than 50 out of every 100 sales collapse and fail to close. The buyer's intentions were not properly qualified, some key facts about the company were not disclosed early enough in the process, some fundamental business terms were not clearly defined, some key employees thwarted the process, the transition of material relationships were improperly handled...there are a litany of reasons deals go off the rails when the parties entering the transaction do not plan carefully and fail to anticipate roadblocks in advance.
1,000 Hours to Close a Sale
On the sell side of the transaction, it takes 800 - 1,000 hours of focussed effort to successfully close the sale of a mid-market company. Without the help of an M&A professional, that means devoting more than 80% of your time over the better part of a year to sell your company. That's a risky (if not impossible) proposition for a seller acting alone, especially when the chances of closing (and becoming “damaged goods”) are far less than 50% without a team of M&A professionals.
Knowledge of the company being for sale is an inalienable right of the seller and must be protected from suppliers, competitors, employees, etc. In our experience, however, the number one (and vastly inordinate) source of confidentiality breaches comes from the seller of the company. There is no explanation for it other than human nature. M&A professionals, on the other hand, have confidentiality in their DNA; it is the lifeblood of sustaining the transaction and M&A professionals know how and when to respond to the inquisitive and coach their clients on necessary vigilance.