Insight

Six Reasons to Never Wade Into M&A Waters Without a Good Advisor

The M&A process is extraordinarily complex under the best of circumstances.  Generally, far more than even the most experienced business executives realize.  Most transactions come very close to imploding at one or more points during their life.  And in those that stay intact, the things that could cost you money, delay your transaction, or increase your risk are almost infinite.  Simply put, a good advisor keeps your transaction intact and optimizes your outcome. They provide the following:

  1. Gravitas.  The presence of a good advisor sends a clear signal to the other party that you are serious about the transaction. This is the start of what is ultimately the powerful leverage you gain when you engage a good advisor.
  2. Structuring and Execution Expertise. A good advisor, one with experience across scores of transactions, has the deal savvy, temperament, emotional intelligence, and communication skills to hold a transaction together at those vulnerable points.  And they are experts at structuring and executing the process to maximize price and optimize terms, in the most efficient, quickest manner possible.
  3. Curation Expertise. A good advisor maximizes your leverage by sharing just enough, but not too many, details of the broader interest in your company, keeping the most likely or most desirable suitors highly engaged and interested in offering the best price and terms, and keeping other suitors “warm” and engaged.
  4. Time.  M&A transactions usually require a full-time effort to manage.  A good advisor allows you to devote most of your time to doing what you do best…running your company.  Moreover, a good advisor knows how to structure and execute a process to minimize the overall transaction time.
  5. Critical Interface. A good advisor recognizes the importance of and is an expert at preserving, and hopefully even enhancing, the relationships between the parties to a transaction.  This is often essential to closing a transaction, given many a deal has fallen off the rails when parties begin to think they just don’t like the person on the other side of the table.  And it is even more essential when a post-transaction relationship (e.g., seller working for the buyer) is contemplated.  Without the advisor as a tempering interface, an emotional shock absorber, relationships are at a high degree of risk, given the emotional charge that usually exists in an M&A transaction.
  6. Value Beyond Their Fee. A good advisor provides value at a multiple of their fee.  Whether in terms of holding together a transaction that otherwise would have imploded, achieving a higher price, optimizing other terms, or minimizing risk, the cost of a good advisor is earned back, usually many times over.

As you likely gleaned, the key here is a “good” advisor.  At Newport, we have some of the best lower middle market advisors in the business.  Check us out at www.newportllc.com/ma-advisory.

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