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Why You Should Hire a Mergers and Acquisitions Advisor

By Generational Equity

02/03/2017

I found a fascinating study recently that caught my attention because the data was so compelling. According to the author, based on his survey of business owners that sold their businesses via an M&A advisory firm or investment bank, 100% felt that the advisor added value to their transaction, and 69% labeled it “significant.”

Source: The Value of Middle-Market Investment Bankers

The study, conducted by Fairfield University professor Dr. Michael McDonald, surveyed 85 business owners who sold their businesses with the help of investment bankers for deals between $10 million and $250 million from 2011 to 2016. The findings were quite convincing. It is rare to find 100% of anything when it comes to any client/customer satisfaction survey.

We are often asked by business owners, “Why should I spend the money to hire you as my investment bank? My accountant says he knows lots of companies in my industry that would be interested in my business. My attorney has told me the same. Even my cousin Larry who worked for Boeing 30 years ago has offered to help me.”

Our answer is simple: You can certainly use these options – you may get very lucky and close a good deal. However, our process is based on providing Wall Street exit planning processes to Main Street businesses. For example, were you aware that Generational Group has more than 34,000 buyers registered in its database? I doubt your local accountant has that many buyers he or she can access!

Here are two other significant findings from Dr. McDonald’s study:

  • For 84% of business owners, their final sale price was equal to or higher than the initial sale price estimate provided by the banker.
  • Business owners saw “managing the M&A process” as the most valuable service the banker provided.

Both of these are valid findings. First, one of the cornerstones of the Generational Group M&A process is the creation of a limited auction. This means that we approach as many prime buyers who would have a strategic interest in your company as we can. From this group, we tap into and create interest in your opportunity with the hope of having 5, 10 or even 30 sign Non-disclosure agreements (NDAs) so that we can get as many offers as possible. This can often drive the value of the deal up.

But even more importantly, because buyers know how we operate, they generally assume that we are going to have multiple bidders for our clients, which leads them to often sweeten their offers in order to get a letter of intent (LOI) signed as quickly as possible. This illusion of a limited auction also drives up valuations.

The second finding above is equally important: You need to run your business while in market AS IF YOU’RE NOT GOING TO SELL. Why? Because you need to keep driving revenue, watching expenses, negotiating with clients, hiring talented folks, and ultimately ensuring that you are reaching your projected financial results in the fiscal year of your sale. The biggest deal killer we see happens when a seller advises a buyer in the 11th hour that the projected numbers are off YTD 15%. Not good.

So, hiring an investment bank like the Generational Group will allow you to run the company as you have been and ensure that your financial targets are not only met but exceeded. This is a vital benefit that can make a significant financial difference in your final payout.

Based on Dr. McDonald’s study, hiring a leading investment bank, like the Generational Group is well worth the investment. The really good news is that we were recognized as the Investment Banking Firm of the Year in 2018 by the M&A Advisor. In addition, we have won other awards throughout the years:

In addition to our awards, we have been one of the top ranked investment banks in terms of deals closed for the past several years:

So, if you want to experience what hundreds of business owners have, please reach out to us. We stand ready to duplicate the results from the study by Dr. McDonald and demonstrate a high level of value added to your transaction.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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