The sale of a company is usually the largest financial transaction ever undertaken by the owners. One can gain or lose much more in the sale of a business than in any other previous transaction. Due to this, we highlight 10 points you need to know before hiring specialized advisory services in mergers and acquisitions.
Find out when the company was founded and for how long it has been providing advisory services on mergers and acquisitions. The evaluation of experience time should take into account the history of the company as a whole and not only the experience of its partners.
Note whether the M&A advisory firm has advised a client more than once. Really satisfied customers (especially clients who did not close their activities in their industry) tend to choose the same advisor in various mergers and acquisitions operations.
Potential buyers have accumulated experience throughout several acquisitions, in addition to having an internal team dedicated to analyzing and negotiating prospective investments. If this is your first selling transaction, you should consider hiring an advisor specializing in mergers and acquisitions to put you on an equal footing in the negotiations.
Verify the transactions completed by the advisor. Investment banks, which advise clients of various sizes, usually allocate more experienced professionals for larger projects, leaving less experienced teams to work in medium-sized projects i.e. (companies that have annual revenues between 50 and 500 million dollars).
We do not recommend hiring a company that is part of an association, organization or international franchise that integrates different advisory firms in mergers and acquisitions and, consequently, does not have standardized procedures. We believe that only a strong internal culture can guarantee the maximum confidence, integrity and confidentiality of professionals in the conduct of projects.
When any professional, in carrying out his activities, has a personal interest in the result of a particular negotiation that is contrary to that of the other party, a conflict of interests is formed. We believe that, in order to maximize the value of the operation, it is necessary to choose an independent company that has no conflict of interest in the advisory it provides to its clients, and does not act in fund management or has an interest in the settlement of loans and financing for the company being sold nor the offer of financial instruments to the buyer. The M&A advisory services carried out by investment banks are, by their nature, subject to conflicts of interest that may compromise one of the parties involved.
Choosing an advisory firm is as important a task as knowing who are the professionals that will be with you. Find out if the leader of your project has a solid link with the advisory firm or investment bank (preferably holding equity interest) and is concerned about their reputation and long-term results. It is common for advisors, pressured by results or motivated by annual bonuses, to influence the timing of negotiations, in order to achieve personal goals and receive a bonus or commission on the sale to the detriment of the valuation of your assets.
If you consider hiring a bank to assist you in the process of selling your company, be aware that the same institution may be simultaneously negotiating various credit transactions with the opposing parties, which naturally creates a conflict of interest. Keep in mind that this will possibly be your last major transaction, but the buyer, due to its size, will probably remain an important customer to the bank.
Any sale, merger or buyout transaction requires intensive dedication. It is common for a project to consume several months of exhaustive negotiation. We recommend that you do not stray into the dealing process, and focus on the day-to-day business of the company so as not to jeopardize the prospect of future cash generation with consequent negative impact on the value of your business. Let your advisor represent you in these lengthy discussions that involve technical and negotiating aspects of the transaction.
Make sure the M&A advisory firm has presence in other countries and has already concluded transactions with foreign parties, with proven experience and ability to perform world-class services.