How do I navigate this minefield to make sure I appoint the right M&A advisor when selling a business?
(PRWEB) September 13, 2010
As business owners and managers return from holiday, September is a key month for launching business sale processes, often with a view to completion by year end.
To respond to the spate of enquiries that arise at this time of year, Shield Corporate Finance is running a series of open seminars throughout September at the Institute of Directors in London to help business owners with selling a business and the issues on their minds, including:
1. How to appoint the right advisor to sell a business
2. How to sell a business for a premium
3. How to build value in a business prior to sale
The first in this series of seminars deals with the following question:
“I want to sell my business but don’t know how to choose between advisors who are all giving me different reasons why I should choose them! How do I navigate this minefield to make sure I appoint the right M&A advisor when selling a business?”
It is important to understand who’s who in mergers and acquisition and the different types of advisors that all sell businesses in one way or another. Broadly speaking they fall into four categories;
(i) Investment banks
(ii) Large accountancy firms
(iii) Boutique M&A advisory firms
The type of service provider most suitable to sell your business will depend largely on the size of your business. Investment banks tend to serve businesses with turnover in excess of £100m and are unable and often unwilling to make exceptions for smaller businesses.
Brokers on the other hand tend to deal with much smaller businesses with turnover ranging from a few hundred thousand pounds to a few million pounds. This leaves businesses with turnover between £5m to £100m, who generally turn to boutique M&A advisory firms such as Shield Corporate Finance Ltd, or large accountancy firms for advice when selling a business.
Whereas accountancy firms tend to find local (or at best national) solutions from among their client base, a good boutique M&A firm will also search internationally for buyers. Accountancy firms, obviously competent in financial matters, may lack the full range of skills required to market the strategic and synergistic benefits your business offers to a wide range of different buyers around the world.
Unless you know the industry well, or have used M&A advisors to sell a business before, it can be very difficult to tell the difference between a boutique M&A advisory firm and a broker.
The difference lies in the value-added service!
Brokers will market your business by advertising it on a website or by sending e-mail shots to a database of potential acquirers. Their business model is a simple numbers game.
The more businesses they advertise the more they are likely to sell so the more money they will make. Common sense you might think, but what’s missing from this business model is the value-added service that makes the difference to the price at which the businesses are sold and the satisfaction of the clients!
When selling your business, you need to appoint an M&A advisor who is willing to dedicate significant resources and senior attention to ensure your business is sold for the highest price and most favourable terms. And you need to make sure they are well incentivised to do so.
The business model of a good M&A advisory firm will depend more on achieving premium prices for their clients’ businesses than the number of business they sell.
It’s easy to be taken in by the success stories brokers will use when they are pitching for business, but what about the failures which are swept under the carpet? This is not to say their approach doesn’t work in some cases, but in many more it doesn’t:
- Advertising a business on a website relies on potential acquirers pro-actively coming to the brokers’ website and finding your business.
- Sending e-mail shots might get a few more enquiries but just think of all the other potential buyers you’re missing out and consequently the all important competition you need to push up the price!
What brokers don’t do, but M&A advisory firms such as Shield Corporate Finance do, is:
- Extensively research potential trade and financial acquirers from around the world to ensure the participation of the strongest potential buyers, and then pro-actively approach their senior decision makers, typically the Chief Executive. Shield knows how to sell a business and present a strong investment case to top management and does not take “No” for an answer.
- Take the time to understand what drives value in a business and also what depresses value, so when it comes to discussions with potential buyers the story is both credible and defensible
- Quantify and communicate stand-alone, synergistic and strategic value, using proprietary techniques
- Prepare businesses in advance for investigation by buyers
- Orchestrate and sustain confidential competitive auction processes
- Employ determined, skilful negotiation to achieve maximum price and optimal contractual terms for the seller
It can be difficult to tell what value-added an advisor can provide without conducting your own investigations first. Don’t rely on the enticing marketing spin on the website.
Many brokers do a good job in convincing sellers of businesses that they add a lot of value to a business sale process, but find out precisely the process they would run.
If you are thinking of selling a business now or in the future, you are now aware of what type of advisor you need. The way to appoint the best one is to talk to a few advisors to make sure you really understand the practical differences between them. And ask for several references from satisfied clients.
Shield Corporate Finance was founded by David Young in 2001, with a determination to deliver remarkable results for sellers of businesses, in a world of financial advice increasingly biased in favour of acquirers.
This has taken their Merger & Acquisition team into fertile new territory, working with clients for a year or two prior to sale, in order to achieve best possible outcomes.
In addition to considerable expertise and success in handling business sale execution mandates and the commercial aspects of contract negotiations, they deliver unique consultancy services in Business Improvement and Recession-Proofing.
They will guarantee senior professional attention and total confidence throughout the whole process. Shield works with companies with operating profits of >£500k, and offers a free indication of value if a business fits this criterion.
For more information and advice on selling a business, contact Shield’s Founder & Chief Executive Dr. David Young.
Download podcast here http://www.sellingabusinessformore.co.uk/podcast.html
Information for Editors:
UK - London
25 Floral Street, Covent Garden
London, WC2E 9DS
Tel: +44 (0)20 7031 8265
Fax: +44 (0)20 7031 8268
UK - Poole
Sunseeker House, West Quay Road
Poole, BH15 1JF
Tel: +44 (0)1202 330200
Fax: +44 (0)1202 649346
31 Howard Street, Suite 402
New York NY 10013
Shield Corporate Finance is a firm of independent specialists in growing and selling businesses around the world. Shield offers merger and acquisitions services ranging from preparing businesses for selling, business sale market testing, selling businesses, business valuation, management buyout, acquisitions, commercial negotiation assistance, M&A training.
Shield also offer a business improvement service which includes growing a business; see their Business Improvement Programme and free online business health check.
Shield Corporate Finance was founded by Dr David Young in 2001 and Shield now operates internationally, with offices in London, Poole and New York and representatives in Beijing, San Diego and Johannesburg; and an alliance with Soft Bank in Japan.
The team works in English, German, French, Italian and Mandarin Chinese.
Shield’s industry sector coverage includes;
- Healthcare sector
- TMT sector (Telecommunications, Media & Technology)
- Business services sector (recruitment, estate agencies, marketing, accountancy firms, insurance brokerage, office supplies and training)
- Travel & leisure sector
- Industrials sector(includes manufacturing, light to heavy industry and chemicals)
- Property and construction sector