Determining what type of group is right for selling your business in a strategic M&A auction is an “it depends” decision.
It depends on the size of your business. What were your trailing twelve month revenues? EBITDA?
It depends on your industry. Are you in real estate or niche manufacturing?
It depends on your desired approach. Is confidentiality preeminent or maximizing your company’s sale price?
Determining the right representation in the sale of your business is likely one of the most important decisions you will ever make relative to the business. The fear and risk of any possible downside risk in a merger or acquisition likely weighs more heavily than any potential upside scenario.
Business Broker < M&A Advisor < Investment Banker
Much has been written on this topic before. The approach, process, level of sophistication and track record for various types of deal makers can have stark differences. A commercial real estate agent turned business broker, is not likely the best sell-side representative for a $10M in MRR (monthly recurring revenue) software/SaaS business. There would be a definite mismatch.
The size question posed above, helps to at least partly answer which group you intend to use for your sell-side transaction. It follows the following path:
Business Brokers are smaller than M&A advisors are smaller than investment bankers.
The larger you are, the more appropriately you should look to hire a FINRA licensed investment banker. This will allow your business to comply with securities laws when it comes to the transfer of equity and certain types of debt in an M&A deal.
Expert + Experience
Expertise and direct deal experience are two very different things. I can have expertise in a particular M&A process, but none within a particular industry. In general, it is easier to move down the learning curve of the latter than the former. Hence, the benefit of an expert generalist in investment banking. That’s not to say there is not a great deal of value to be had from a banker with direct deal experience in a given niche. For instance, a manufacturer of commercial pumps would benefit from hiring a long-standing investment banker who has completed several sell-side mandates in the commercial pump space in the last decade.
Process-Driven Results
First and foremost is finding an expert in process. In other words, the experience in running a complete sell-side M&A process from start to finish. Your process could be a broad auction, a limited auction or a targeted solicitation. The ideal candidate would have experience in running a very tightly-controlled process in all three areas. This will allow a seller to match their intended outcome with the type of process they may be looking to run in the sale of his/her business.
Numerous articles have been written on determining whether you should hire an investment banker, an M&A advisor or a business broker. The fact remains: the best and most appropriate sell-side M&A advisor for your deal is an experienced dealmaker with direct deal experience in your niche that has closed multiple deals with multiple buyers.
