Should You Hire a Sell-Side Advisor or Do it Yourself?
While the decision to sell the successful and valuable business you’ve built over the years can be taxing, you’ll immediately be faced with another equally-important question: Should you handle the sale yourself or should you hire a sell-side advisor?
Many business owners make the mistake of choosing the former, thinking that it will save them time and money. But, even if a potential buyer approaches you, here is why you shouldn’t attempt to navigate a DIY sale.
Who Sell Side Advisors Are
Perhaps the primary factor that makes business owners hesitant to hire a sell-side advisor is a misunderstanding of what an advisor does.
Sell-side advisors are M&A experts who specialize in representing and assisting companies who are actively looking to be acquired. They provide a team of professionals who have knowledge of the current M&A landscape and are able to navigate the entire process for business owners, from pre-sale analysis to the successful negotiation and completion of the transaction.
The primary focus of the sell-side advisor is to market the company to gain more potential buyers and higher valuations. Therefore, a good advisor will provide a detailed plan to help make the company look more attractive and manage the execution of that plan.
To do that, some of the services an advisor would provide include a pre-sale analysis of the range of values that the company can sell for, financial projection modelling, a marketing plan, the ability to pitch the business to a greater number of potential buyers, due diligence management and negotiation management.
While you could argue some of these services are ones you can do yourself, advisors are trained to do them better since that is their business. Unless you want to make selling your business your full-time job, using an advisor will save you time, money and stress.
Advisors Optimize Value
One of the most important factors in selling a business is ensuring that it is valued correctly in order to establish the best sale price possible. While there are common factors used to determine valuation, such as EBITDA, assets, liquidity, etc., every industry and even locality requires a slightly different approach. If you aren’t experienced in evaluating and negotiating deal points such as working capital and excluded assets, you’re potentially driving the valuation and your net proceeds down.
Advisors Make the Process Efficient
An almost equally important factor is ensuring that the sale process is efficient. Experienced advisors know the common mistakes to avoid and can help you get your business sold quickly. Who wants to spend a year of their lives trying to get through an M&A?
Some common mistakes that slow down the process include:
Focusing on one potential buyer—usually someone the business owner knows—rather than confidentially connecting with a large pool of potential acquirers. This can hamstring you to the demands of your only prospect.
Marketing your business poorly or not at all, rather than developing unique and targeted marketing materials for various types of buyers.
Failing to help your potential buyer through the in-depth requirements of due diligence. This includes not preparing for the sale by organizing your books and analyzing your company’s financial standing before starting the process.
DIY M&As Fail… A Lot
Far too often, business owners find themselves in the midst of a difficult sale process only to see the deal fall apart. However, not executing the deal is not the only way to fail.
When selling your company is your path to retirement, not getting the money you need is just as bad. This commonly happens when business owners don’t take the tax impacts of the sale into account, fail to recognize suboptimal structures in the deal or fail to minimize all closing risks.
Hiring an Advisor Lets You Focus on Your Business
Rather than stepping away from your business early to navigate a process you likely know very little about, hiring an experienced advisor allows you to focus on keeping your business running at peak efficiency. Showing consistent earnings is key to increasing value, and it’s probable that no one in your business is better at doing that than you.
This article is from Divestopedia and written by Chad Byers. To see more of their great content on M&A transactions click here.