In today’s market, 70% of buyers are financial buyers – family offices, private equity groups, or perhaps synergistic buyers. They are professionals, and buying businesses is what they do for a living. They like to have someone on the other side who can package the information as they want to see it, who knows the process, who can guide the seller through it.
From the perspective of an experienced buyer, having an M&A professional involved in the deal on the seller’s side actually:
- speeds up the process, and
- increases the chances for a successful closing.
We recently closed a deal in which a large company bought a business through us. Six months later the buyer came back to us and said, “Here’s another company we want to buy. We’ve signed a letter of intent with the seller, and we want you to represent them.”
We pointed out to the buyer what they already knew: If we represent the seller, our job is to get as much money out of the buyer as we possibly can.
The buyer’s reply: “We really want this company, and without professional help we will not get a deal done.”
So, at the buyer’s request, the seller hired us. We ended up selling the business, to that buyer, for almost double the price to which they had originally agreed.
But the buyer was willing to pay the extra amount, which included our fees, as a premium for the relative certainty of closing the deal.
The buyer’s willingness to pay that premium should not come as a total surprise. The purchase of an attractive business requires substantial commitments of time, energy, and money – on both sides – and neither buyer nor seller will devote their maximum effort if they foresee too many issues on the other side that could cause the deal to fall apart.
From the buyer’s viewpoint, they appreciate knowing that:
- the company has been professionally valued and critically assessed by an experienced third party;
- the M&A intermediary can keep the seller grounded in the realities of a complex deal, the timeline (see a simplified sample below), the exchanges of information, the bothersome minutiae of due diligence, and more;
- the seller has someone on their side who can hold their hand and keep them committed to the deal when the going gets tough (as it invariably does);
- the seller has someone on their side who speaks the buyer’s language and can look at the deal through the buyer’s eyes (while retaining their commitment to the seller’s interests); and
- the seller’s M&A professional will see the deal through to a successful closing and help ensure that the post-closing process – including the transition of ownership – is completed.
Involving an M&A professional to represent the seller is good for both sides. Sophisticated buyers know that going in, and successful sellers learn that, to their lasting benefit, on the way to the finish line.