The Value of Expertise: Understanding the Role and Impact of a Quality Advisor

Your best sale outcome is built by creating, recognizing, and seizing the right pieces out of many moving parts and possibilities. Choosing the right M&A broker will add value for you.

By John C. Johnson

Selling is among an owner’s biggest life decisions. It can create financial security and cut constraints inherent in business ownership and open new life options to enjoy meaning and fulfillment beyond business. Your business generates personal income and is your vault of accumulated wealth. An opportunity to cash in your business value deserves smart choices. Questions needing answers will include:

• What’s my business really worth?
• Is this the right time to sell or is it better to wait?
• What’s involved?
• How to keep it private?
• What can maximize and protect value?
• Who will help me sell it right?

WHY USE AN M&A BROKER?

M&A brokers can help answer the questions and be an owner’s most valuable ally in managing their sale.

Smith Bucklin’s research found sellers recognized value when business sales were guided by M&A professionals. 75% said working with their M&A broker was “very valuable”. 90% observed that confidentiality was better protected. Over 85% thought the selling memorandum effectively portrayed maximum value for their firm. Sellers cited significantly less stress as a key benefit.

Studies show sellers receive higher sale values by using an M&A specialist:

• 33% reported a 10% increase
• 40% noted 30%-40% increases
• 15% percent enjoyed 40%-100% higher value.

Buyers’ experiences are also instructive. Buyers reported they prefer to buy businesses represented by professional M&A brokers, even knowing that the price they pay may be higher. The main reasons for this were recognition that represented sellers are better prepared to conclude a sale, more genuinely motivated, better educated about the process, and their information is more easily analyzed. Buyers find they waste less time, negotiations are smoother, deals close faster, and there is far less stress when an M&A broker is representing the seller. Their probability of getting from offer to closing is much higher.

All things considered, business owners are well served when they rely on a talented mergers and acquisitions professional to manage their business sale.

WHAT REALLY MATTERS WHEN CHOOSING YOUR M&A PROFESSIONAL

Many commentators suggest considerations to help select an M&A specialist, such as:

• Education and training
• Business sale certifications
• Tenure
• Deals done
• Marketing “reach”
• Local knowledge
• Reputation

Credentials can look very similar among many potential choices. Many are very skilled. The question then becomes ‘what else should you seek in an M&A broker to manage selling your business and to produce the best outcome?’ Using advisors’ marketing materials, credentials, and claims, it is difficult to distinguish one from another. So what sets some M&A brokers apart and above the pack? Succinctly, it is talent.

“Skills are common. Talent is rare.” – Colin Clark

Your best sale outcome is built by creating, recognizing, and seizing the right pieces out of many moving parts and possibilities. Optimal results at closing start by properly setting the table, then managing appropriate information, market access and resources, using a well-crafted M&A process. At IBG Business, our proven process features six key steps:

1. Assess your company and the market
2. Package your business
3. Marketing your business
4. Maximize the offer
5. Close the deal
6. Provide transition assistance

The most valuable M&A dealmakers add talent to the mix. Talent integrates other critical factors such as wisdom, “feel,” creativity, instincts and vision. Judging these is more challenging than merely considering credentials and personality. Knowing traits to look for will be helpful.

Some valuable talent traits in a dealmaker are described below. Many are innate personal abilities and there are clues for recognizing them. Talent drivers can be spotted in results, such as successes, leadership, and accomplishments across multiple and diverse circumstances. Evidence can be found in testimonials and by interviewing the advisor. Do they promptly “get it,” understand, and respond with options and possibility thinking. Are interactions quick, candid, and bright, or are responses canned speaking points?

TRAITS FOUND IN TOP TALENT

Flash Insight. Flash insight sees obscure opportunities. It comes from combining expertise with uncommon ability to conceive multiple possibilities and components thereby producing new alternatives. It identifies a broad spectrum of impacts from dynamic and multifaceted parts. Flash insights appear at intersections of knowledge, discernment, feel, and creativity. Opportunities to benefit from these insights occur many times while crafting a transaction

Artful Communications. Many deals fall short of best outcomes due to inadequacies in communications. Ability to listen accurately, with insight to “hear” beyond what is said, is invaluable, as is presenting information straightforwardly, with minimum noise and distraction.

Judgment. Sensing appropriate actions to take with the appropriate people at the appropriate moment adds value. Likewise, knowing when to influence, when to intercede, and when to let things flow, will keep selling your business on the right path forward.

Perception. Early recognition of problems, obstacles and opportunities also improves your results. It allows course corrections to minimize problems, avoid obstacles, and boost outcomes. A talented advisor will “see around the corners and over the hills” to anticipate what is coming, how to prepare, and the best responses.

Multi-Level Thinking. Your M&A broker’s multi-level thinking synthesizes possibilities on the fly across many deal dimensions. It enhances your outcome by realizing how one change may open up other areas of improvement or impact several diverse aspects of your transaction. It reduces losses arising from unintended risks and consequences. It adds value that easily would be lost in the shuffle. Zooming in on critical spots to quickly open multiple arrays of consequences, opportunities, and to understand where “opponents” are trying to go. You do this type of expert thinking in your business and top M&A brokers do it for your business sale.

People Smarts. Deals involve people who bring in divergent agendas, knowledge, and personalities. With many opposing objectives, they also share a central objective to conclude a successful acquisition and sale. Establishing trust and working relationships consistent with how others receive and process information and handle relationships is a talent that helps achieve the best business sales.

Negotiating the Deal. In a successful business sale or merger, effective negotiations are essential.

If you are contemplating the purchase or sale of a company, think about how to improve your communication and negotiating skills and choosing an M&A broker who has a good track record in the art of negotiation.

Cultivating Win-Win Situations. Achieving a win-win for all parties is essential and involves many components. It starts with understanding what the other party is seeking and ends with helping them also feel that they succeeded in the deal.

One tried and tested strategy is to lead people through a series of “yesses” by starting with topics and points that can be agreed upon, and then working forward. In the beginning of this negotiating strategy, the yesses may come from reaching agreement on what may be seen as simple, trivial things. However, this step works to create the right climate for moving forward so that yesses can be obtained on more important issues.

Maintaining the Flow of Information. The flow of information is a critical aspect of the negotiation process. For this reason, it is preferable for negotiations between buyer and seller to go through an M&A broker, rather than conducted directly.

Otherwise, there are too many variables and risks of something to go wrong, ranging from miscommunication to ego and pride. When you choose a qualified, proven M&A broker, the parties have an intermediary whom they can trust to achieve optimal outcomes.

Understanding One Another. It is important to keep the other side talking and show that you understand their perspective, objectives and concerns. It is in this way that you can encourage cooperation and defuse areas of resistance before they have a chance to blow up the deal.

Ultimately, successful negotiations stem from effective strategy, preparation, education, enhanced communication, and a clear understanding the other party’s needs. When you and your M&A advisor foster good communications with the other party, it will enhance the level of cooperation you are seeking, which in turn dramatically increases the chances of achieving win-win outcomes.

Managing Disruptions. At some point, every business owner will need to think about selling his or her business. This means you’ll need to be ready to overcome a range of obstacles, as the process of selling a business can be both confusing and time-consuming. This is especially true for those who have not gone through the process before. Let’s turn our attention to some of the key reasons why deals can fall apart.

Psychological Factors. Buyers, like sellers, enter the process with a variety of preconceived notions about how the process should work, as well as what they consider to be “a great deal.” The psychological factors involved in selling a business shouldn’t be overlooked.

Sellers need to understand the specific wants and desires of the buyer as well as their own psychology. Even serious buyers may have highly unrealistic expectations regarding various aspects of a business, ranging from its price to its opportunities for future growth. In some cases, they may stall due to the fact they are not quite ready to buy a business and see no urgency in the matter.

Buyers can also be influenced by outside parties, whether advisors or friends and family. In short, sellers may discover that, for all practical purposes, buyers may actually be several people who are forming a collective opinion on issues regarding the business.

A seller’s own psychology can play a huge role in whether or not a business is successfully sold. Many sellers enter into the process without a full understanding of what is involved. This factor, of course, underscores the tremendous importance of working with professionals, months, if not years, before you actually place your business on the market. These professionals should include an M&A advisor.

Another major obstacle is that many sellers have unrealistic expectations about both price and the time frame in which their business can be sold. Sellers should enter the selling process with their eyes open and realistic expectations in place. Be sure to establish a fair price. It’s also important to understand that it may take a year or longer before a buyer is found.

Acts of Fate. Sellers should remember that there are many “acts of fate” that can disrupt a deal. A deal may seem like everything is moving along without problems, only to discover at the last minute that the buyer isn’t able to secure the needed funds as expected.

It is important for all parties involved to realize that until a deal is finalized, problems can still arise. In fact, they can arise from unexpected directions. But it is difficult to anticipate and spot every potential disruption. The complexity of selling a business is one of the main reasons why so many business owners opt to work with a brokerage professional.

Courage. Seek an M&A broker with the courage to challenge your positions, offer solutions, and speak truth. Too often brokers rely on asking their client what to do. You will be better served by the advisor’s courage to present you with clear recommendations for you to consider and base decisions.

When selling your business, engaging a professional M&A broker will pay off in your outcome. Your broker’s talent will magnify the amount of that pay off.

A professional association for M&A brokers, such as The M&A Source (www.masource.org) is a great place for finding certified mergers and acquisitions brokers. Also, I would personally welcome hearing from you to privately address your business sale concerns.