Academic Research Highlights the Top Reasons to Engage a M&A Advisor

FSBO (For Sale By Owner) or Engage a M&A Advisor?

Suppose you have decided to sell your business. Maybe you have been approached by a buyer. Or want to take “chips off the table.” Or are tired and want to pursue something else.  Regardless the reason, how will you go about the deal process?  Will you pursue the FSBO (for sale by owner) approach or engage a Merger & Acquisition Specialist?

Several academic studies have concluded that engaging an advisor that specializes in M&A provides several important benefits that FSBO cannot; and importantly, generates a 15%-50% higher price than FSBO (more than offsetting any fees paid by a substantial amount).

Research Indicates the Top Ways M&A Advisors Add Value to Business Owners Selling Their Business

Based on a a research paper entitled, “The Value of Middle Market Investment Bankers” (1), the top benefits of engaging a M&A advisor based on survey respondents from 85 owners/sellers of U.S. private businesses with business values between $10-$250 million include:

1. Managing the entire M&A process – preparing the marketing materials, soliciting interest from multiple qualified parties and maintaining a disciplined competitive process with bidders to maximize shareholder value
2. Negotiating and structuring the transaction – allows sellers to maintain a positive relationship with the buyer; insulates the seller from difficult and complex negotiations to find creative and workable solutions to obtain the best terms and minimize seller risk
3. Identifying and finding the buyer – M&A professionals can tap into their network and have access to research that allows them to cut through the competing noise and get their client’s deal in front of the right buyers
4. Adding credibility to the seller – M&A specialists represent the seller and level the playing field between experienced, professional buyers (e.g. strategic and private equity buyers) and one-time sellers

What’s the Bottom Line?  M&A Advisors Add Significant Value

In conclusion, the final sale price was equal to or higher than the initial estimate based on 84% of these survey respondents.  The results indicate that business owners felt that M&A specialists add important value to the sale transaction.

Notes:

(1) Michael B. McDonald IV, Assistant Professor of Finance, Fairfield University (Oct. 2016)