Looking past the pitch - choosing an exceptional M&A adviser

Jan 2017

BY Jordan Buck, Investment Strategist LGT Vestra

In my last blog, ‘Set up before you sell up’, I described the considerations you should make as an entrepreneur and as an individual, before you begin to explore the sale of your business. If an exit (or partial exit) remains the right decision, then it is important to choose an exceptional M&A adviser to guide you through this process.

This is not such an easy task. Pitching is a very different skill set to delivering: some are blessed with both and some possess neither. So what should you actually look for in an M&A adviser that ticks all the boxes?

The first is depth of team.
Find out who will actually be working on your process, and if they have the capacity to do so. Every member of the team, from the most junior to the most senior, plays their role within a firm. This can range from origination or acting as a figurehead, to truly understanding the day-to-day intricacies of your transaction. It is important that you can pick up the phone and have your questions answered, and that the people with experience and expertise can use that to help you achieve your objectives.

The second is track record.
Specifically, I refer to a track record relevant to you, including the right deal size, sector, transaction type and geography. If your business is below the adviser’s sweet spot, then prepare to be the client at the bottom of the pile. If it’s above, prepare to be unimpressed at their ability to serve your needs. And whilst the firm may have worked on transactions similar to yours, ensure this means the team that you actually mandated! Beware of the credentials slide with no dates – a deal closed by a team that all left 10 years ago will add little value.

The third is alignment.
There will always be a motive for winning your mandate, and you should ensure that any motive works in your favour. The most common motive is of course fees. Agreeing fee terms which suit you is difficult, but usually revolves around some form of retainer plus a success fee. This creates a process whereby your advisers are motivated to sell your business for the maximum price in the shortest time possible, which might well match your objectives. If you have different objectives, however, you should design remuneration around these, for instance with a larger success fee if the business is sold to a specific type of buyer, or a time-based retainer so that the team remains energetic if your process goes on longer than anticipated.

Other motives include cross-selling opportunities, brand recognition, a long-term relationship or the opportunity to use your deal for future marketing. The most important thing to note, however, is that being cheap (and therefore misaligning interests) will not usually provide you with the best outcome.

The fourth is network.
A good adviser can really add value when they have strong relationships and know how to interact with potential acquirors, particularly during negotiations. This, again, will be entirely personal to you depending on whether you value relationships with private equity funds, sector-specific corporates or otherwise. It is wise, therefore, to start thinking about desired acquirors before you hire an adviser. You should also consider whether an international network is important to you, bearing in mind that some firms are better than others at connecting their global offices or sister firms if they exist.

The fifth is personality.
They will of course need to be good listeners and good negotiators, but do not underestimate the importance of actually getting on with your adviser on a personal level, during what might, after all, be one of the most stressful periods of your life. Having similar working styles and personalities, and building a rapport will make this time-intensive process much more bearable. The ideal way to achieve this is through an introduction by someone that knows both parties. Failing this, however, you should always seek references, speak to existing clients and spend some good quality time with advisers before you hire them.