For executives of small to medium sized businesses (SMBs), it can be challenging to determine what advice is necessary to prepare the company for sale, particularly if this is a first time experience for them. While the temptation may be strong for founders or owners to manage the sales process themselves, experienced M&A investors advise strongly against this. It’s too risky. With a false sense of security in their own dealmaking capabilities, company executives are often blindsided by the nuances and specialization required in an M&A or capital-raising transaction.
At a minimum, sellers should engage in the services of a sell-side investment banker. We asked Harry Durity, an expert dealmaker whose M&A career includes more than 300 M&A transactions for firms such as RJR and ADP, to share some practical tips. “First and foremost, you need to find an investment bank who specializes in your industry,” Durity said, “The right firm can be instrumental in helping you identify a much wider list of possible buyers than you may have anticipated, and will also help you achieve the best possible valuation for your company.”
In addition to industry experience, it’s important to choose a banker that has the right level of access to decision makers. “At the end of the day, a large part of making the right choice is finding an agent or advisor with the ability to reach the right people at the right level, who can act on their interest in your company,” Durity said, “so choose advisors who can demonstrably reach those senior level decision makers who can make a deal happen.”
If you’re in the market for an investment banker, keep the following in mind:
1 Seek advice within your professional network. Your peers may know of investment banks that were involved with the sale of other companies in your industry. Another potential source for ideas may be professional organizations such as theAssociation for Corporate Growth or The M&A Advisor.
2 Compare banks. Large global investment banks often include a range of industries and a broad portfolio of services. Mid-market investment banks, on the other hand, tend to focus on one or a few industries. The best approach is to identify several potential banks and interview each firm thoroughly to determine their depth of experience, the size and depth of their team, and the full value of services they will bring to the table.
3 Explore conflicts of interest. Find out if there are any potential conflicts of interest that may exist on the bank’s team or across the entire firm. Do they have other teams working in parallel on potential deals that may be in conflict? How do they propose to protect your interests?
4 Meet the teams. Take the time to meet with everyone who will be working on your team from the senior advisors to junior associates. Ask probing questions that will give you a sense of how this team will work with your team and also promote your company’s interests.
5 Discuss fees structures. Some banks may have a published schedule of fees, others will not. Some will require a retainer, others will waive it. It’s important to talk through the fee structure as it applies to the entire process, and get detailed enough information so that you can compare your options.
The bottom line? Thorough due diligence counts when you’re looking for an investment bank to represent your company in what is likely one of the most important milestones in its growth.
On this important decision, Durity had some final words of advice: “Don’t make the decision solely on price,” he said. “I have seen a number of companies choose an investment bank primarily based on fees and frankly, it was a mistake.”
As you’re comparing your options, keep in mind, you want the absolute best ally on your side. The team that can demonstrate that it’s going to do whatever it takes to help you achieve the best possible price and ensure a certainty of close is well worth the fees.
About Merrill DataSite
Merrill DataSite is a secure virtual data room (VDR) solution that optimises the due diligence process by providing a highly efficient and secure method for sharing key business information between multiple parties. Merrill DataSite provides unlimited access for users worldwide, as well as real-time activity reports, site-wide search at the document level, enhanced communications through the Q&A feature and superior project management service - all of which help reduce transaction time and expense. Merrill DataSite’s multilingual support staff is available from anywhere in the world, 24/7, and can have your VDR up and running with thousands of pages loaded within 24 hours or less.
With its deep roots in transaction and compliance services, Merrill Corporation has a cultural, organisation-wide discipline in the management and processing of confidential content. Merrill DataSite is the first VDR provider to understand customer and industry needs by earning an ISO/IEC 27001:2005 certificate of registration – the highest standard for information security – and is currently the world’s only VDR certified for operations in the Europe, United States and Asia.
As the leading provider of VDR solutions, Merrill DataSite has empowered more than two million unique visitors to perform electronic due diligence on thousands of transactions totalling trillions of dollars in asset value. Merrill DataSite VDR solution has become an essential tool in an efficient and legally defensible process for completing multiple types of financial transactions.
For more information, please contact Merrill DataSite: Tel: 1-866-399-3770;
Email: info@datasite.com; Web: http://www.datasite.com
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