Merger and Acquisition (M&A) firms function as intermediaries to facilitate the sale of a business to a strategic buyer, private equity group, or other entities. The M&A market is expected to grow when Trump takes office due to greater economic certainty, lower interest rates, and lower regulations.
Selling to an M&A firm offers advantages and disadvantages to an exiting owner. Here is a summary of the advantages and disadvantages of working with an M&A firm:
Advantages of Working With An M&A Firm:
1. Maximized Sale Price –
M&A firms specialize in valuing businesses and positioning them to attract the best possible price from potential buyers using leverage.
2. Access to a Network of Buyers –
M&A firms have established networks of strategic and financial buyers, increasing the likelihood of finding the right fit for an exiting owner.
3. Expert Guidance –
M&A firms provide professional advice on deal structuring, due diligence, and negotiations, which can protect a seller’s interests.
4. Time Savings –
M&A firms manage the sales process, allowing a business owner to focus on running his or her business while the M&A firm manages things like buyer outreach, documentation, and negotiations.
5. Confidentiality –
M&A firms often implement confidentiality protocols to protect sensitive information during the sale process.
6. Customized Deal Structuring –
M&A firms can tailor the sale to meet a seller’s financial and personal goals, including a full exit, partial exit, and/or earn-outs.
Disadvantages of Working With An M&A Firm:
1. Cost of Services –
M&A firms charge significant fees, often a percentage of the sale price – which can range from 2-10%, plus upfront retainers.
2. Potential Misalignment of Interests –
The M&A firm’s primary goal is to close a deal which may not align with the owner’s long-term objectives or legacy.
3. Lengthy Process –
Despite their expertise, the M&A process can take several months or even years, requiring patience and persistence.
4. Pressure to Sell –
Some M&A firms could pressure a business owner to close a deal to secure their commission, even if it’s not ideal for him or her.
5. Disclosure Risks –
Sharing sensitive business information with multiple potential buyers increases the risk of leaks or misuse, despite confidentiality agreements.
6. Limited Post-Sale Support –
Once the sale is completed, the M&A firm’s involvement typically ends, leaving the business owner to manage post-sale transitions independently.
In conclusion, using an M&A firm can be highly advantageous if you want to achieve maximum value and ensure a professional sales process; but, if it is crucial to vet the firm carefully, understand their fee structure, and ensure they prioritize your specific goals. In addition, you should engage legal and financial advisors to complement their expertise and protect your interests throughout the sale.
About Greater Prairie Business Consulting, Inc.:
Greater Prairie Business Consulting, Inc. is an award-winning, national consulting practice serving entrepreneurs, small to mid-sized privately held and family-owned businesses and middle market companies of any type with revenues between $1 million and $250 million. The firm helps small, mid-sized and middle market companies maximize their performance and exit.
Greater Prairie Business Consulting, Inc. can be reached by calling 1-800-828-7585 or emailing info@gpbusinesssolutions.com.
About the Author:
James J. Talerico, Jr. CBEC® CMC® is an award-winning author, speaker, and a nationally recognized small to mid-sized (SMB) business expert.
With more than thirty- (30) years of diversified business experience, Jim has a solid track record and an A+ BBB rating helping thousands of business owners across the US and in Canada tackle tough business problems to improve the performance of their organizations.
His client success stories have been highlighted in the Wall St. Journal, Dallas Business Journal, Chicago Daily Herald, and on MSNBC’s Your Business. He was named “Texas Business Consulting CEO of the Year,” by CEO Today Magazine, identified as a “Top 10 Management Consulting Entrepreneur to Watch in 2023” by Entrepreneur Magazine, was listed among the “10 Most Visionary Companies to Watch in 2023” by Inc. Magazine, and has also been ranked among the “Top Small Business Consultants” followed on Twitter.
For more than half a decade, Jim was a regular guest on “The Price of Business,” a nationally syndicated radio program on Bloomberg Talk Radio and has also appeared as a subject matter expert on many FOX Radio interviews. He is a regular contributor to several blog sites and has frequently been quoted in publications like the New York Times, Dallas Morning News, Philadelphia Inquirer, The Entrepreneur’s Review, and on INC.com, in addition to numerous, other industry publications, radio broadcasts, business books, and Internet media.
Jim received a Gold “Stevie Award” for “Thought Leader of the Year,” a Gold “Stevie Award” for “Media Hero of the Year During Covid” and a Bronze “Stevie Award” for “Best Entrepreneur” in the Category of “Business and Professional Services” at the American Business Awards ® in New York City. The competition received more than 3,700 nominations and is the premier accolade for business excellence in the US honoring organizations of all sizes and industries. Jim also received an “Outstanding Leadership Award” at the Money 2.0 Conference for his contributions to the financial services industry.
Jim is the author of “8 Steps to Becoming an ETHICS FOCUSED ORGANIZATION,”™ a small business certification program that utilizes a unique eight – (8) step approach for strengthening ethics in any organization. The certification program won the Better Business Bureau’s “Torch Award for Ethics” for the North – Central Texas Region, the International Better Business Bureau’s “ Torch Award for Ethics,” and a Gold “Stevie Award” for “Ethics in Sales” at the International Sales & Customer Service Stevie Awards ®. Participants who complete this certification program are eligible to receive eight – (8) continuing education units from the University of Texas’ Division of Enterprise Development.
Jim received his Certified Business Exit Consultant (CBEC)® designation from The International Exit Planning Association (IEPA) to help entrepreneurs, small business owners, family businesses, and middle market companies maximize their business exit, and he received his certification in succession planning from the ASPE. Jim currently serves on the IEPA’s education committee.
Jim is also a Certified Management Consultant (CMC)® and has been an active member of the Institute of Management Consultants. The Certified Management Consultant® mark is awarded by the Institute of Management Consultants USA (IMC USA) and represents evidence of the highest standards of consulting, a commitment to continuous development, and an adherence to the ethical canons of the profession. Less than 1% of all consultants in the world are Certified Management Consultants (CMC)®
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