M&A Advisory firms help clients maximize the value they receive for their businesses, protect confidentiality and negotiate on their behalf. They do this all while ensuring that the transaction is completed in accordance with regulatory requirements.
M&A advisors have a strong network of buyers and sellers, giving them the leverage to create competitive bids for their client's business. The literature also suggests that they have stronger incentives to complete deals than shareholders do (Rau 2000).
Mergers and Acquisitions
M&A advisory firms help companies with their sales or acquisitions. The firm's responsibilities include due diligence, negotiation and valuation. They also assist with the integration process after a sale. In addition to these tasks, the M&A advisory firm identifies possible risks and issues. They then make recommendations on how to mitigate them.
Most M&A advisory firms are not securities licensed, limiting their involvement to middle-sized transactions at most. Larger deals are handled by investment banks that hold these licenses.
As an accounting professional, you can leverage M&A advisory services to expand your expertise and gain new career opportunities. You'll develop skills in developing financial models, conducting due diligence and evaluating risks for M&A deals. You'll also build relationships with individuals in your industry who could become clients or partners in future M&A transactions. This expansion can help you advance your career and increase the amount of money you earn. True Tamplin is an author, speaker and founder of Finance Strategists.
Due Diligence
Due diligence is the process of investigating and assessing the details of a company before making a deal. Thorough due diligence increases the odds of M&A success by identifying potential risks and opportunities.
A good M&A advisory firm will conduct thorough due diligence before offering advice or recommending an investment. This involves examining a variety of factors like the target company's financial performance and operational history, the market and industry conditions and future projections. It also includes an evaluation of the target's legal and regulatory issues, including any pending or past litigation and noncompete agreements.
The process typically starts with a letter of intent (LOI) between the parties, although this is not legally binding. The LOI will delineate a timeline for due diligence. The typical time frame is 30-60 days, but this can vary depending on the complexity of the deal. The LOI will outline the parameters of the investigation, and both sides must sign nondisclosure agreements.
Negotiation
M&A advisory firms provide a range of services, including valuation and due diligence. They also use their advanced negotiation skills to help clients mitigate risks and achieve their desired outcome in M&A transactions.
For business owners looking to sell their company, M&A advisory firms prepare marketing materials and curated company background information for potential buyers. They then manage a competitive process and negotiate transaction details such as price, terms and sources and uses of funds.
M&A advisory firms often have large industry contact lists and can help to open doors for their clients. This is a big benefit, as it can save the client time and money from trying to find and establish their own connections with potential buyers. However, be careful as many M&A advisory companies oversell their contacts and can make false claims. This can lead to unintentionally creating perverse competitive incentives in the transaction. These incentives can have a negative impact on value in the long run.
Valuation
M&A advisors perform valuation services to help their clients determine the fair market value of their businesses and assets. They use a variety of methodologies to evaluate a company's performance, which may include analyzing the current economic environment and industry trends.
They also conduct due diligence to identify potential risks and issues that could impact the M&A transaction process. This is a very important aspect of the M&A advisory service because it enables them to negotiate better terms and conditions for their clients.
While M&A advisors resemble investment banks in many ways, they are not licensed as such. They also typically focus on privately owned companies rather than publicly-traded firms. This is why it's important for business owners to research and M&A Advisory interview M&A advisors before selecting one to work with. Clarifying a firm's capabilities, payment structure, history with past clients and investing approach will ensure that you're working with the right M&A advisor for your needs.
