The decision to hire an M&A advisor is an important one, not something to rush. You’ll likely only sell a business once, and the effects of that sale can have far-reaching reverberations. So ensure you partner with the right person by interviewing them first. These five questions can help narrow your options:
Is this transaction the right size for your firm?
Most M&A firms specialize in transactions of a specific size range. Size affects much about the transaction, so you need to ensure there’s a good size fit. If your transaction is too small, it may become a low priority. Conversely, an excessively large transaction may be too complex for firms that specialize in smaller deals.
Who will work on my deal, and how many clients do they have?
Junior staff members often do the heavy lifting in bigger firms. You deserve to have a partner as a primary partner and point of contact. It’s also important to ensure that the team working on your deal is overwhelmed. That generally means working on no more than a few deals. Ask for specific details about how much of a time investment you can expect from your advisory team.
How many buyers will you target? Whom do you think is the ideal buyer?
You need to know both that the advisor can target the right buyers, and that they’ll be honest about how many buyers are likely to be interested. Someone who says they have personal relationships with 10 buyers in your industry is likely exaggerating. The reality is that most of these buyers will not be interested. Some advisors continually try to sell to the same group of people, so it’s important to ensure the advisor is targeting the right type of buyer. Ask for specific details about the ideal buyer for your business, and how best to market to them. Move on if the advisor speaks in vague generalities or exciting promises, but with few concrete details.
How will you keep me updated?
An M&A advisor can reduce your workload, but you’re still the one who must ultimately make decisions. That means you need to remain informed. You’ll also need to ensure the advisor is doing what they promise. So keep your focus on running the business, but check in regularly. The best advisory teams have clear communication plans, and give you information without being nagged. That saves you time and hassle.
How much will this cost?
It can be difficult to answer this question. You don’t want to appear cheap, rude, or naive. But this is probably the biggest transaction you’ll ever be involved in, and you need specific information about how much it’s going to cost, since cost can affect virtually every decision you make. People who act like money doesn’t matter end up paying more and getting less. Ask about cost at the outset, since you don’t want to fall in love with a team you can’t afford.
The best teams typically charge an upfront fee. This ensures they get paid even if the transaction falls through. But they’ll also charge a larger success fee that incentivizes them to ensure the business sells. If the team only charges one type of fee, ask why. Carefully review the contract for any hidden costs or fees, too, since these can quickly add up.