Buying a business


What are M&A advisors and how to work with the best one

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Taylor Wallace

March 15, 2023 ⋅ 12 min read

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What is an M&A advisor?

An M&A (Mergers and Acquisitions) Advisor is a broad term for someone who helps either the buyer or the seller of a business throughout the transaction process. I’ve bought and sold companies with and without M&A advisors, and I can promise you that working with experts will make for a much smoother process. This guide is meant to help you understand what an M&A advisor is, how they can help you, and what to look for if you’re considering hiring one. If you want to learn more, read our breakdown of the differences between an M&A advisor and a business broker.

Selling without an M&A advisor

After five years of building a software company, I was done. “Try and sell it”, our advisors said. We weren’t all that big, and no one had come pounding on our doors trying to buy us. I wasn’t really sure where to start. “Talk to some of your partners, and see if they’d be willing to buy you,” they suggested. We tried that and ended up in months-long lengthy conversations about what a sale could look like.

When we finally found a potential buyer, we spent another few months hashing out a transaction that in the end didn’t end up being all that lucrative for anyone. Neither I nor the buyer had done a deal like the one we were negotiating, and I’d later learn that working with experts in M&A helps you more quickly identify prospects, come up with workable terms, and then work through the legal process to complete a transaction.

Experts have done it before, and they often come up with solutions to problems we’d never considered at the time. With the right M&A advisor, we could have saved ourselves a lot of time and money, and potentially found a better end result for our shareholders with a better buyer for our business.

Buying a business without an M&A advisor

When I left tech to buy a doggie daycare, I did so without the support of an M&A advisor. I purchased my first two businesses myself, with the support of a loose advisory board and a business attorney who had done a lot of legal work on business transactions. The first business we bought had an M&A advisor working with them. He was an accountant and a business broker, and he was very familiar with the process of selling a business.

He helped the seller package up their business finances in a way that made it easy to evaluate the company. He also acted as the main conduit between me (the buyer) and the seller, so the seller could focus his time on running the business and not be completely distracted by the sales process. The seller paid him a portion of the proceeds from the sale, and in the end, everyone felt good about what had happened.

Why I hired an M&A advisor

The second business we bought did not involve an M&A advisor on either side. The seller and I worked directly with one another and our legal teams to finalize the terms of the deal. And while we both saved some money doing this, the process took longer than it would have if one or both of us had M&A advisors supporting us. The seller was an experienced businessperson, but he was upfront about how he’d never sold a company before. I’d only ever bought one! While this meant we had an amicable back and forth, there were times when it felt like we were butting heads trying to resolve issues:

“I want to put money in escrow, I hear that’s normal,” I’d say.“

Escrow is for chumps!” the seller would respond.

Simply because there are so many nuanced pieces involved when buying or selling a business, having someone who has done it many, many times can help you understand what’s normal, what’s not, and how to resolve disagreements between buyer and seller.

Those two first acquisitions were a grind - I didn’t know what I didn’t know throughout the process, and when an M&A advisor, Jon, offered to get involved in my ongoing search to buy more businesses, I jumped at the opportunity to work with someone far more experienced than myself when it came to buying and selling companies.

Jon’s background is in corporate M&A. He spent the first decade of his career buying companies for a large, publicly traded software company. He then went on to work internally at a private equity-backed software firm and helped them acquire several companies. After semi-retiring, he supported another private equity group in buying up small services businesses. Over the course of his career, he’s been involved in 50+ business transactions and looked at thousands of potential acquisitions.

Jon knows what he knows and doesn’t know, and his help in acquiring new businesses has been invaluable.

Defining the role of an M&A advisor and their typical tasks

M&A advisors can often be intermediaries, business brokers, lawyers, accountants, and anyone familiar with the process of buying and selling a business. There’s no formal “M&A Advisory” certification - and the right to be an M&A advisor should really come from years of experience buying and selling companies. Only those who have done this many times before will have a deep understanding of what the process is like and how to optimize it to save you time and money.

Generally speaking, you have “buy-side” and “sell-side” M&A advisors. As you might have guessed, buy-side advisors work with those buying companies. Sell-side advisors work with a company that wants to sell. The skill sets and experiences required for both are slightly different. Some boutique firms will specialize in either the buy or the sell side, while others can support both.

Sell-side advisors are generally responsible for helping a business sell. Investment banks often refer to this as “running a process” - where they will pull together all the necessary facts and figures of a business, package it up, and then present it to contacts in their network who buy businesses. If the business is big enough, usually an investment bank will generate multiple offers and have potential buyers compete with one another so that the seller will get the best price.

Boutique M&A advisors can operate in much the same way - helping a business package itself for a sale and then working to find the right buyer. If you want to get a better understanding of everything needed to package your business for a sale, read our seller’s checklist.  

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How I work with a buy-side M&A advisor

Our M&A advisor runs our direct outreach to potential acquisition targets. Together, we build out a list of companies we’re interested in, and he is responsible for contacting them and finding out if they’re potentially interested in selling. We meet and evaluate those companies together and decide if we’re going to make them an offer. He’s a financial modeling expert, so he’ll often help us “underwrite” the acquisition, looking at what it will cost and how we think it will perform after we acquire it.

Our M&A advisor is not an attorney, but he saves us on legal fees. He’s so familiar with the legal process and requirements of buying and selling a business, that he can help us review documents more quickly, make more efficient requests with attorneys, and generally work with sellers in a more effective manner than we could on our own.

When we decide to make an offer to buy the company, he drafts the LOI, supports our due diligence, and then works directly with the seller through the sales process to help us finalize the acquisition. He manages the attorneys and works with the seller's attorneys and advisors to help us complete the transaction.

How to work with a sell-side M&A advisor

There are generally a few types of advisors that can support the sale of a small business: brokers, attorneys, accountants, and true M&A advisory experts.

Brokers are the most common M&A advisors for small businesses - and a good broker may be all that you need. If you're curious, check out our breakdown of the pros and cons of using a business broker. A good broker will have enough M&A experience to help you package your business up for sale. They’ll have a network of potential buyers, and they’ll know places where you can list your business to drum up interest. If you don’t yet have an attorney, they will have attorneys who specialize in M&A that you can work with, and they can often guide you through the entire sales process.

Attorneys are essential to successfully selling a business, but attorneys often focus on the legal side of things rather than marketing the business. You’ll need an attorney to draft the legal documents necessary for a sale, but if you’re struggling to market to buyers, consider working with an additional M&A advisor.

Accountants are another essential part of selling a business. They can help you package up your financials to present to sellers and help you structure the sale to optimize tax savings. But again, they’re generally not experts in marketing businesses for sale.

How much does an M&A advisor cost?

Most good M&A advisors may charge an hourly rate and typically a percentage of the sale price of a business. Their fee structure can vary, but many M&A advisors want to be compensated largely based on the sale of a business. This can be both good and bad- when incentivized to get to a sale, they may push you towards a deal.

Sales-based compensation can save you fees if your business doesn’t sell. If you choose to use an M&A advisor, expect to pay between 2-10% of the total sales price to them. Keep in mind, if you’re a seller, they may be able to make up that cost with a higher sale price. If you’re a buyer, they’ll save you time in buying the business and potentially help you find better deals at a lower overall cost.

The difference between M&A advisory firms and investment banks

The simplest difference between a general M&A advisor and an investment bank is the size of the companies they will work with. Famous investment banks like Goldman Sachs generally work on multi-billion dollar deals, helping large companies buy, sell, or go public. They have in-house teams of all the necessary experts to complete a transaction that often takes months or years to complete.

There has been an emergence in the last decade of smaller, boutique investment banks. If your company is doing more than $10M a year in revenue and/or $1M in annual profit, you may be able to attract these types of investment banks to help you sell your business. While they’ll typically charge more than a business broker, they may have a network of potential buyers willing to pay more for your business.

If your business is big enough, you may be better served by working with a boutique investment bank instead of a broker or M&A advisor. If you’re running a smaller company, there are plenty of brokers and M&A advisors who would love to work with you.

Why you might need an M&A advisor

There are two core reasons to hire an M&A advisor: time and money. If you’re busy running your business and don’t have the bandwidth to focus your energy on either selling your company or buying another one, an M&A advisor can lead that process.

Similarly, if you’ve never bought or sold a business before, having an experienced advisor can help you navigate what is often a foreign and complicated process. They can save on legal fees (and legal headaches). Most advisors should also have a network of both buyers and sellers of businesses that will help you cast the widest net possible in your search to buy or sell.

How to find an M&A advisor

Baton provides M&A advisory services, specializing in a variety of different industries. If you’re considering selling your business, I’d recommend you start by getting a free business valuation from Baton. That will help an M&A advisor understand the type of company you have and the work involved to try and help you sell it.

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Similarly, if you’re a buyer, Baton has M&A advisors who can help you find and source your next acquisition.

If you run a business and decide to sell your company or buy another one, be ready to have two full-time jobs: running your company and the acquisition process. For some business owners, the idea of buying and selling companies is thrilling, and they’ll have the experience or the desire to do that themselves. For many, myself included, I benefited from working with experts who know more than me but there are trade-offs like the ones discussed above and it’s not one-size-fits-all.

I’ve learned through hard-won experience that having M&A advisors who can support me in my search to buy more businesses makes the entire process smoother and allows me the time to focus on supporting both their search and the day-to-day operations of my actual business. Regardless of where you are on your journey, connect with Baton here to find the resources you need for a smoother acquisition process.

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