M&A advisors (series)
May 14th, 2021 • Ondřej Fryc
Reflex Capital → Blog → M&A advisors – How to choose
Most importantly: as in any job, you can only succesfully play a league you belong to. Goldman Sachs will not sell your local fruit stall network. You need to know what you want to achieve and realistically assess who might have the competence, but also motivation, to help you.
Look at individual boutiques and don’t trust affilation – that “part of XY network” with successful names affilation does not work. They will not pick up the pen unless the fee makes it worth their while. And if that’s the case, you can go to the famous boutique yourself.
If you know your goal and your league, choose an advisor with relevant experience in your field. Especially foreign advisors are specialists (travel, fintech, building materials, etc.) They have the right network. If you want to sell your company to Amazon, it’s better that the head of acquisitions in Amazon gets the phone call from his trusted source. From someone they have done business before, rather than a cold e-mail from a no-name boutique. Ask for relevant transactions and references (and call them!). Ask what value would they give to your company, who do they think they can sell it to and who specifically will be leading the transaction. Often you can tell the quality of the boutique by their “number two”. You’ll get the presentation from a senior partner with high credibility, but if the transaction will be actually managed by a student and the senior will be just supervising, you can ruin your good name in the market. Junior can do Powerpoint well, but cannot create a story and build a proper negotioation dynamic. You need a lot of experience for that and it’s not something you get taught in school.
Further on, ask what services will actually be provided. Some experts think that calling few of their contacts and create DCF spreadsheet to kick off the price negotiation is enough … and the rest will come naturally. Good advisor will do much more. You are not selling a company, you are selling a story. You are selling the future. And that’s an art form.
Of course, you also need to ask how much will all of that cost you. There are many variables there: success fee, retainer, cost, “tail”, that is what happens if the company is not sold, etc.
That will be the topic of the next instalment, stay tuned.