When Should You Hire an M&A Advisor?

Welcome to Alkali Insights: M&A Musings and Advice

In the capital markets, preparation is paramount. If you’re preparing to sell or considering a sale in the future, you need to engage an M&A advisor now. A skilled advisor helps you see your business through the lens of a buyer today, so you can make strategic operating decisions tomorrow. With planning and foresight, you’ll be ready when opportunity calls.

When Should You Hire an M&A Advisor?

If you’ve followed this series, you know how an M&A advisor can add value to a deal, from taking on time-consuming due diligence to making a viable market. The next natural question is: when should you engage an advisor?

Every buyer, seller, and deal is different, so there are no rules on when to enlist an M&A pro.

If the goal is to eventually sell, dialogue with an M&A advisor should start now.

Founders usually hire an M&A advisor at three key moments, each providing their own compelling considerations.

1. A deal is on the table. The phrase, “better late than never” rings true for this level of engagement. Although it’s never too late to hire an advisor, founders simply cannot reap the full benefit of an advisor’s expertise if they wait until an offer is presented to them. Advisors engaged in the eleventh hour may not have time to fully vet a deal nor bring in competitive offers, which may make it difficult to judge the offer’s fairness and to impact the founder’s place in the business moving forward. However, a late-state engagement is better than none at all. Even after all LOI terms are set, the cash proceeds equity holders receive can still vary by 5-10%. An advisor can assist with financial due diligence, while ensuring the entire process is moving towards a closed deal.  
2. Two to six months before sale. Oftentimes, motivated founders looking to sell will seek out M&A expertise within six months of when they want a deal to close. At this juncture, most founders don’t understand the perspective of potential buyers and changing market conditions. Additionally, although the average sell process takes 4-9 months, it’s nary impossibly to predict individual process timelines. Engagement at this point is about establishing the company’s story and building a market for it.
3. One to three years ahead of a sale. For founders with an inkling that they may want to sell some day, it can never be too early to build a relationship with an advisor. It’s as much an investment in a company’s current trajectory as it is in its future. With an established working relationship, an advisor can gain an intimate understanding of a business’ strengths, weaknesses, and value drivers. Financials can be put in order and opportunities to position the company can be assessed. Regardless of whether the company goes up for sale, laying the groundwork for growth and success is essential in the long run.

Plan Ahead ‍

As a founder planning an exit strategy, trusting those responsible for negotiating a successful corporate and financial future is vital. Taking time to establish strong advisor relationships is crucial for current company success and future financial opportunities.