5 Ways an M&A Advisor Can Bring Value to a Company
If growth is your company’s goal, an M&A advisor can be a valuable asset to have on your side. At a high level, they can provide you with an understanding of the market, the competition, and where your company may fit into the landscape. When you engage with one of these experts here are some of the ways you can benefit.
Supporting Your Growth Strategy
An M&A advisor can help perform a SWOT (strengths, weaknesses, opportunities, threats) analysis based on identifying a pathway for growth. A self-assessment can easily be influenced by biases that a business may not even be aware that it holds. These biases can influence outcomes. An outside view provided by an M&A advisor can reduce this risk.
Their knowledge of the marketplace can help a business leader get more thorough answers to questions about what is going well, what isn’t, what can be improved, and what are your competitors doing.
Armed with this knowledge, leaders can decide whether an organic growth strategy or an acquisition may make more sense. The SWOT analysis can inform things like how to leverage a strength that differentiates you from competitors so you can capture a new opportunity. An M&A advisor may be able to see an internal weakness that needs to be transformed or addressed through a strategic acquisition. They may see an opportunity in the marketplace that can be capitalized upon if a company moves quickly. They may also be able to help a company build a defense to counter threats to their business through either a transformation or an acquisition.
The findings from this type of work is critical to determining what your company is worth if you are planning on looking for a buyer.
M&A transactions are very complex, with a lot of moving parts that have to come together in the right way at the right time for a deal to successfully close. An M&A advisor educates and guides buyers or sellers regarding what to expect in terms of:
- Time commitment
- Resource demands
- The long list of detailed questions that need to be answered
- Managing the process as it progresses and what steps to expect next
What is your intent? If you want to sell, you want to maximize value. If you go through an auction process, you will need an investment banker or broker. If you are buying a very complex business that operates in multiple geographies, including international territories, that will affect your tax planning. If your M&A advisor is not an expert in one of your particular need areas, they will be able to connect you with professionals who can provide answers and guidance.
Understanding Financials to Determine Value
Sellers want to know what their business might be worth. Buyers want to know that, too, along with likely risk from a financial perspective. An M&A advisor can help set realistic expectations and identify initiatives that, over time, can increase performance to further enhance value.
For example, a great run rate for one month is not enough. How can you get a run rate that is three to five months long to show consistency which will help improve value? If the company’s financials are not in accordance with Generally Accepted Accounting Principles (GAAP), then an M&A advisor can help create adjusted financial statements that are commonized.
Owners typically look at their business through their own lens, whereas an M&A advisor can see things through a different lens based on their experience. They know what questions to ask and how to dig deeper. They will examine the financials in such detail that they may end up understanding the business better than many from the business from a financial perspective. They can help set up the financials from an analytics or metrics perspective, focusing on the most pertinent key performance indicators (KPIs).
Building an Integration Strategy and Synergies for the Buyer
Buyers are looking toward the future. The goal is to paint a picture of what the company will look like going forward, how to maximize the value achieved via the acquisition, and how to ensure seamless integration. An M&A advisor helps buyers consider not only cost synergies but also revenue synergies and the longer-term view of how to operate and expand the business. An advisor can help to identify both risks and opportunities. For instance, could the resulting company simplify its supply chain, cross-sell to existing customers, or enter a new market at an opportune time? An M&A advisor can help a business leader see places where 1+1=3.
Resource: Guide to Buying a Business
For most owners, exit is the ultimate destination on their strategic business growth roadmap. The more planning you can do, the better your outcome will be. Bringing in an M&A advisor one to three years in advance facilitates more effective planning, giving you time to maximize the company’s value or get it to the point where you can hand it over with confidence, whether you are transitioning the business or selling.
Resource: Guide to Selling a Business
If you are going to transition the business, you still need a personal exit plan. Part of that must include ensuring the person stepping into the new leader role is prepared for success and understands the business relationships and the drivers of value for the company.
An M&A advisor can help you discern what that involves by assisting with things like a SWOT assessment, a gap analysis to improve run rate, or establishing and tracking financial performance indicators. They will introduce you to additional professional advisors with the resources to support every aspect of your transaction—investment bankers, brokers, legal specialists, and tax strategists.
With big-picture advice, specific assistance on technical areas, and the right connections, an M&A advisor can help buyers and sellers get the most from their business growth strategy.
Kory Boyer, MBA
Kory Boyer is a director in the M&A advisory practice area. He partners with companies in numerous industries to assist in areas including inorganic and organic growth strategies, along with the full spectrum of mergers and acquisitions from target identification, due diligence, transaction management, and integration. Kory also helps clients evaluate operations and processes, to help drive improvements through performance improvement and optimization strategies. He completed his undergraduate studies in Mechanical Engineering at the United States Military Academy and earned his M.B.A. in Finance at Gies College of Business at the University of Illinois at Urbana-Champaign. Kory joined Redpath and Company in 2021.
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