The job of Mergers & Acquisitions advisors, also known as Investment Banks, is a go-between profession that you might imagine is easy to dispense with. Just as a property owner might decide to do without the assistance of an estate agent to sell their property, the head of a company can choose to forgo the services of a Mergers & Acquisitions advisor when divesting their company.
Naturally, they must then devote a great deal of time and energy to their project: learning about the market and transactions, valuing the business, drawing up attractive literature to present it, building a convincing business plan, setting up a virtual data room, identifying suitable potential buyers in France and abroad, establishing contacts with these targets, managing questions and answers, conference calls, visits, and negotiations, etc. All this must be achieved while maintaining the strictest possible confidentiality outside the company, in the market, and, above all, internally amongst employees. It is, however, important to note that while no prejudice would be caused to a property by the time devoted to selling it, since there is no reason for it to deteriorate over the few months required to complete the operation, this does not hold true when selling a business.
A Mergers & Acquisitions advisor, therefore, coordinates the processes they implement, and they are able, with their team and in conjunction with the company’s usual advisors, to deliver a full package to their client. This takes into account not only the interests of the client, their employees and the business but also market realities. This is particularly true for SMEs, which don’t have an M&A manager or a team assigned to such operations, but it is significant that even very large organisations, which are well-equipped in terms of human resources and financial and strategic skills, keep investment banks’ teams of analysts working hard!
Study after study shows that hiring the right investment banker yields a high financial payoff. For instance, a University of Alabama and Portland State University study involving 4,468 transactions over a 20-year period estimated that sellers who hired an investment banker received valuation premiums of around 25 per cent, depending on their methodology. Perhaps more insightful, this study also found that ~99 per cent of the 1,727 business sales by sophisticated institutional sellers involved an investment banker. That finding is pretty amazing considering that a majority of private equity investors are former investment bankers and typically have a large contact list of potentially interested buyers
Conclusion: Don’t do it yourself! A study by Fairfield University entitled “The Value of Middle Market Investment Bankers” surveyed business owners who sold their businesses for between $10 million and $250 million with its findings best summarized by quoting one recent seller:
“Unless you have substantial expertise, a broad buyer network, and a lot of free time, partner with an investment bank. You may be able to get it done yourself, but you’ll be leaving millions of dollars on the table as well as closing a higher-risk transaction (when it comes to representations, warranties, and indemnifications).”
Do you want to sell your business?
Even if you don’t want to sell your business for now, or if you already started on your own and are in the middle of the process, it is never too late to contact an M&A advisor.
On our Office Page, you can find our M&A Worldwide Advisors by country or by city, and enter in contact directly.
M&A Worldwide is a global corporate finance advisory organisation specifically focused on cross-border advice to the mid-market (deal values of €6m – €300m). Acting through a network of professionals in 46 offices across 36 countries, we provide dedicated corporate financial advisory services (M&A advice) to mid-market clients seeking global transactions.
Sources: Philippe Delecourt, David W. McCombie III, Forbes