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Why Use an M&A Advisor?

Updated: May 14

As fractional CFO and M&A advisor, I frequently come across CEOs and business owners (“Sellers”) who are thinking about selling their company. Frequently, Sellers are skeptical about the need to hire an advisor like me.  Afterall, advisors are not cheap. 


M&A Advisors with First CXO

For example, an M&A advisor will cost anywhere from 2.5-10% of the overall sale price of the company, depending on the size of the business sale.  Or maybe Sellers do not want to engage an advisor because they think they already know to whom they can sell their company. Or maybe they even have a buyer currently courting them.  So why, then, should a Seller hire an advisor?  The top 6 reasons are below.   

company evaluation

Valuation

As a business owner, chances are that you do not have a realistic expectation of the value of your company.  I cannot tell you the number of times I have been quoted unrealistic company valuations by potential Sellers.  So rather than guesstimate your company’s worth, why not engage an advisor whose primary occupation is to advise buyers and sellers of companies and can therefore give an objective and experienced business valuation based on tangible data?


Make the Market: 

One of the primary purposes of an M&A advisor is to find lots of potential buyers for your company.  M&A firms “make a market” for a business sale.  To be clear, one buyer does not make a market.  A market consists of multiple potential buyers.  So, while a Seller may get approached from time to time by one or two possible buyers, that does not mean those buyers represent what the company is really worth. The only way to know what a company is worth is to take the company to market!  


The Benefits of Competition: 

Running a competitive sale process has the potential to drive several key benefits.  For example, more potential buyers increase the likelihood of more offers.  More offers increase the likelihood of a higher price.  More potential buyers also increase the probability of finding the “right” buyer for your business.  More buyers also increase the company’s leverage during the sale process.  If a Seller is only talking to one buyer, then that one buyer has all of the leverage.   


Objectivity:  

Let’s face it, most business Sellers only sell a company once in their career if they are lucky.  And when they do, chances are that their experience during the sale process is an emotional rollercoaster.  On the other hand, an experienced M&A advisor will sell hundreds of companies over their career thus giving them insights into what works and does not work when selling a business.  And because an M&A advisor does not have the personal and emotional attachment to the company that an owner, CEO or other member of management have, the M&A advisor should be able to remain objective during the sale process.   By remaining objective, the M&A advisor helps increase the probability of success.


Keep an Eye on the Bottom Line: 

Using an M&A advisor allows the Seller to keep their focus on operating the business at its highest level during the sale process.   Any slip in company performance during the sale process opens the door to “re-trading” – the practice of renegotiating the purchase price of a company after initially agreeing to a higher price.  One of the key roles of the CEO or owner during a sale process is to make sure the bottom line stays healthy.  So let the M&A advisor focus on keeping the sale process moving forward while the CEO/owner keeps the business humming.  


Momentum: 

No matter what type of business deal you are working on, if someone does not keep the deal moving forward, then the deal dies.  Since M&A advisors are not distracted by day-to-day operating issues at the company they are trying to sell, and as M&A advisors are mostly compensated based on a success fee, M&A advisors are highly motivated to keep up the momentum during a deal process.  At the end of the day, momentum makes deals.  

 

 

Bob Fiorella, First CXO
CEO and Founder of First CxO. 

Bob Fiorella is a strategic problem solver, M&A advisor, and right-hand man to CEOs and business owners contemplating or dealing with a major change; whether it's restructuring a company, building a finance team, getting a loan, setting the company up for growth, successfully selling the company, etc.  He began his career as an investment banker and worked on several deals including the multibillion-dollar merger of Avery and Dennison.  Over the subsequent two decades, Bob’s career centered around the media, entertainment, packaged goods, wholesale distribution, specialty retail, technology, and software development industries where he took on roles such as SVP Finance, Chief Financial Officer, Chief Operating Officer, Chief Strategy Officer, and independent board member. Bob is the Founder and President of First CxO.  Some of his assignments include being a fractional CFO for a $30mm packaging technology company, a $5mm software development company, and a $25mm e-commerce company.  He is also an advisor to a $500mm franchising company.  Bob holds a BS in Economics from Cornell University and an MBA from UCLA’s Anderson School of Management.  Bob can be reached at 310-422-6858, bob@firstcxo.com.


Bob’s “claim to fame” is appearing on Season 13 of America’s Got Talent as part of the Angel City Chorale. They made it to the Semi-Finals. 

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