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An M&A advisor will help their client identify potential strategic and financial acquirer targets by conducting research and analyzing the market.

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What Does an M&A Advisor Do?

Mergers and Acquisitions (M&A) can be complex and challenging processes, and finding the right M&A advisor can make all the difference.

An M&A advisor is a firm made up of professionals which helps business owners and founders through the various stages of an M&A transaction, from identifying prospective buyers to closing the deal.

Below is some helpful information to help you understand what an M&A advisor does, why they’re important, and how to choose the right one.

An M&A advisor is a financial professional who provides guidance and support to companies looking to buy or sell a business. They typically have expertise in finance, accounting, and law, and they use this knowledge to help their clients navigate the M&A process. Some actually bring experiences from running their own companies and navigating through the complexities of economic cycles. Here are a few of the key tasks an M&A advisor may handle:

Identifying Potential Buyer Targets: An M&A advisor will help their client identify potential acquisition targets by conducting research and analyzing the market.
Developing a comprehensive confidential information memorandum (CIM): While the list of potential buyers is being curated, the M&A advisor will help develop a set of materials to put the business in the most favorable light. An M&A advisor has the unique experience of executing a large number of sell-side initiatives and knows what potential buyers consider before making an acquisition. This includes financial information, operational procedures, founder’s motivations, etc.
Execute the sell-side process: Once the CIM and buyers list are completed, the firm will execute a comprehensive campaign to contact potential buyers, execute NDAs on the client’s behalf and distribute the CIM. Through a series of deadlines throughout the sell-side process, the M&A firm is able to narrow-down the potential buyers list to a group of interested parties. After a series of meetings with interested buyers on the client’s behalf, the firm will collect the best Indications of Interest (IOIs) and present them to the client. The advisor will then establish a deadline for the interested parties to submit official letters of interest (LOIs) from which the prospective seller chooses the best preliminary offer.
Negotiating Deals: Once a target has been identified, the advisory firm will help negotiate the terms of the deal, including the purchase price, payment structure, and other important details.
Conducting Due Diligence: They will then help their client conduct due diligence, which involves reviewing financial statements, legal documents, and other relevant information to ensure that the target is a good fit.
Structuring the Transaction: The M&A advisor will help structure the transaction in a way that maximizes value for their client, while minimizing risk.
Closing the Deal: Finally, the advisor will help their client close the deal, ensuring that all legal and regulatory requirements are met.

Why Are M&A Advisors Important?

M&A transactions can be incredibly complex, and without the right expertise, companies may miss out on potential opportunities or make costly mistakes. Here are some of the key reasons why M&A advisors are important:

Expertise: Advisors have specialized knowledge and expertise in the field of M&A, which allows them to provide valuable guidance and support to their clients.
Objectivity: They can provide an objective perspective on potential acquisition targets, helping business owners make informed decisions based on data, rather than emotion.
Negotiation Skills: M&A advisors are skilled negotiators who can help their clients get the best possible deal.
Time Savings: M&A transactions can be time-consuming and complex, and an advisor can help streamline the process, allowing their client to focus on running their business.
Network: M&A advisors have the necessary connections with founders, owners, lenders, growth equity investors, private equity firms, family offices, and others which enable the advisor to “create a market” for sellers. While receiving solicitations from “single” strategic buyers or other groups wanting to explore buying the seller’s company is a strong indication that the business is sought-after, running a process to create a market to produce more options is generally more financially beneficial.
Increased Purchase Price: Running a thorough sell-side process establishes, in essence, a blind auction process that creates competition that drives up the value of the business. Although well-run companies may be getting unsolicited one-off offers to sell, running a process can help get the most competitive price for the business.

How to Choose the Right M&A Advisor for Your Business

Choosing the right advisor is a critical decision that can have a significant impact on the success of the transaction. Here are some key factors to consider when selecting an M&A advisor:

Experience: Look for extensive experience, as well as a track record of successful transactions. It’s important for the firm to have a wide breadth of advisors within the firm with complementary experience.
Compatibility: It’s important to work with a firm that you feel comfortable with and that understands the business goals and motivations for the sale. An advisor who pressures a business owner into deciding to sell should be a red flag. An advisor who understands not only the business, but has the best interest of the seller in mind, is critical.
Services Offered: Make sure the M&A advisor offers the services required, whether that’s identifying potential buyers, negotiating terms, or conducting due diligence.

Working with an M&A advisor can be a wise investment for business owners looking to sell. Ultimately, when choosing an advisory firm, it is important to find the right experience, fit and complement to the business. If you’re interested in reading Encore AMC’s comprehensive timeline for a sell-side process you can read our post, “What Does a Sell-side Process Entail and How Long Does It Take.”

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Othon "O" Herrera

Othon ‘O’ Herrera has established a consistent record of strong returns over multiple business cycles at the C-level, across a range of industries for companies with up to $625 million in revenue, including navigating complex situations such as those requiring performance improvement, M&A, international expansion, turnaround, and transformation.

He has led M&A as a private equity backed consolidator leading to value creating exits for investors and shareholders. He founded Encore AMC taking the best investment banking practices from M&A firms he has hired throughout his career.

At Encore, Othon chairs the firm’s deal committee, while maintaining a direct presence on all the firm’s deal teams and transactions.

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