Mergers and acquisitions (M&A) involve companies consolidating their assets through various financial transactions, including mergers, acquisitions, consolidations, asset purchases, management acquisitions, and corporate restructuring. Given the delicate nature of these proceedings, companies often enlist the help of external parties, such as business brokers, M&A advisory firms, and investment banks, to provide consulting services.
These advisors ensure smooth, efficient, and profitable transitions by pairing companies with the right buyers. While their duties are similar, they serve companies of varying sizes. With an estimated $2.8 trillion generated from M&A transactions annually, the importance of having consulting services negotiate these financial deals is clear.
Next, let’s explore what M&A advisory entails and how these specialized services support businesses through complex financial transitions.
What Is an M&A Advisory Firm?
M&A advisory firms guide clients through the complex mergers and acquisitions process, which might include legal and tax implications, debt restructuring, and equity financing. However, an M&A advisory firm’s responsibilities extend deeper than simply providing guidance to companies undergoing a merger or acquisition. These firms also advise companies entering a sale, financing event, or corporate restructuring.
The M&A advisory firm acts as a middleman in business transactions between companies that either initiate the transaction or the buyer. Typical M&A candidates include companies either trying to buy or sell a portion or all of their company to a different business. While mergers and acquisitions comprise the bulk of what M&A firms handle, they can also assist companies in the following processes:
- Acquisitions advisory and market analysis.
- Capital raising and due diligence.
- Developing and reviewing financial models.
- Negotiating terms and identifying potential conflicts.
What Do M&A Advisory Firms Provide Companies?
End-to-End Support
Outsourcing your M&A work to an M&A firm provides valuable access to insight from the pre-merger stage through the close of the transaction. A full-service team of financial professionals should coordinate and review contracts and provide post-merger integration services.
Efficiency
Your M&A firm should provide a cost-effective approach to the entire process. These professionals can review and analyze merger documents and create actionable strategies based on their analysis. With in-depth contract reviews and transaction analysis, you should be able to count on your M&A advisory to identify any missing documents or missing information, reducing delays and keeping the merger on schedule.
Confidentiality
Your M&A advisory firm should be able to keep your information safe and secure. They should have internal processes and procedures that secure your financial data and transactions.
Advisory and Negotiation
One of the primary components of M&A advisory roles is their ability to navigate complex transactions by leveraging their extensive market knowledge. An M&A expert can negotiate and locate the correct buyers for companies using the following tactics:
- Setting accurate valuations for companies.
- Leveraging the highest price for sellers.
- Marketing the company to prospective buyers.
- Avoiding below-market sales.
- Providing the seller with the best fit for a buyer.
- Providing assurance that the sale gets completed according to plan while creating thorough contingency plans throughout.
- Advising their clients on executing an exit strategy that aligns with the company’s sales objectives.
How Do M&A Advisory Firms Differ from Investment Banks?
M&A advisory firms and investment banks provide similar services to their clients. However, the primary difference between the two organizations corresponds with the size of the company each renders service to. Investment banks typically cater to clients with annual revenues exceeding $250 million. M&A advisory firms, on the other hand, are better suited toward small-to-medium-sized companies or startups with revenues between $5-$75 million.
Investment banks and M&A advisory firms use many of the same methods to fulfill their clients’ needs. They both guide their clients through the sales or acquisition process with the mission of creating competitive buying environments that attract the best deal and the right buyer. M&A advisory is about providing advice and presenting facts about the company to improve a powerful negotiating position.
The Different Types of M&A Advisory Organizations in More Detail
M&A advisory firms and investment banks can be divided into three different fields: business brokers, middle-market firms, and bulge-bracket investment banks. Business brokers work with smaller clients and represent them in transactions with values less than $5 million. Middle-market firms provide advice for transactions at an enterprise level between $5 million and $75 million. Bulge bracket investment banks typically work on transactions greater than $100 million.
Regulations on M&A Advisory Organizations
Most M&A advisory firms are not licensed in securities, so they are regulated to handle middle-sized transactions at most. Larger deals are handled by investment banks that are licensed in securities.
Business brokers typically base value on factors such as sales, location, and profit, whereas M&A firms focus on businesses based on their strategic potential targets, required investment analysis, valuation of intellectual assets, and potential future growth. M&A firms also handle deals that are too large for business brokers.
M&A advisory firms are also subject to federal regulations. In 2016, the SEC relaxed FINRA rules that govern M&A firms and their activities. M&A firms are not required to be licensed broker-dealers whereas investment banks are.
How Do You Choose an M&A Advisory Firm?
While business brokers, M&A advisory firms, and investment banks perform many of the same duties, companies must consider which size organization best fits their needs. Additionally, companies should consider precisely what financial services they require.
If companies are looking for financial consulting services or tax planning, they should consider a fractional CFO or an outsourced accounting firm. Sometimes, as in the case of Fully Accountable, M&A advisory firms can guide your company to the services you require most.
Your M&A advisory firm should schedule an interview with you to determine the most appropriate course of action. The interview should also specify payment structures, the firm’s past successes, and its investing approach. Clarifying the firm’s capabilities, payment structure, reputation with past clients, and investment approach will give you all the information you need to decide whether they are the right fit.
Consider Fully Accountable for Your M&A Advisory Needs
The full-service team of financial professionals at Fully Accountable is here for any small-to-medium-sized business that needs merger and acquisition services. Our fractional CFOs ensure the proper business fit, whether you’re selling your business or implementing a corporate restructuring.
Our commitment to providing a personalized approach expedites the M&A process and ensures an efficient transition. This personalized approach ensures you adhere to all legal obligations and simplifies any post-merger challenges. We make the most of your negotiations and attract the right candidates for your business sale.
Contact us today to set up a free consultation and ensure you get the most out of the mergers and acquisitions transaction process.
