Why Work With a Buy-side Advisor?
Updated: Jun 13, 2019
Companies looking to grow through acquisition may be asking themselves, should we hire a buy-side advisor?
In many cases it would be wise.
While there are instances in which a larger company uses in-house M&A professionals or a smaller one is tempted to handle it themselves, experienced advisors are invaluable in guiding clients through the process.
Buy-side M&A advisors help acquiring companies to find potential acquisition targets, evaluate those opportunities and complete deals—all while the buyer goes about day-to-day business without a hiccup.
Experienced, savvy buy-side advisors will prove their worth by proactively searching for deals, conducting expert financial due diligence and properly valuing a target company before closing the deal in a timely manner.
It begins with providing clients a deep pool of potential acquisition targets.
Leveraging a proactive approach and years of industry-specific expertise, the advisor is able to compile a list of potential sellers that are not actually “on the market.” Some sellers may not even know they’re interested in a sale before they are approached in a strategic way.
Rather than sitting back and hoping something good comes along, buyers partnered with advisors will know they’re getting the best possible pool of candidates.
It’s a game-changing service. Because if a prospective buyer exists to manufacture widgets, it shouldn’t be directing precious time and resources to sourcing proprietary deals.
Buyers will benefit from having an expert third-party analyzing and interpreting financials and pro forma modeling to ensure the best possible deal comes to fruition.
Before their clients are even introduced to a potential seller, the advisor will have a requested basic financial information with a nondisclosure in place. By comparison, if the buyer’s ownership team were to directly contact a seller themselves, they may not get a warm reception. It’s an awkward position to be calling a prospective acquisition target out of the blue and asking for confidential financial information, especially if that company is a competitor. Having an intermediary makes the acquirer look more professional, and positions them for sensitive discussions.
Buy-side advisors guide clients through all stages of the process, from having an initial conversation to actually closing a deal. All the while, they are carefully managing points of communication and data requests. It takes dozens of contacts between the advisor and a single prospective seller to get a deal done—a time commitment that makes advisors critical to a successful process.
Moreover, buy-side advisors, being unbiased third parties, are less emotionally attached and thus able to advise clients with a clear vision that is driven by quantifiable factors and past experiences. That’s important in, say, a bidding war.
It’s an extremely competitive M&A environment. Deals are flowing quickly and valuations are high, making the services of buy-side advisors that much more valuable.
Ask an advisor
It’s often beneficial to work with a buy-side advisor who’s familiar with the industry and who has the requisite transaction experience. It’s important to work with a firm that puts industry veterans with senior deal experience on all prospect calls and which guides buyers through the process as an extension of their team.
See for yourself the value of working with a buy-side advisor on your next deal.
Michael Shaw is a Partner and Managing Director of Copper Run.