As I take a very deep breath and a sigh of relief after closing one of my most complex and largest transactions ever (we have been working with this client for 15 months*), I reminisce on the last sale of my own company and how I wish my advisor would have done all the things I did for my client.
This also reminded me of a great article that I found a while back on the top 10 things a great broker (aka M&A advisor) should do for you. I only wish I had read it before I selected my own advisor. But after years now of selling technology companies, I thought I could expand on this article a little, so here is my take on it:
My Additions to the Top 10 Things That a Great Broker Will Do:
(Original source: Divestopedia)
#1 They don’t just say they know your industry, they prove it
Knowing a specific industry and the specific vendors and buyers who play in it is critical. Even if the broker says they work in “technology,” be sure to drill down on what exactly that means. Do they know the difference between a VAR, MSP, MSSP, CSP, ISV…. you get my point. In my case, it turned out I was the first “partner organization” my broker ever sold.
#2 They get inside your kitchen before selling your food
Knowing your industry is one thing, but knowing your company is another. Nobody can sell your company’s attributes better than you, but the broker must come a close second. A good broker spends some serious time immersed in your business before putting together any sales material and/or marketing your company. They should be able to articulate your value proposition better than your own sales team because they are positioning it for the eyes of a “buyer.” Getting inside your kitchen also means looking at your gross profit margins and, in turn, your cost of goods sold. Nothing retrades a deal faster than presenting an overstated gross profit margin number because not all costs have been allocated properly to the cost of goods sold.
#3 Their selling materials are worthy of your company
One of the first things your broker will do is prepare a blind profile or teaser and a CIM, so ask them to show you some examples and see if you like how they market companies. No one wants to read a boiler plate boring document. I only prepare CIMS in PowerPoint, so they are concise, easy on the eye, and fun to read, but still chock-full of valuable company information that has my sellers’ “look and feel.”
#4 Like a great closer in baseball, they close deals
All brokers will tell you they can sell your business, but only nine out of 10 private companies for sale (who use a broker) actually sell. Right now, I am batting a 1000, but it is not by luck. It’s about a lot of hard work and rarely taking “no” for an answer – or at least finding a good middle ground that works for everyone.
#5 They leave no stone unturned
Finding buyers is not a problem. Finding the “right” buyer is a lengthy process. I pass on the majority of buyers I speak with before finding one I want to present to my sellers. And sometimes I find these buyers in the oddest places. It is a long and exhausting process, but it yields tremendous results if done right. And, I have come to learn, the buyer is almost never the one the seller thinks it will be.
#6 They become your financial advisor
I am called upon time and time again to use my skills as a former CPA, while always qualifying that I am not your tax accountant. But being able to discuss tax implications and numbers on the fly is something I like to bring to the table for my clients. Sometimes you get the option to pick either a stock or asset transaction (with different terms of course), so you want someone who really understands the financial implications of all decisions. A good advisor will also help you think through the difficult decisions about how much money to share with those very import “key” employees who are NOT shareholders.
#7 They manage your expectations
Setting expectations on value and terms are so important right from the beginning. Not doing so is going to waste everyone’s time in the end. A great broker strikes the right balance between getting you the most value and keeping you realistic. I use my Value Maximizer Assessment to help my sellers get a good idea of company value.
#8 They roll up their sleeves
There is nothing more painful to watch during a transaction than a broker who doesn’t help out, or better yet, stops once he/she gets you an LOI. Once the letter of intent is signed, the buyer will start the due diligence process and a great broker will help run the due diligence process. They work with you and your accountant or internal team to gather up all the information even before it is requested. I like to work a couple of months in advance with my sellers to get their virtual data room established with key documents. Oh, and they crunch a ton of numbers for you, so you don’t have to.
#9 They make sure you train before the big race
Those first calls with buyers are so important, as they not only make the first impression, but set the tone for future calls. You want to know in advance what they will be asking you and what you should be asking them. That’s when I pull out my list of 34 questions to ask and be ready to answer, which you can find in my book, Get Acquired for Millions. Oh, and don’t have the first call be with the most impressive buyer. Wait on that and get a feel for how those initial calls work with a smaller or less attractive buyer before you take on the lead dog.
#10 They understand which deal points to fight for
Sometimes sellers just cannot give up the fight. In reality, some deal points are just not worth creating deal fatigue. A good M&A advisor knows which battles to fight, and which ones are just not worth it in the end. Sure, you want to negotiate for every dollar, but you also want to be viewed as fair by all parties. This does make the deal close much smoother, and all parties feel like they have won the battle.
*Most transactions are completed in 6 – 9 months, but occasionally one does run longer; usually it’s because the buyer extends the process or needs additional time due to other transactions they are closing.
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