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Why Should I Hire an M&A Advisory Firm?

By Generational Equity

M&A Guidance

This is a legitimate question that every business owner should consider. The reality is most business owners are experts at running their companies. They have been growing a vibrant business for years and are usually gifted entrepreneurs. However, since most only exit one business in their entire lives, they are relative novices when it comes to actually finding and closing a deal with an optimal buyer.

Unfortunately, far too few realize how complex the exit process is and how much can truly go wrong along the way.

Recently our friends at Axial released a report that examined some of the key reasons why business owners should make the investment in hiring an M&A advisor. Here are just a few of the statistics they talked about in the article:

  • A 2016 study asked CEOs who had recently sold their businesses with the help of an investment banker whether their advisor added value. For a full 100% of respondents, the answer was yes, with 69% reporting a “significant” impact.
  • Eighty-four percent of the owners achieved a final sale price equal to or higher than the initial estimate provided by the advisor.
  • With these kinds of outcomes, one would think hiring an advisor would be a no-brainer. But many would-be sellers are skeptical of the cost of bringing in outside help. Part of the problem is that the specific value-add of an advisor can be opaque until you actually start working with him or her.

The end of the last bullet point above summarizes the situation clearly. Until you actually get mired in the 9- to 18-month process it takes to close a deal for your company do you realize just how valuable an M&A advisory firm can be. Here is some insight from a few business owners just like you on the importance of good M&A advice and counseling:

The theme with these (and with all of our clients post close is the same): The M&A process is far more complex, time consuming, and difficult than ever imagined. Axial breaks it down to three key reasons you should hire an M&A advisor because an experienced advisor will:

  • Identify weak links in your management team
  • Find quick ways to increase cash flow
  • Whip your financials into shape

While all three of these are important (and if time and space allowed it, I would probably come up with 10 more to add), it is the latter two that you probably are least aware of as you consider the benefits of an M&A advisory firm.

The first step for all Generational Equity clients is a thorough and complete business evaluation and valuation. And the most important component of this step is “recasting.” Unless you are a CPA or took accounting classes in college, the idea of recasting is new. But it is really one of the most important services we provide to our clients.

Recasting of your historical financials (we usually go back three years) allows us to see your company’s true profitability. Let’s face it, for years and years your accountant has taken every measure legally available to suppress the company’s true profitability to minimize your tax liability. This has worked out great for you, but if you do not recast your financials, you will be presenting your company’s true earnings erroneously.

And you will be doing so not only historically but without recasting, all your projected earnings (we do five year pro-formas for our clients) will be wrong as well, and you will potentially be leaving millions of dollars on the table when you negotiate with a buyer.

Preparing You Too

From a financial standpoint, hiring an M&A advisor is vital. And not only do we prepare the company’s financials for buyer review, we also help ensure that our clients are truly committed to the exit process. This is very important from a buyer’s perspective because the one thing all buyers lack is time. Spending 3-6 months negotiating and working through due diligence to have a seller back out at the 11th hour due to indecision regarding selling is very, very painful for buyers.

In short, why should you hire an M&A advisory firm to guide you as you consider your exit? Because not doing so could significantly impact not only the deal you eventually close, it could hurt your financial legacy, the return on your investment of blood, sweat, and tears in the company you have grown from scratch.

The major caveat to all of this simply a word of warning: When you do hire an M&A consulting firm, make sure that they have a track record of success. Generational Equity has been the leading middle-market advisor in North America for years. Don’t just take my word for it, take a look at some of our awards and accolades:

If you are curious to learn more about how your business could benefit from working with us, you should contact us about attending one of our exit planning conferences near you. We hold these to help business owners understand how to effectively plan for their exits and how to take control of their financial legacies.

And special thanks to Axial for outlining just a few benefits of hiring an M&A advisor.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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We were represented by Michael Goss with Generational. The due diligence was grueling and exhausting, but Michael propped us up and kept us motivated throughout the process. Debi and I continued to ask each other how we could possibly make it through this process without the assistance of Michael. Michael's professionalism and knowledge is absolutely amazing, and we are so blessed to have had him by our side as we made our future dreams come true.
Bob and Debi Lee, Owners of BL Technology, Inc and BL Tl Services, LLC
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I decided to attend the conference and hopefully receive some guidance on how to structure an exit plan of my business. Upon arriving at the conference, I was so impressed with the presentation given by Generational Equity that I set a future appointment that week to discuss the possibility of selling my business with their Senior Managing Director David Robinson.
JoAnn Ellis, Owner of Fondren 5 Star Kennels
Through the sale process, Generational brought in several interested buyers and we closed in about 6 months. I am so glad I accepted that invitation to the conference and could not be happier with the whole process. The team at Generational coupled with their knowledge and guidance was so valuable that in the end, I know I could never have done this on my own!
JoAnn Ellis, Owner of Fondren 5 Star Kennels
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
I wanted to take this opportunity to thank you for all that you have done for us. Not only did you take care of all the aspects of the sale but took extra care to make sure we knew what it looked like every step of the way. I will definitely recommend your company to anyone that is in a position to or looking to exit their business.
Shane and Johanna Kline, Owners of Vision Upfitters
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
The professionals at Generational Equity then helped develop a roadmap for enhancing the value of the firm and an evaluation report. This was completed by June 14, 2021. We then developed the Confidential Information Memorandum and put Taylor Studios, Inc. on the market by July.
Generational Equity’s professional staff helped me every step of the way. Their network and professionals are the only reason I sold my company this quickly. For me this is a once in a lifetime sale and I was unfamiliar with the process. I was able to lean on them with questions and concerns.
Betty L. Brennan, President, Taylor Studios
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The most important contribution I think Ahmad made was with his personality and work ethic. He is sincere, efficient, and very hard working. He was available to me at all times, whether it was for specific detail of the negotiation or just to talk through the bigger picture. He listened, advised, and recommended, but never forced his idea or opinions. In the time we worked together, he became a valued colleague and also a friend.
Salvo Stoch, Founder and CEO of Sleeping Partners
After attending a conference with GE, I decided that the value they bring would be worth the expense and as soon as I started working with them, I realized that was the right decision. When we started to get LOIs, Fred Zweifel took the lead on the communication and supported negotiations throughout the process, which got tricky as we moved forward. I learned that it can be common for companies to make a great offer then work to erode that price with their discoveries, but Fred and the GE team kept that from happening.
Caroline Connelly, CEO, OptoTest
Thanks to you, the entire GE team and especially Michael Goss for driving a great valuation, coaching me and driving the process across the finish line. Please let me know if there is anything I can do to support GE going forward.
Tom Currier, Former President & CEO, Rackmount Solutions
We had the pleasure of working with Mr. Ahmad Behjati Managing Director, M&A, for Generational Equity during our acquisition of Papa's Dodge in late 2021. Generational Equity and Mr. Behjati represented and marketed Papa’s Dodge. As our primary contact, Mr. Behjati was professional in every facet of this acquisition process, conveying valuable advice most times and assisting us in every step of the process.
Rick Greene of Dobbs Equity Partners LLC
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms