Volume 7, Issue 18, September 15, 2020
At VERTESS, we are often asked what value we can bring to sellers as they decide to sell their business. We often talk about our large contact list of buyers and our experience as a business operator/owner and seller or as a merger and acquisition (M&A) advisor.
However, a study conducted a few years back better illustrates our value in a less biased way. It was conducted over a 5-year period. The survey group was comprised of 85 business owners who sold their businesses for between $10m and $250m and used investment bankers, i.e., M&A advisors.
The study set out to examine the value an advisor brought to the seller. Thankfully, the majority of participants were grateful for using an advisor or broker, but the top cited reason why might be surprising.
The study highlights the standard M&A process as one that is mired in inefficiencies: from an opaque market, one that has very little public information about the middle market and prior prices disclosed, to a severe imbalance of information and experience between the buyers and sellers. Many sellers are taking their one and only shot, while the larger buyers are experienced and skilled at the process. Lastly, the acquisition process is time consuming and often difficult to navigate.
The study outlined the numerous steps involved in the process — more than 20 in total that were broken down into four stages of the typically transaction process: planning, marketing, buyer due diligence, and final diligence and negotiation.
The study primarily focused on the value added by M&A professionals in helping business owners sell their enterprises. Although services often vary from one advisory firm to another, there are typically common services provided to help sellers that range from pre-market planning to negotiating the deal to facilitating communications and collecting information.
The surveys focused on eight primary services provided by an advisor:
The survey results indicated that the typical respondent felt that, in retrospect, all eight services were at least somewhat valuable, while six of the services were significantly valuable, as the figure below shows. Somewhat surprising to some is that "managing the M&A process and strategy" was the most important function, followed closely by "structuring the transaction" and "educating and coaching the owner," while "identifying and finding the buyer" actually has the lowest importance rating.
To address the possibility that an average importance ranking could be deceptive or misleading, the surveyors asked respondents to rank order the eight services from one to eight, respectively. The results were as follows:
We often receive calls from perspective sellers who are trying to decide how best to exit their company. They may sometimes have a buyer in mind and will often ask why they should pay us to be their advisor if they already know who the buyer will be. This study is a wonderful example of the value that an M&A advisor will bring to the process — regardless of whether owners are just beginning the process or feel like they are already well on their way.
When it comes time for you to sell your business, we strongly believe that you should secure the support of a knowledgeable M&A advisor. We'll happily explain to you why VERTESS should be on your short list of advisors to consider, in part because we bring operations experience to a transaction. We've been in business, sold our businesses, and understand the delicate conversations that must occur to help our seller clients find their perfect buyer. Partnering with an M&A advisor — whether it's VERTESS or another firm — may prove to be the difference between whether the sale of your business goes smoothly and delivers a fair return or leaves you wondering what could (and should) have been.
As Co-Founder of LifeShare, a multi-state human services and healthcare organization, Rachel has a unique background of over 20 years of successful operational and executive experience, in addition to an MBA in Healthcare Management. She began her professional life as a home care provider, an experience that created the foundation for the innovative quality and success of LifeShare, while also changing her life. At LifeShare, she managed their Operations (Adult Day/Residential; Child Therapeutic Foster Care; HCBS; Child Therapeutic Day/Diversion Services, and Educational Programming), Finance, HR and Quality Assurance (facilitating COA accreditation and policy/procedure implementation). After selling LifeShare to Centene, Rachel remained during the transition of management and helped to provide outcome measurements and COA compliance reporting. At VERTESS she is a Managing Director providing M+A advisor and consultant services, specifically in the I/DD, behavioral health and related healthcare markets, where systems are rapidly evolving, and providers are striving to adapt strategically to diverse challenges.