Tips for Hiring and Working With Your Advisors


When hiring a professional advisor, the number one thing you should look for is real-world experience buying and selling companies. Ask how many M&A transactions they have worked on in the last three years and their role in each transaction. The more, the better. An “affordable” advisor lacking real-world experience will prove to be much more costly than the most “expensive” experienced advisors. 

For example, it’s common for CPAs to kill deals by offering their unsolicited opinion on a business’s value. They may attempt to use logic that only applies to publicly traded companies or they may use valuation methods such as discounted cash flow (DCF) that don’t apply to small to mid-sized companies. I have heard CPAs claim that an appropriate multiple for a business was seven to nine times EBITDA when, in reality, multiples were in the range of three to four times. The CPA on the opposing side claimed that multiples for the same business were three to four times EBITDA. Such opinions are common among CPAs. If a CPA or other advisor opines on your company’s value, respond by asking how many transactions they have personally been involved in.

The best advisors have deep, relevant experience. They understand their client’s business and industry and are willing to be flexible to meet the needs of both parties. Negotiating the deal involves making numerous tradeoffs. Both you and your advisor must be prepared to be flexible and make concessions if you want to get a deal done. By the same token, your advisor should have the experience necessary to know when a buyer is being unreasonable and when it’s sensible to advise you to stand your ground.

This understanding is required if they’re going to offer their opinion on the transaction structure, as opposed to simply accommodating your requests. The most valuable advisors play a technical role and have the requisite experience to add more value than that for which they were retained. This is particularly important when a transaction structure involves an earnout, one of the most complicated deal mechanisms to design. Don’t pay your advisor to learn on the job – ensure you have retained advisors who have significant relevant experience drafting and negotiating earnouts. As a business owner, you likely have no practical experience negotiating an earnout. You must, therefore, solely rely on the advice of professionals. Close collaboration with your deal team will be essential to creating a deal structure that minimizes your risks and maximizes your purchase price. 

Negotiating the agreements for the sale of a middle-market business is a complex undertaking. Don’t be shy when inquiring about qualifications. Ask what role your advisors envision themselves playing in your situation – some prefer to be in the background while others prefer to be on the firing line.

The reps and warranties in the purchase agreement can have significant implications for several years following the closing. In some instances, the liability you may incur in reps and warranties can be perpetual, such as in the case of environmental issues, the payment of taxes, or for employment-related matters. One word in the agreement can make the difference between a million-dollar recovery of damages and no recovery at all. 

Experienced accountants and attorneys know what’s customary and reasonable and what isn’t. The American Bar Association (ABA) compiles surveys of attorneys in the trenches based on what’s currently considered reasonable in an industry. For example, the ABA study might indicate that 34% of M&A transactions under $10 million in purchase price include an earnout, or that the average escrow is for 11% of the purchase price. The ABA’s studies are highly detailed and contain specifics on every critical element of a purchase agreement. An experienced advisor can spot when the opposing party is making an unreasonable request and will be able to couple your objectives with current standards of reasonableness. A good advisor will tell you when to fight and when to acquiesce. 

The more experienced the professional, the more cost-effective they will be. For example, an attorney charging $500 per hour may be cheaper in the long run than your general business attorney with little M&A experience that only charges $200 per hour. 

While your general business attorney may be sufficient for advising you regarding general business matters, M&A is not a general business matter. Your attorney should have significant experience negotiating M&A transactions. For example, an inexperienced attorney may miss that your reps and warranties should include a basket (deductible) and a cap (maximum). On a $50 million transaction with prevailing norms regarding the reps and warranties (10% holdback with a 1% basket), this could cost you $500,000 if problems arise after the closing. What if a problem arises after the closing with potential damages estimated at $600,000? With the inexperienced attorney and no cap, you would potentially be liable for up to $600,000. With an experienced M&A attorney and a $500,000 cap, you would potentially be liable for only $100,000. In this scenario, you saved $10,000 in attorney fees but this cost you $500,000. 

If your attorney forgot to include a cap, or the maximum amount of your indemnity, this one seemingly small oversight could cost you millions of dollars – $45 million (or more) in this case if something terrible goes wrong.

If your business may be sold to a corporate buyer, such as a competitor or private equity firm, you can count on the fact that they will bring dozens of specialized experts to the negotiating table. Their team will run circles around you if your advisors are inexperienced. To be sure, this isn’t the place to be cutting corners. 

Of all the specialists you hire, your investment banker (or M&A advisor) and your M&A attorney are the most critical, and therefore should have deep experience.

You should only hire an M&A advisor that specializes in M&A. If they’re attempting to do multiple other things, there’s probably a reason for that.

An “affordable” advisor lacking real-world experience will prove to be much more costly than the most “expensive” experienced advisors. 

Knowledge of Your Business

Selling a business involves juggling numerous tradeoffs. Price is relative to the ratio of risk vs. reward. If the perceived risk is high, either a buyer will offer a lower purchase price or seek to mitigate the risk through transaction structuring, such as earnouts or stronger reps and warranties. It’s critical that your advisor understands your business from an operational standpoint so they can see how the deal mechanisms a buyer proposes fit into your overall deal structure. 

Your advisors should understand the risks inherent in your business, particularly the risks a buyer will perceive. The perception of risks will vary from buyer to buyer. Understanding this enables your advisor to get a handle on how a buyer’s proposals relate to the overall transaction structure and their perception of risk. Your advisor will then be able to propose alternative deal structures that meet both parties’ needs.

Help your advisors understand your business from both an operational and a financial standpoint. Tell your accountant or attorney what your primary concerns are and work with your advisor to meet your needs before burying yourself in legal or financial jargon. Don’t lose sight of your objectives. Once your advisor understands your business and aspirations, you can work together to create package proposals that meet the buyer’s needs while also addressing the needs of your business.


Allow your own experience to dictate the roles of your accountant and attorney. If you have never sold a business, be prepared for your advisors to play an instrumental role in the process. If you’re a serial entrepreneur who has sold dozens of companies, your advisors may play a more limited role. Ask what role your advisors envision themselves playing in your situation based on your experience level. If you’re hands-off, you will want an advisor who can take charge and lead the transaction.

Appetite for Risk

Attorneys and accountants are conservative by nature. Find an advisor whose appetite for risk matches your own. Some advisors are excessively risk-averse. Likewise, some business owners are also risk-averse. You should employ an advisor whose risk profile matches your own.

Pre-Sale Due Diligence

Ask your attorney and especially your accountant to conduct pre-sale due diligence. This involves conducting due diligence before you put your business on the market and will allow you to identify and resolve potential problems before you begin the sale process. If your accountant lacks M&A experience, it may be wise to hire an accountant who specializes in this. Conducting pre-sale due diligence may also lessen the scope of the reps and warranties.

Ask your attorney and especially your accountant to conduct pre-sale due diligence.