The M&A Advisor Trap — The Red Flags Sellers Miss

About the Episode

It is easy to hire the firm that quotes the highest number, and that one decision can cost you the sale. This episode covers the M&A advisor red flags that are easiest to miss: fees tied to nothing, a valuation built to win your signature, and a buyer list that does not exist. You will learn where business brokers, M&A advisors, and investment banks each actually operate, how to check a number before you sign a one-year exclusive, and what preparation to do yourself first.

What You’ll Learn

• Match the firm to the size of your company: Business brokers work at the small end of the market, M&A advisors handle the middle, and investment banks start far higher up. Hiring the wrong tier means paying for a process your buyers will never see, or listing with a generalist who has no route to a strategic buyer.
• Test the valuation before you sign anything: Ask how the number was built and check it against a range of comparable transactions rather than the single outlier a firm quotes back at you. An inflated number does not raise your price, it keeps your business on the market while you turn down the offers that were actually available.
• Judge a firm on preparation, not on its buyer list: A good advisor tells you what your business needs to look like before it goes in front of buyers and coaches you on how to run those meetings. A firm that lists you and waits is selling you a spot on a website, and the queue of ready buyers it described usually is not there.
• Do the groundwork yourself before you hire anyone: Assemble the data room, draft the bones of an information memorandum, and find out what businesses like yours have sold for. Skip it and you pay consultants to produce material your own team could have produced, and you walk into your first meeting unable to tell a realistic number from a pitch.
• Wait to engage your deal team until you have a deal: Choose your attorney and accountant early, but do not put them on the clock before there is a transaction for them to work on. Engaged professionals accrue fees and add opinions to every conversation, which costs you money before anything is on the table.

Topics Covered

Want More? Related Resources:

• Business Broker and M&A Advisor Fees: A Comprehensive Guide
• Can a Business Broker’s Success Rate be Accurately Measured?
• How to Navigate M&A Advisor Fees: Insights from an Investment Banking Expert
• Build the Right Deal Team to Avoid M&A Mistakes

Meet Our Guest

Jeremy Harbour

Founder, Unity Group and The Harbour Club

Jeremy has bought and sold roughly 200 companies and taken close to 100 public, working mainly with owner-managed businesses under $20M in revenue. He completed around 50 distressed acquisitions during the financial crisis. He founded The Harbour Club, which educates buyers of small companies, and Unity Group, which connects investors with small businesses. He is the author of Go Do and Go Do Deals.

Location: United Kingdom