As a business owner considering an exit, it is essential to build the right team of professionals to guide you through the process. The team will become your advisory council, helping you maximize the value of your years of hard work. It is crucial to build this team well in advance of going to market. A well-constructed team can help you prepare your company for sale and ensure that you are maximizing your value. But who are the key players you need on your team?
The M&A Advisor is responsible for managing the sales process from start to finish. They help you navigate the complexities of the transaction process and work closely with you to develop a comprehensive plan. A good M&A Advisor should be someone you are comfortable with, who has extensive experience and relationships with private equity and strategic buyers. They should also be an expert in their field, able to offer strategic advice and support. In addition to managing the sales process, they also play a key role in identifying and resolving any problems within the company that could impact the transaction. They should have an understanding of the marketplace and help determine the optimal time to bring the company to market. Once your business is out to market, they typically handle confidentiality agreements and manage the virtual data room. The M&A Advisor manages the story of your company, so you can keep managing your company.
The M&A Attorney is perhaps the most important of all the team players, aside from the M&A Advisor. You simply must have an experienced M&A Attorney. The attorney that drafted your will or handled the purchase of your real estate is usually not the right person. I will go as far to say that your general counsel for your business is in most instances not the right person. We understand you do have a relationship with your business attorney – sometimes, they will offer to do it for you to try to save you money. They mean well. However, the documents are not “standard” contracts, and someone who doesn’t negotiate the terms on a regular basis is less likely to be best equipped to protect your interests. Mergers and acquisitions is a specialty that requires years of experience to avoid the minefields that can potentially cost you millions of dollars if you are not careful.
The Accounting Firm you choose should be able to provide you with the additional support you need for a sell-side transaction. Your accountant should be able to tell you if he or she would work with you and your team directly or if they have a transaction team that you would work with. Ask them how many transactions they have helped with and how large were those transactions. An important role of the accounting firm is also to determine the potential tax liability of a transaction and work with the M&A Advisor to structure the deal for the best possible after-tax benefit for the client. Quite often, the accounting firm that is currently working with the business owner is fully capable of handling the additional needs of a sell-side transaction. However, there are times when this is not the case, and you may need to find a different firm.
Your wealth advisor can also play a critical role in the exit process. In many cases, they have a deep understanding of your personal financial situation and can help you determine your “lifestyle number.” This is the amount of money you will need from the sale of your business to maintain your desired level of comfort and financial security in the future. The lifestyle number takes into account a variety of factors, including your current spending habits, anticipated retirement expenses, and other financial goals. By working with your wealth advisor to determine your lifestyle number early in the process, you can gain a clearer understanding of what you need from the sale of your business to achieve your financial objectives. This information is critical because it helps you establish realistic expectations for what your business is worth and what you can realistically achieve in a transaction. It also helps your wealth advisor identify potential tax planning strategies to help you achieve your financial goals. Ultimately, having a clear understanding of your lifestyle number can help you make better decisions throughout the exit process and ensure that you are able to enjoy the financial benefits of your years of hard work.
Tax Attorney & Trust and Estate Attorney
Another vital member of your team is a tax attorney and a trust and estate attorney. These attorneys bring valuable insight to the transaction by analyzing your business and personal situation and providing recommendations regarding deal structure and transactional options. They help ensure the optimal tax structure when exiting the business to save millions in taxes. They can help you understand the tax implications of different deal structures and guide you in making an informed decision. These attorneys will work closely with your M&A advisor to structure the deal for the best possible after-tax benefit for the client.
Building an Effective Management Team for a Successful Exit
It is important to note that a successful transaction is not just about hiring the right advisors, but it’s also about having the right team members. This includes your senior management team. You need to develop a plan of who you include in the M&A process and when you bring people into the fold and inform them about the process.
Confidentiality concerns are common during the M&A process, and this is particularly true when it comes to senior management. It is best to bring key management into the fold in a staged approach, starting with a tight circle initially and then slowly expanding it. Almost all buyers want the key management team members to remain, and this involvement may involve providing stay-bonus agreements with key management. Your M&A advisor can assist you in deciding if your company could benefit from getting senior management under contract prior to even the initial evaluation of the business. By including senior management, they can help the seller develop an impressive post-close growth plan that is not just fantasy put together to sell the business by the seller and M&A advisor without the engagement of the management team. Buyers like to see operationally grounded plans.
In conclusion, building the best team for exiting a middle market business is crucial for a successful transaction. The team must include experienced professionals in M&A advisory, legal, accounting, and wealth management, as well as key management personnel. The M&A advisor should have extensive experience and relationships with private equity and strategic buyers and expert advice. Most importantly, the team should consist of proactive members who are thinking about value creation instead of merely transaction execution. A great M&A team can ensure you not only receive maximum value for your business, but also that your interests are protected throughout the process.
Contact Astria LLC today and leverage our expertise in M&A advisory. Our proactive approach and extensive industry relationships will help maximize the value of your business and safeguard your interests throughout the transaction process.