Maybe you’re thinking about selling, or you have acquisition opportunities available, or you’re just tired and ready to leave the business. Whatever brought you to this article, picking the right M&A advisory partner is likely one of the most crucial decisions you’ll make in this process. Unfortunately, most business owners don’t know what to look for.
TL;DR: The best M&A advisory partner has relevant deal experience in your industry and size range, clear fee structures, a strong buyer/seller network, and ideally offers extra services like fractional CFO support to help you prepare and execute.
Does The M&A Advisor Have Experience in Your industry?
Many people overlook this, but not all M&A advisors are the same. An advisor who focuses on $100M+ tech acquisitions likely isn’t the best fit if you’re selling a $5M manufacturing business.
It’s very important to ask about their deal history. Specifically, how many transactions have they closed in your industry? What business and transaction sizes have you worked with? This is a huge decision, so don’t let them give vague answers. If they haven’t sold a business like yours before, they’ll be learning while you pay.
You want an advisor who knows the buyers in your market, understands realistic valuation multiples for your industry, and recognizes the specific challenges that could arise in your type of deal. That knowledge is invaluable when you’re negotiating terms late at night.
Know the Fee Structure Before Working With An M&A Advisor
Most M&A advisors work on success fees, which usually are a percentage of the deal value and often follow a Lehman scale (e.g. 5% on the first million, 4% on the second, and so on). Some also charge monthly retainers. Both models can work, but you need complete clarity from the start so you aren’t hit with any surprises.
How Much Does M&A Advisory Cost?
Typically, you can expect to pay between 2-10% of the transaction value, depending on the deal size. Smaller deals typically have higher percentages. For instance, an advisory fee for a $3M sale might be 8-10%, while for a $20M deal, it might be closer to 3-5%. If charged monthly retainers, that can usually range from $5,000 to $15,000, but it depends on your situation.
The key question is: what exactly are you getting for that fee? A good M&A advisory partner should handle the entire process, including business valuation, marketing materials, buyer identification, negotiations, due diligence coordination, and closing. If they only “introduce you to buyers,” that’s more brokering than advisory.
Your M&A Advisor’s Network is Everything
Your advisor’s contacts can make or break your deal.
Do they have established relationships with private equity firms, strategic buyers, and family offices that purchase businesses like yours? Can they call a partner at a private equity firm directly? When selling your business, you don’t want someone who just posts your listing on BizBuySell and hopes for the best.
Ask them: “Who would you call first about my business?” Their answer will reveal a lot. If they provide specific names and firms, that’s a good sign. If they say “we have a proprietary database of thousands of buyers,” be cautious.
This also applies if you’re looking to acquire. Strong M&A advisors hear about opportunities before they become public.
When Should I Start Working With An M&A Advisor?
Here’s something more business owners should understand: the best time to engage an M&A advisory partner isn’t when you’re ready to sell; it’s 12-18 months before.
You need time to tidy up your financials, your customer concentration may raise concerns, and/or your operations might not be documented in a way that a buyer will find appealing. Advisors who also provide fractional CFO services can be especially valuable during this time; they can help you prepare for an exit while managing the financial aspects that make you appealing to buyers.
Even during the deal process, having someone who understands capital raising and deal structure beyond just closing the deal can make a difference. The terms are just as important as the price. Sometimes more so.
The Real Question: Do You Trust Them?
You will spend 6-12 months working closely with this person or team. You’ll share information you haven’t even told your spouse. You’ll call them in a panic during odd hours when a buyer disappears or due diligence uncovers something unexpected.
Do you actually like them? Do they communicate honestly with you, or do they just tell you what you want to hear? When they explain the M&A process, is it clear, or does it feel like they’re confusing you with jargon?
Trust your instincts. We’ve heard of business owners choosing advisors purely based on who promised the highest valuation, and those deals rarely end well.
Ready to Get Started With An M&A Advisor?
At Surfside Capital Advisors, we’ve helped Boston-area business owners (and others beyond Massachusetts) through exits, acquisitions, and the messy middle of deciding what comes next. We provide M&A advisory along with capital raising, exit strategy planning, and fractional CFO services (and more!) because we’ve learned that the best deals happen when you’re adequately prepared and have the right team to support you.
If you’re considering any of this, let’s have a conversation. Reach out for a free initial consultation, and together we’ll determine if we’re the right M&A advisory partner for you.
