What to look for in an M&A advisor before you hire one

To choose an M&A advisor, check six things before you sign: that the firm has worked on sales like yours, what exactly it will do, who will do it, how it is paid, how it protects your confidentiality, and what the engagement letter lets you do if the work is not going well.

An advisor will see your financials, your customers, and your plans for months, and will speak about your company to others. You may have spent twenty years building it. That is a lot to hand to someone after a few meetings, so it pays to know what to ask.

Does the advisor have experience with a sale like yours?

Ask what size and kind of company the advisor has worked on, and how recently. A firm that mostly handles the largest technology sales may be a poor fit for a regional manufacturer, and the reverse is also true. Ask for the experience in specific terms: the industry, the size range, and the part the firm played.

Check what you are told. An advisor can describe past work without naming clients, since client names are confidential. If a firm names a client, ask whether the client agreed to it. If it names none and gives no specifics, treat the answer as unproven.

What will the advisor actually do?

Get the scope in writing, in plain words. Firms use the same titles for different work. Typical items to ask about:

• A valuation, and the method behind it.
• Cleaning up and explaining your financials, including adjustments to earnings.
• The written materials a buyer asks for, such as a summary of the company.
• Running the sale process: who contacts buyers, if anyone, and who answers their questions.
• Help with due diligence requests.
• Help reviewing offers and terms.

The answer to "who contacts buyers" tells you the most. Contacting buyers and taking part in negotiations are activities securities law looks at closely, so a firm should be able to say clearly what it does and does not do.

Who will do the work?

Ask who sits in the meetings and who builds the model and the materials. Ask whether the people you meet at the start are the people who will do the work. Ask how many sales the team is running at once, because the number affects how fast it can respond when a buyer asks a question on a Friday afternoon.

How is the advisor paid, and is it registered?

Ask for the full fee structure in writing: any monthly fee, any payment that depends on the sale closing, expenses, and what you owe if the sale ends early. Pay that depends on closing changes incentives, so ask how the firm handles a buyer who offers a lower price late in the process.

Then ask whether the firm is registered as a broker-dealer, and if not, why not. The SEC's broker-dealer guide lists soliciting transactions, taking part in negotiation, and pay that depends on a transaction's outcome among the signs a firm may need to register. If the firm is registered, you can look it up on FINRA's BrokerCheck. If it says it does not need to be, ask it to explain that in writing before you sign.

How will the advisor protect your confidentiality?

Ask how the firm decides who sees your name and your numbers, and in what order. A common approach shares an unnamed summary first, a signed confidentiality agreement next, and detail only after that. Ask who tells your employees and customers, and when. A leak can cost you staff and customers before any buyer is serious.

What does the engagement letter say?

Read it line by line before you sign. Look for five terms:

1. Scope. The services listed match what you were told.
2. Term. How long the exclusive period lasts.
3. Ending it. How you can end the engagement and what you owe if you do.
4. Tail. If the letter has a tail period, how long it runs after the engagement ends and which buyers it covers.
5. Fees and expenses. What is charged, when, and under what conditions.

A good fit also shows up in how the advisor talks to you. You should come away understanding the process, not confused by jargon, and the advisor should tell you things you would rather not hear. Trust that, and verify the rest.

What to do next

1. Write the six checks on one page and leave space for each firm's answers.
2. Meet at least two firms and ask each the same questions.
3. Ask each firm to put its scope, fee structure, and registration status in writing.
4. Check the engagement letter against the five terms above before you sign.
5. Bring current financials to the meetings, so each firm answers about your real numbers.

If you want help with step 5, our M&A advisory work values the business, prepares your financials, and assembles the materials a buyer asks for, so you meet each firm with numbers it can test. If you are still deciding what kind of firm you need, read business broker or M&A advisor, and for the stages after you hire, what to expect during the M&A process.

Questions owners ask

When should you start talking to an advisor?

Earlier than you think. Preparation, such as clean statements and a documented business, takes months, and an early conversation costs little. Exit optionality explains how to prepare without committing to sell.

Should you pick the advisor who names the biggest number?

Treat a high price with caution when no reasoning comes with it. Ask how the number was built, and compare it with a valuation based on your own earnings.