How M&A advisors can help with selling your startup? As the owner of a business, you are faced with a variety of major and minor decisions on a daily basis. Choosing whether or not to sell your startup business will be one of the most crucial choices you will ever have to make in your life.
Selling a business can be a stressful time for many business owners due to the fact that they don’t really know where to begin. Few have been through it before, and it is a different beast every time. Worse, many jump in, only to discover how complex it is afterward.
Hiring a qualified and experienced M&A (Mergers and Acquisitions) advisor to build a market for your business through a competitive process will help you throughout the journey and maximize your company’s value. As selling a startup business takes a lot of time, effort, and knowledge, having the guidance of a professional M&A advisor can make the process a more seamless transition.
In this article, we’ll discuss how a merger and acquisition (M&A) advisor can help maximize your success when selling your startup.
Remember that mastering the storytelling side and how you are positioning your business is critical when it comes to engaging and speeding up the process. This is done via your acquisition memorandum. This is super important to reach a successful acquisition. For a winning acquisition, memorandum template take a look at the one I recently covered (see it here) or unlock the acquisition memorandum template directly below.
Here is the content that we will cover in this post. Let’s get started.
- 1. Value Versus Cost
- 2. Their services include:
- 3. How M&A Advisors Help With Selling Your Startup
- 4. Business Sales Experience
- 5. Capacity to Inspire Competition
- 6. Understanding Tax Consequences
- 7. You’ll Need To Hire Professional Consultants Regardless
- 8. You Have a Business to Manage
- 9. Confidentiality Is Essential
- 10. The Wrong Buyers Can Be a Drain
- 11. Achieving The Most Competitive Terms
- 12. Conclusion
Value Versus Cost
When you are considering selling your startup, one of the questions that may cross your mind is whether or not you should get the assistance of an M&A advisor, or if you should sell it on your own.
Great M&A advisors may not be cheap. They can demand anything between 4.5 and 10% of the business’s purchasing price. Or a combination of retainers and success fees.
However, they may offer a lot more help and value than you can appreciate before you’ve been through the process. One slip up, and you can lose a whole lot more than that. As some founders have found out that even after selling their startup for over a billion, they effectively walk away with nothing.
After reading this article, you will realize that the value M&A advisors bring to the table is worth much more than the cost of hiring them. M&A experts help handle the entire sale process for you, saving you time and money so you can focus on your business.
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Their services include:
- Helping you get the most out of your business sale.
- Protecting your privacy.
- Negotiating on your behalf.
- Provide direction and education on all transaction elements.
Don’t just look at the cost of hiring an M&A advisor, but realize how they can assist you in getting the best value for your business. As well as saving you from even bigger losses. Take the time to understand how M&A advisors can help with selling your startup.
Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
How M&A Advisors Help With Selling Your Startup
M&A consultants are expert professionals with extensive experience in closing deals. They have the skills and knowledge to assist you in getting the best deal possible and help you in achieving your objectives.
Business Sales Experience
Many business owners only sell a company once in a lifetime. An expert mergers and acquisitions advisor will have sold dozens of enterprises.
While you focus on making your startup business profitable and more valuable, your advisor will be able to foresee and manage all of the challenging aspects of selling, such as negotiating and dealing with potential buyers.
They know how they should continue the sale moving forward in a strategic, well-planned manner. On the other hand, business owners who attempt to sell their startup business on their own may get caught up in the emotions of the process and lose track of time. If the deal fails to complete, they may have very little of a business left.
Capacity to Inspire Competition
If you choose to partner with an expert M&A advisor, the number of potential buyers can increase substantially. The best way to ensure that you get the best deal for your business is for buyers to compete.
So, the M&A advisor you hire should be able to put out a clear plan for promoting and gaining bids for your startup. To begin with, professional advisors will create a detailed description of your startup business, called a Confidential Information Memorandum (CIM). This document is the foundation of your marketing and may be as long as 30-60 pages if done well.
They know how to connect the dots between what you’ve got to offer, and what the best buyers want and need. As well as how to generate action and a sense of urgency.
Expert M&A advisors have a network of buyers. They know who is shopping, who is buying, who is qualified, and who may be the best match.
What’s the bottom line? You’ll see a significant boost in the figure of potential buyers when your M&A advisor executes these tactics. You’ll have a far higher chance of finding a good fit and getting the best price and terms if you increase the number of potential buyers. That
Understanding Tax Consequences
For business owners, it’s all too easy to get caught up in the price a buyer is willing to pay for the business. Don’t get caught in this trap! After all, the amount of money you will have after taxes matters a lot more.
A skilled merger and acquisition advisor can help you prevent losing a huge amount of dollars by effectively guiding you through your taxes and how different deal structures will impact them.
An M&A advisor understands the tax consequences of such transactions. They’ll collaborate with your accountant to design a tax minimization approach before working on your behalf to attain the most pleasing potential outcome. And that’s just one of the ways how M&A advisors can help with selling your startup.
You’ll Need To Hire Professional Consultants Regardless
Many business owners attempt to sell their startup independently, oblivious to the hundreds of small particulars or steps that must be completed and tracked. The list of elements that need to be addressed can appear limitless, ranging from licensing to real estate, inventory, leases to utilities, and personal assets.
You will need lawyers, accountants, and more working on this. You need someone to take the lead. Or you are going to burn a lot more billable hours with those professionals, and your own time juggling it all.
You Have a Business to Manage
As we’ve all heard, the best time to put up your startup for sale is when things are going well.
Buyers and lenders will be more confident in your company if it consistently expands revenue and profits, and keeps on growing with new happy customers through the closing. Which can take months, or well over a year.
The worst thing that can occur is losing focus while selling your company. Buyers become concerned when revenues and profits fall. Lenders begin to question when or if things will improve.
You’ll have to spend most of your hours on buyer queries and meetings, facility visits, negotiating purchase terms, and conducting due diligence if you try to sell on your own.
It puts your company’s operations at risk and puts your privacy in jeopardy. When you have an M&A expert on camp, you will be able to stay focused on managing your business throughout the sales process.
While you focus on keeping your startup running smoothly and profitable, an M&A expert will be able to handle the thousands of minor issues such as qualifying buyers and ensuring confidentiality. That’s how M&A advisors can help with selling your startup.
Confidentiality Is Essential
If you deal with the sale of your startup on your own, the chances of a confidentiality violation are substantially higher.
Handling buyer queries, giving your company tour to potential buyers, preparing financial data, submitting banking and insurance paperwork, and a slew of other deal-related tasks can all leave you open to giving away more than you should at the time.
Employees may leave, customers may get concerned, vendors may seek changes, or competitors may use the sale against you, depending on your situation.
The buyer may back out of the contract if they are concerned about losing significant personnel or customer base.
An expert advisor will have a straightforward approach to protect your confidentially through the process, help insulate your business, and strategically plan how and when to best tell others about the deal, and get them involved in a positive way.
Prospective buyers are vetted to guarantee they can afford to buy your business, have the right intentions, and are a great fit for your vision after the deal is closed.
They’ll help you choose a secure virtual data room to store sensitive financial data and other items, throttle that information well, and advise on how you should manage permissions.
It’s critical to consider confidentiality at every stage of the process. By operating in this manner, you will lessen the likelihood of anything happening that is less than ideal. By ensuring confidentiality, M&A advisors can help with selling your startup.
One of the most critical areas where M&A advisors help is showing you how to value your company. For more information, check out this video I have created.
The Wrong Buyers Can Be a Drain
Expert advisors know how to distinguish between buyers and vet them.
The wrong buyers can steal your information. Or they may just waste months of your time without being able to close.
Just as importantly, you need the right buyers who can follow through with any earnout provisions, take care of your employees and customers as agreed after the deal, and keep working the mission in the right way. Unfortunately, while these can be the most important and impactful elements, most sellers don’t know how to manage this part of the transaction well.
Achieving The Most Competitive Terms
Your M&A advisor can certainly help position your startup and position it in the best way to demand the highest offers. Yet, even more important than that is the terms of the deals.
It is the clauses and fine print which really determine what you’ll net, what the buyer is going to be held to doing, and how you’ll feel about the transaction when it is finally done.
Besides the purchase price, there are a lot of things to take into consideration. Here are a few examples:
- Can you keep the money you have in the bank?
- Will you have to offer seller financing?
- How much time should you set out for due diligence?
- What about your receivables?
- Is it better to sell an asset or a stock?
- How will the tax implications of the acquisition price be handled?
- Should the buyer be allowed to speak with your employees?
- How much of the price will be set aside in escrow for variables?
- Is an earn-out advantageous? What should the structure be?
As previously stated, a good M&A advisor will more than pay for themselves in the long run, as they will provide more value to your startup sales than their cost.
It’s not easy to sell a business. It’s time-consuming, puzzling, and can stumble on numerous roadblocks and obstacles. You worked hard to build your business into what it is now, so you should get the best outcome from the best buyer when selling.
Merger and acquisition experts can assist in negotiating the best possible deal while also reducing the amount of complexity, stress, and uncertainty associated with the sale. M&A advisors will provide you with more value than the cost of hiring them.
M&A advisors will positively deal with the entire process, leaving you time to focus more on your business during the process. Trust that M&A advisors can help with selling your startup.
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