How Sell-Side Advisory Services Can Create Value

July 14, 2021  |  Barton Walter and Krier

Selling your company is one of the biggest business decisions you will make as a business owner. You’ve spent years growing your organization and you’re a trusted expert in your field. But when it comes time to plan your exit strategy, you may have more questions than answers. How do you prepare for the sale? Where do you find a buyer? What about business valuation? A sell-side advisor can help guide you through the entire process from defining objectives to closing the deal. Read on as we look at how sell-side advisory services can create the most value for your business.

What is a sell-side advisor?

A sell-side advisor is a deal consulting professional who represents a company looking to be acquired. Sell-side advisors are a critical member of the divestiture team. They are a strategic partner with an expert understanding of the M&A landscape who can attractively position a business for sale as well as help minimize risk and maximize valuation. The advisor provides a wide range of services throughout the cycle including:

  • Due diligence
  • Pre-sale analysis
  • Financial modeling
  • Quality of Earnings report
  • Deal-basis financial statements
  • Net working capital
  • Dataroom preparation
  • Negotiations
  • And more!

Just as you wouldn’t represent yourself in court without a trained professional, having a trusted advisor to support you through the deal and at the negotiating table is critical to enhance the value of the deal.

Key benefits of sell-side advisory services

During the acquisition of a business, it’s important to increase the seller’s credibility and the buyer’s trust. A sell-side advisor understands the seller’s most pressing concerns of the transaction, providing guidance to enhance value and reduce the time to close. Other key benefits to sell-side services include:

  • Maximize the seller’s deal value – increase in EBITDA, NWC target definition, etc.
  • Identify potential Quality of Earnings adjustments, including pro forma, operational process improvement, and run-rate adjustments
  • Help with tax structuring alternatives and tax planning
  • Assist with readiness planning – HR and operational separation
  • Assess Quality of Net Assets and help with working capital and computation
  • Increase the certainty of the transaction – minimize risk
  • Minimize disruption
  • Reconcile historical financial data with deal-based financials

As a seller, you want peace of mind that you receive the most value for your business. A good advisor identifies and utilizes the right valuation technique to help you avoid common pitfalls and reduce closing risks.

Questions to ask your advisor

Not all firms are created equal and retaining an advisor who understands your business and your industry is crucial. Here are a few basic questions you can ask during your initial search:

  1. What is your sell-side process – it’s important to understand the firm process, how it’s managed, as well as a thorough timeline to completion.
  2. Who is on the team – you’ll want to know who you’ll be working with, their credentials, education, and experience with transactions in your industry.
  3. What is the plan for marketing the sale – will it involve a full or limited process; the more specific the information, the better the process in the long run.
  4. What is the fee structure – does the firm require a monthly retainer, how are the fees calculated; it’s important to go into the transaction with all the information up front.
  5. Deliverables – asking about what deliverables should be expected, including the need for a Quality of Earnings report, deal-basis financial statements, and other customary items to be included in the dataroom or shared with a buyer.

Moreover, it’s wise to meet with your advisor before making a decision. If you feel comfortable with the individual and firm, you’ll know you’ve made the best choice. Do your research and ask other trusted professionals like your CPA for advice. In the end, you’ll be glad you did.

BWK’s integrated team of financial, tax, and strategy professionals provide national and global experience for every stage of the transaction lifecycle. We work across multiple disciplines and services to help navigate the complexities of M&A transactions. Contact us today for more information or to speak with a Transaction Advisory Services professional.