M&A Advisors What is their role?

475,Correspondent,, | Wednesday May 5, 2021 00:00

It is also not uncommon for people to ask me “So what is it you actually do as an M&A Advisor?”

M&A stands for Mergers and Acquisitions. We generally classify our services into two categories, Sell Side Advisory Services and Buy Side Advisory Services. Put rather simply, we provide advice and assistance to clients, mostly individuals and companies, who are looking to either sell their businesses or shareholding in a business, or clients who are looking to buy a business or acquire an interest in a business. We are not stockbrokers or Financial Advisors. An M&A Advisor takes an active approach in guiding and assisting an individual or company to successfully complete the transaction. Sadly, we are often brought in when transactions and negotiations have already commenced and when clients find themselves in a tough spot and under pressure to conclude a transaction with doubts as to whether they are getting the best deal. Ultimately, anyone looking to sell or acquire a business or an interest in one, wants a certain level of peace of mind before they sign the dotted line.

Most of our mandates fall into the Sell Side category. Often our clients have worked numerous years and made many sacrifices to establish successful businesses and when it comes time to sell, they are unsure where to begin. This can be a daunting process for any shareholder, never-mind owner managed business. They are often approached by keen buyers who have noticed their success and want to leverage off this for their own investment return purposes. M&A Advisors also act for Liquidators, Business Rescue Managers, Private Equity Firms, etc. In this article, we focus on M&A Advisors who act for owner managed business and shareholders in private companies.

Let us go back to that question: “So what is it you actually do as an M&A Advisor?”. On Sell Side Advisory mandates, we basically work hand in hand with clients to gain an understanding of their business. Thereafter, we undertake an indicative valuation to obtain a sense of what a willing buyer would be prepared to offer for the business or the shareholding our client has in the business. Once we know this information or have a good sense of it, we are able to prepare and recommend sale strategies and identify potential interested buyers.

On behalf of our clients, we prepare the marketing documentation and approach potential interested parties on a confidential basis to assess their appetite. Depending on the sale strategy agreed with our client, we begin to provide additional information to interested parties to enable them to assess the transaction and solicit offers and negotiate the transaction. There is a lot more that goes on behind the scenes and each transaction is different and often requires a different approach.

Most sale processes take anywhere between four to six months, but we have been involved in a few which have taken up to 18 months to conclude. I was recently told that our services can be likened to “an insurance”. Something which I found not only flattering but also quite accurate. The key objective of an M&A Advisor is to complete a deal as quick as we can, for the best value and to provide our client deal certainty. Our clients still have their businesses to run on a day to day basis and do not have endless time to spend involved in the transaction. The M&A Advisors’ goal is to relieve the burden and stress of their client and management as much as possible whilst the transaction is in progress and during conclusion.

We all know that age old saying “fail to plan, plan to fail” and an M&A Advisor never likes a failed transaction. Our fees are mostly linked to transaction success and the success of most transactions underlies in the preparatory work undertaken prior to soliciting offers and in preparing the asset for sale. An M&A Advisor is responsible for ensuring the process is well managed and that their client gets the best deal possible given their circumstances and the market environment within which they operate. Before potential parties are even contacted, a clear sale strategy needs to be in place and agreed upon.

When looking for an M&A Advisor you should be looking at firms and individuals who have a wealth of experience of successfully completing transactions. They are not there to simply broker a deal and need to have a deep understanding of their client’s requirements.

What we do is not an exact science. We have professional qualifications but more than that we have hands on experience gained through completing various transactions. As professionals, M&A Advisors are required to act with the outmost integrity and in compliance with requisite legislation.  M&A Advisors must be able to quickly obtain an understanding of the business, what drives it value, to identify potential deal breakers and to negotiate transactions in the toughest circumstances.

Our network is also vital. Your M&A Advisor needs to be able to identify potential interested parties, both locally, regionally, and sometimes internationally. They should have sound knowledge of which other advisors are required in the transaction process to conclude a transaction and their roles and responsibilities.

 M&A Advisors should have good working relationships with other advisors. For example, lawyers are integral to the execution of a transaction. M&A Advisors work closely with them to negotiate the transaction’s commercial terms (i.e. price, payment terms, warranties and indemnities) which are included in the legal agreements and required to execute the transaction. Lawyers provide confidentiality agreements used by the M&A Advisors to protect the information shared with potential buyers. They also advise on matters where legal opinions may be required and assist in obtaining various consents and approvals required by law. By working closely with our clients’ lawyers, we are able to derive the best value for our clients and provide them the necessary legal and commercial protection.

Another common question we get asked is “How do you know you completed a successful deal?”. More often than not, my answer is that “both parties walked away a little unhappy”. You may ask how does that make sense, surely you want a happy client? Well it means that both parties have compromised enough that the deal was fair to both and neither have given up too much that the deal could not be concluded and was worth their while. The process of negotiation is not always straightforward, it can be difficult, but a seasoned M&A Advisor will be confident in their negotiation strategy, approach and skills.

If you are ever considering disposing of your business or a shareholding in a business, I would strongly advise you to “obtain insurance” early on and consider appointing an M&A Advisor.

Look for one that has passion, has a successful track record of completing transactions, is professional, has professional qualifications in the financial sector, has a good business understanding and acumen, operates at the highest levels of integrity and can negotiate the terms which are important to you. When you are in the deep end it is tough for M&A Advisors to re-negotiate terms which you may have accepted or implied you are agreeable to. You increase the chances of completing a successful transaction or resolving a dispute with the help of an M&A Advisor.

We have not dealt with Buy Side Advisory Services in this article.

If you would like to know about what this entail, please reach out to us via our website. Contact us via email enquiries@merero.co.bw for more information on our AML/CFT training and consultancy services in Botswana.

MICHAELA POWELL-REES*

*Michaela is an experienced M&A Advisor. She has completed a variety of transactions locally and regionally and has been involved in some of Botswana’s largest deals. She has trained over 200 M&A Professionals across Africa, Europe and the Middle East.