Choosing a buy-side M&A advisor requires deciding what skills and expertise you need to make your deal successful. Most M&A advisors focus on sourcing and structuring the deal, which is logical since most M&A advisors come from investment banking. However, if you want to make your deal successful, you should think about what other skills and expertise you need throughout the M&A deal cycle.
As the chart above illustrates, the M&A deal cycle requires significantly more skill than simply sourcing and structuring a deal. There are numerous areas where your company could utilize M&A expertise. Two examples will illustrate this point:
- An M&A target could show signs of significant integration problems. An advisor with skills limited to sourcing/structuring wouldn’t necessarily see these problems, nor are they incentivized to deal with these problems (they are only responsible to get the deal done).
- Your internal teams may have limited M&A experience and may not know what is expected of them or how to successfully complete their tasks. An advisor needs to recognize this problem, and have options to address the issue. Ideally, your M&A advisor would have sufficient experience to coach and guide the teams through the process.
These are just two examples of why you should expect your M&A advisor to have experience and expertise across the entire deal lifecycle. Even if you don’t need to hire the M&A advisor for the entire deal lifecycle, this integrated expertise will add significantly more value when you do need them.
When choosing an M&A advisor, you should utilize three basic questions to differentiate the advisors:
- What direct experience do they have in each phase of the deal lifecycle: strategy, integration, etc.?
- Does your advisor know what it takes to make a deal successful (not just getting the deal done)?
- How can the advisor help your teams execute better at their tasks?
These three basic questions should enable you to differentiate between M&A advisors so that you can decide who is in the best position to make your deal successful.
If you want to dig deeper during the interview process, the chart below illustrates how an M&A advisor can and should be an effective Deal Manager. The role of a Deal Manager is to guide a deal from the beginning to the point where the deal achieves its expected outcome. To be successful, there are general skills required from a Deal Manager as well as specific tasks assigned to the Deal Manager at each stage of the deal lifecycle.
The “General Skills” are key attributes and tasks that a Deal Manager should perform across the deal lifecycle. For example, with Collective Wisdom, the Deal Manager should understand why the deal is being done (stated objective), and should track its progress across the deal lifecycle. The accumulated collective wisdom from strategy, sourcing and due diligence will enable the Deal Manager to keep the teams focused on what it takes to be successful and to guide the deal towards successful conclusion.
The “Specific Tasks” are separate from the traditional M&A tasks (valuation, legal negotiations, etc.). These tasks help you identify risks, deal with problems and drive the deal towards success. For example, in the strategy phase, the Deal Manager should quickly identify the riskiness of the strategy and outline a plan for managing these risks during the deal lifecycle (for more information on the risk profiles with different M&A strategies, please see my other article, How Risky Is Your M&A Strategy?).
You can and should expect more from your buy-side M&A advisor. These advisors should have the skill to make your deal successful, not to simply get the deal done.