Choosing an M&A advisory firm

Choosing an M&A advisory firm – An advisor checklist

Selecting an advisor for an event as significant as a business sale can often be a difficult decision. To assist in the process, we’ve put together a suggested checklist to adopt when conducting your ‘due diligence’ on an M&A advisor, based on some of the key questions we get asked routinely. Divest Merge Acquire’s credentials are included as a benchmark for comparison.

M&A REFERRAL CHECKLIST:

1. Experience
Does the firm have a record of successful transactions of comparable size?

  • Divest Merge Acquire has provided advice on clients’ businesses totalling more than $550M.
  • Most of Divest Merge Acquire’s transactions are in the $1-$50M+ range and the average transaction value is around $5-10M.
  • Divest Merge Acquire is regularly appointed by private equity groups, local and overseas listed companies looking for acquisition targets in specific industries.
2. Credibility
Are the key advisors suitably qualified and experienced?
  • Divest Merge Acquire’s team of advisors consists of Chartered Accountants and expert Industry Professionals with a wealth of experience in corporate advisory, business management and transactions.
  • Our advisors are complemented by an experienced, capable team responsible for the distribution of client marketing material and screening of initial responses.

3. Management
Will the advisors personally oversee the project?

  • At least two of Divest Merge Acquire’s advisors are involved with each project, ensuring personal attention and backup.

4. Confidentiality
Does the firm understand and respect client confidentiality?

  • Divest Merge Acquire manages transactions under strict confidentiality, with the utmost discretion and sensitivity in marketing and negotiations to minimise risk and disruption to the business.
  • Prospective purchasers (or buyers) are thoroughly qualified through a strict process. Before a clients identity is released, an investor registration form is completed along with a Confidentiality Agreement. Our team then research each respondent and prepare a summary report for our clients review and approval. If approved, the clients identity is released and an Information Memorandum is provided. These precautions minimise the risk to the business.

5. Regulatory
Does the firm hold the appropriate licences?

  • Divest Merge Acquire holds an Australian Financial Services Licence (AFSL). This confirms Divest Merge Acquire’s status as a quality service provider and underlines its commitment to deliver the highest possible standard of advice and service.
  • Divest Merge Acquire’s Member Firms are either authorised representatives or hold equivalent licences appropriate to their home State.

6. Marketing Resources
Where does the firm source most purchasers from?

  • Divest Merge Acquire’s database covers all organisations in Australia with more than 10 employees, and corporate, private and international investors, stratified by Industry SIC codes. This allows us to readily identify and target prospective purchasers among key industry groups and demographics. More than $3 million has been invested in this asset alone. It is understood to be one of the best sources of business intelligence available and is a key point of difference.
  • More than 80% of purchasers are either already on Divest Merge Acquire’s database or referred by those who are, including accountants, former clients, lawyers and financiers. The remaining purchasers come primarily from Divest Merge Acquire’s and other websites.

7. Presentation
Will the firm professionally present the business opportunity?

  • DMA prepares a sophisticated and comprehensive Information Memorandum (IM). This is a pivotal element to marketing a business, as it is designed to provide purchasers and their advisors with sufficient information to make an initial assessment, as well as build their confidence to proceed with the acquisition.
  • As part of the process, we analyse our client’s business for its strengths and potential, and make recommendations on any aspects which could be improved to maximise the perceived value of the business to interested parties.
  • The IM requires the client’s written approval prior to release.
  • The IM is issued to prospective purchasers only after they have signed a Confidentiality Agreement, completed an Investor Registration and have been approved by our client.

8. Communication
How well does the firm communicate with clients?

  • Divest Merge Acquire provides high-level communication and advice throughout the sale process so clients can make informed decisions.
  • Divest Merge Acquire’s fast acting and highly responsive communication with clients and their other advisors ensures a smooth process to completion.
  • Divest Merge Acquire maintains documentation of key events regarding the sale.
  • We provide regular written and verbal reports of activity and progress, including details and status of every prospective purchaser.

9. Cooperation

Can they work with us and other professional advisors?

  • Divest Merge Acquire’s advisors are professionally qualified and work seamlessly with clients’ other advisors
10. Preliminary Valuation
Will the firm provide an indication of expected market valuation before the client commits?

  • Divest Merge Acquire prefers to provide an indicative valuation of each business before a client commits to proceed to market.
Easy to find out more?
  • Divest Merge Acquire can provide a Divestment Proposal containing information to assist prospective clients understand more about the process.
  • Divest Merge Acquire’s advisors are willing to meet both prospective clients and their advisors to discuss the process or specifics of their business.

Can a clients accountants/lawyers or other advisors become involved in the process?

  • Divest Merge Acquire offers a range of partnering options as an opportunity to become more involved in the sale or acquisition process, or in preparing your clients’ businesses for sale. Checkout the ‘partnering options’ page on our website.

11. Process to Completion
Does the firm manage the full process to completion?

Divest Merge Acquire manages the entire process, from start to completion.

  • Qualifying Prospective Purchasers
    • We qualify prospective purchasers to minimise risk and lost time. We assess their ability to complete the acquisition and consult clients on a regular basis.
  • Questions
    • We coordinate the question and answer process to maintain protocols, confidentiality, accuracy and documentation, as well as provide feedback and advice.
  • Inspections
    • We coordinate and attend inspections and other meetings and make recommendations.
  • Expressions of Interest are evaluated as follows:
    • Assessment and ranking of offers
  • Finance sourcing
  • Assess the ability of interested parties to complete the transaction
  • Strategic fit
  • Negotiation and Completion
    • Capitalise on competitive tension
  • Focus on value drivers to improve price negotiations
  • Liaison with legal and accounting advisors
  • Assistance throughout the Due Diligence process
  • Assistance with warranties, indemnities and guarantees
  • Assistance with Letter of Intent or Heads of Agreement as appropriate
  • Due Diligence
    • Co-ordinate and facilitate the due diligence process
  • Setup and management of in-house online datarooms
  • Contract
    • Where appropriate, provide the lawyer with a pro-forma Contract of Sale to save time and cost.
  • Negotiate the commercial aspects of the contract of sale.

Please feel welcome to add your comments and/or share with your colleagues.

Posted in Choosing an Advisor.