The Best Agency M&A Advisors – And How to Avoid Bad Ones

Who you hire to evaluate and sell your agency affects the outcome.  Who you may think of as a “top” M&A advisor may not be the best M&A advisor too.  Let’s talk about how to avoid the bad ones.

I’ve been in this world for nearly 20 years.  I’ve watched advisors come and go.  I’ve reviewed materials from a variety of advisors and firms.  I’ve heard stories of the good, the bad, and the ugly.  As the leader of a firm and a thought-leader, it’s my job to pay attention to who is doing what and to share the truth to help agency owners make sound decisions.

I posted an article on Linked In about who not to seek out when you want to understand what your agency is worth.  My advice included:

1. Ignoring online articles and valuation tools (too general and often call/click-bait).
2. Ignoring buyers and peers (too self-interested and of limited perspective).
3. Avoiding fee-based valuation consultants (make money doing something other than closing deals).
4. Ignoring parties inexperienced in agency M&A (don’t know the marketplace and what it takes to close a deal).

Shifting to the topic of selecting an M&A advisor or advisory firm, here are four considerations:

1) M&A Experience

How many transactions have they closed for firms like yours? 

Look at the completed transactions on their website.  Firms that don’t post their completed transactions online are trying to either hide the actual number of deals they have closed or hide what deals they have worked on so that you can’t do your own due diligence.  If the firm shows completed transactions, look up some of the agencies and gauge similarities.  Ask the advisor to tell you about clients they have represented that are like you and your agency.

What have past clients said about the firm or advisor? 

Many firms claim a high volume of transactions but have no or very few client testimonials.  Why is that?  We are talking about a transaction that for most people is the largest deal of their life.  If they were happy with the service, they would either give a testimonial or be willing to tell other owners their story.  Ask for client references.

Hire an advisor that has a successful track record of making clients like you happy.

2) Client Advocacy

Who is the advisor advocating for? 

This is a very important question.  It may be hard to ascertain but look at the advisor’s website and listen to them talk.  Indicators of conflicts of interest include:

• A high percentage of completed deals over a short time frame with the same buyer.
• Deals done where the firm advised buyers instead of a seller.
• Promotional materials of specific buyers, such as interviews.
• Enthusiastic promotion of specific buyers to you, a client or client prospect, verbally.

That behavior indicates a subconscious or financially-motivated bias.  Beware.

If an advisor is being paid by the buyer, including for other services, that’s a conflict. At best it’s unethical, at worst it’s illegal if they don’t disclose it to seller clients (see FINRA rules).  Numerous representatives of large acquirers have told me directly that certain M&A firms have quid pro quo requirements for doing business with them.  If you as buyer will pay them for due diligence consulting, then they as an M&A advisor will let you bid on deals they represent.

I’m drawing attention to this because I hear stories of competitors blocking buyers from their closed-market process and steering clients to specific buyers while pushing the client to roll more proceeds into the buyer’s equity than the client wants.  That’s advocating for a buyer.  Your advisor should have a fiduciary obligation to you as their client.

Hire an advisor that will 100% advocate for you with no conflict of interest.

3) M&A Processes

What is their go-to-market process? 

An advisor can have an open-market process (many buyers) or closed-market process (limited pool).  An open-market process is slower unless the advisor has a large contact database of potential buyers.  If they don’t have a large contact database, they will put out an ad and wait for inquiries – which prevents them from being able to create a competitive bidding process.

A closed-market process involves the advisor directly soliciting a pool of known buyers.  You will want to understand how many buyers the advisor will solicit, who, and why.  The answer should have more to do with you and your agency (i.e. finding the best fit and getting multiple offers from the highest bidders) than the advisor’s preference.  And the number of buyers in their process should be in excess of 10 to ensure you get market exposure and have a competitive bidding process (i.e. leverage).

In either process, the advisor should prepare a marketing deck about the agency that educates buyers on the history, operations, opportunities, financials, etc. with a clear and defendable pro forma.  It’s hard for buyers to present their highest and best offer if they don’t have a clear picture of the opportunity.

Who is involved in the process? 

It takes a lot of attention and a team to get a deal done the right way.  If the advisor works solo and has multiple clients, don’t expect much help from them through the process.  What you will experience under that scenario is what I call a throwing-spaghetti-against-the-wall approach – they’ll introduce you to buyers and disappear.  Professional M&A firms plug a team behind a client engagement, set timelines, hold regular meetings, and push the process forward.  The process runs like a well-oiled machine, and you’re never left wondering – what’s next?

Hire an advisor that runs a structured process with a support team.

4) Professionalism 

What applicable training does the advisor have?

The difference between a broker and a true advisor is that the latter is a trained professional.  It’s not hard to be a broker.  An M&A advisor though is trained in the nuances of M&A – industry terminology, finance and financial modeling, accounting and tax principals, contract and employment practices law, M&A processes, and even professional ethics.

Like with the insurance industry, many people working in M&A stumbled into the industry – followed a family member, were recruited by a firm, sold a business, etc.  All they know is what they’ve been exposed to or learned on-the-job.

A professional seeks education.  In the insurance industry, agents can get certified (e.g. CIC, CPCU, etc.).  The same is true in the field of M&A.  There are a variety of certifications in business valuation and M&A out there that elevates a broker to the role of advisor.

Hire a trained professional because you will get more bang for your buck.

The Bottom Line

As a business owner, you get one shot to sell your agency the right way.  Prepare for the process, do your due diligence on advisor options and hire experienced, trusted and professional representation.  You won’t regret it or find yourself wondering if you hired the wrong advisor.

Posted by:  Michael Mensch, Founder and CEO

Direct: (321) 255-1309

P.S.  I wrote this article for a reason and did not use AI.