How to build the best exit team (& what it will cost)
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The document provides insights on building an effective exit team for mergers and acquisitions (M&A), emphasizing the importance of an M&A advisor and their varying quality levels. It outlines the criteria for selecting an M&A advisor, including their success rates, fees, and the distinctions between different types of transactions. Additionally, it discusses the potential costs involved in legal and accounting services during the M&A process.
How to build the best exit team (& what it will cost)
- 1. MODERATOR Dr. Basil Peters, CEO, Strategic Exits Corp and Author of: “Selecting Your M&A Advisor” and “Early Exits” PANEL Darin Brock, Business Development, TorQuest Partners Inc. Ed Giacomelli, Managing Director, Crosbie & Company Inc. Bruno Suppa, Partner, Financial Advisory Services, BDO Canada LLP Randy Williamson, Partner, Aird & Berlis LLP HOW TO BUILD THE BEST EXIT TEAM (& WHAT IT WILL COST)
- 2. OUTLINE • Introductions • Building the Ideal Exit Team • Terminology • M&A Advisor Success Rate • Selecting Your M&A Advisor • What the Team will Cost • Resources
- 3. THE IDEAL EXIT TEAM • The single most controllable factor in determining whether a saleable company will actually be sold is the capability of the exit team • Who are the ideal members of an exit team?
- 4. WHAT IS AN M&A ADVISOR? • Is that the same thing as an Investment Banker? • How is that different from a Business Broker? • What do M&A Advisors do and why do you need one?
- 5. M&A ADVISOR QUALITY • With almost every service, there are varying quality levels available. • For M&A advisory engagements, what’s the difference between: 1. Gold (premium) 2. Silver (mid-range) 3. Bronze (economy) • Service levels?
- 6. TYPES OF M&A TRANSACTIONS • What is a fully marketed transaction? • What is an unsolicited offer? • What are the differences?
- 7. M&A ADVISOR SUCCESS RATE • One of the secrets of the M&A business is that paid M&A professionals very often fail to complete a transaction • There are no statistics available on this and the professionals almost never talk about it • After a company engages an M&A advisor, what are the probabilities they will actually end up completing the sale?
- 8. M&A ADVISOR SELECTION CRITERIA • Reputation for transaction completion rate • Reputation for getting exceptional price and terms • Reputation for being a good 'bad guy' • Chemistry and experience with seller psychology • Geographic proximity • Post transaction service (warranty work) • Domain expertise • Fees
- 9. M&A ADVISORY FEES • For a “fully marketed” global search – researching 50 to 250 companies • And a “Gold” quality service • Work fees usually $50,000 regardless of the company size (less if not busy) • Success fee, including the work fee, from: o 8 to 10% for sales under $5 million o 5 to 8% for sales from $10 to 30 million o 2 to 4% in the $100 million range
- 10. SUCCESS FEES VS QUALITY AND SCOPE FOR A $20 TO 30 MILLION TRANSACTION Service Level Fully Marketed Global Search Limited to 3 or 4 Buyers Gold 7% 3.5% Silver 5% 2.5% Bronze 3.5% 1.75% Reference: http://www.exits.com/blog/ma-advisor-fees-selling-business/
- 11. PRICE RECEIVED AND M&A ADVISOR FEES -50% 0% 50% Low Average High PriceandFeeDifferences* M&A Advisor Quality Additional Cash to Shareholders Reduced Cash *Estimated Ranges Price Received Fees Paid
- 12. LEGAL AND ACCOUNTING FEES • Legal and accounting fees vary widely depending on the complexity, not the size • For a simple, clean transaction legals might only be $25,000 • But for a complex deal can easily be $1 million or more • Accounting costs can be a few thousand to over $100,000 if audits haven’t been done