The M&A Advisor.

The M&A advisor landscape in Australia is split into 4 tiers based primarily on the size of the transaction.

    1. Business Brokers – specialise in under $2m businesses and land rich businesses (Hotels, Caravan Parks etc).  The buyers for these businesses are overwhelmingly individuals.  the reasons for this are:
      1. The nature of these types of businesses lends itself to an owner operator as the margins are normally not enough for professional managers, and
      2. When a company buys a business there is a large fixed cost of due diligence and of integration of the two businesses.  Much of this cost is similar regardless of the size of the business.  Therefore, it is more cost effective for a large business to focus on a business that will give a significant boost to the bottom line.  This is unlikely to be a sub $2m business.

      Each broker takes a different approach to selling these types of businesses.  A low priced broker will simply list your business for sale and will not undertake any marketing nor often help with the sale negotiations.  A full service broker will prepare marketing documentation, market the business and assist with the sale process.

      There are specialist brokers who focus on specific industries such as pharmaceutical, financial planners and Hotels and Motals.
      As the broker is marketing the business to individuals the business will likely be advertised on a number of business for sale websites and often in specialist industry websites.

    2. Micro M&A Firms, such as Copperstone Capital, will handle your sale of businesses ranging from $2m up to about $50m.  The buyers for these types of firms are larger Corporate firms and sometimes Private Equity firms.  The process the micro M&A firms will employ include:
      1. Assistance with the strategy of the company to prepare the company for sale.
      2. Preparing the marketing material which is normally quite detailed,
      3. Identify potential buyers
      4. Identify and run an appropriate marketing strategy,
      5. Assist with the sale negotiations
      6. Manage the due diligence process
      7. Liaise with other advisors

      The micro M&A firms will only run a few transactions a year.  As the value of the business is smaller than the boutique M&A firms, the fees received are less.  To prosper, the micro M&A firms do not have the larger overheads of the boutiques.  These micro firms normally run with 1-2 key principals, but they bring a level of expertise that can be similar to the larger firms.

    3. Boutique M&A Firms and Larger Accounting Practices,.  These firms focus on the $50m to $500m deals, although some of the boutiques have the capability to do multi-billion dollar deals.  These firms will typically do quite a lot of financial modelling of the proposed transaction.  They have extensive networks of M&A professionals at the larger Corporates and the key Private Equity firms.  the transactions they do often involve cross border deals and will likely require significant tax and corporate restructuring elements.
    4. Investment Banks, are the behemoths of the industry, employing hundreds of staff. These firms handle the deals from $500m upwards, although in tough times they will chase smaller deals.  A key function of the Investment Banks role is to also help structure the deal which may involve raising debt, equity or a combination hybrid.  The Investment Banks are very active in approaching Corporates with a pitch to drum up business.

Legal Advisors

The lawyers are primarily involved in two tasks:

  1. To prepare and negotiate the sale contract(s)
  2. To conduct legal due diligence.  This will normally involve a review of amongst other things, IP rights, Employment contracts, supplier and customer contracts, leases and any legal disputes.

Often a lawyer who is not skilled in M&A will derail a deal by being too black letter law.  A good M&A advisor knows how to work with a lawyer to close the deal.

Accountants

The accountants have a more peripheral role but probably a bigger role.  They will be involved in much of the due diligence.  They will also typically sign off the financial num,bers used in any forecasts or projections provided during the sale process.  A good M&A accountant will be responsive and detailed in their responses.