M&A Insights – Mark Young, Managing Partner, CKS Advisors
Welcome to the April 2021 edition of M&A Insights. Our goal at CKS Advisors is to help you stay up to date on the Mergers and Acquisitions climate
Given our profession as M&A Advisors, it would be somewhat surprising if we did not profess the benefits a business owner receives when using a firm like ours to sell their business. But please do not just take our word for it.
Two recent independent studies make the case for us. A 2019 study titled “Does Hiring M&A Advisers Matter for Sellers?” by Anup Agrawal, Tommy Cooper, Qin Lian, and Qiming Wang, concluded that using an M&A Advisor results in positive impacts on selling prices – quantitative benefits.
Several notable findings from the study, which was conducted by reviewing 1,554 sales transacted over a 17-year period (1993-2010), were as follows:
- Sellers receive significantly higher prices when retaining an advisor. The study found the premium range to be 6% to 25%.
- Announced returns of buyers are significantly lower, by about 7%, in deals where sellers use M&A Advisors—indicating advisors increase the bargaining power of sellers.
- Overall, the study revealed that hiring an advisor to assist in selling their company allows business owners to find and negotiate better deals with better outcomes.
A second study, performed in 2016, titled “The Value of Middle Market Investment Bankers” by Michael B. McDonald IV, examined the qualitative benefits that M&A Advisors provide during the sales process. Based on data from a survey of 85 business owners who sold their companies between 2011 and 2016, the study asked business owners to rank several qualitative benefits on a scale from 1 to 5.
Overall, the study found that investment bankers add value in several qualitative areas. In fact, 100% of survey respondents agreed that retaining an advisor added moderate to significant value to the transaction process and contributed to a successful closing.
The areas in which business owners felt the advisors provided qualitative value included:
- Managing the M&A Process and Strategy
- Negotiating and Structuring the Transaction
- Providing Access to Qualified Buyers
- Adding Credibility to the Seller
- Enabling Management to Focus on Running a Company
- Educating and Coaching the Owner
- Preparing a Company for Sale
In conclusion, we offer these studies as independent confirmation that with each of these benefits crafted together in a professionally managed M&A process, a seller receives considerable value when they hire an Investment Banker to assist in selling their business.
If you would like to learn more about the M&A process, the M&A market in general, or are ready to take the next step to explore your options, we would be glad to meet. Please contact me at 480-351-8533 or myoung@cksadvisors.com.
This post is for informational purposes only and does not constitute an offer, invitation, solicitation, or recommendation to buy, sell, subscribe for, or issue any securities. While the information provided herein is believed to be accurate and reliable, CKS Advisors, LLC and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of CKS Advisors, LLC are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. CKS Advisors, LLC and Ashland Securities, LLC are separate and unaffiliated entities. Securities and Investment Banking Services are offered through Ashland Securities, LLC.
