What should you look for when you pick an advisor for your deal team? Those with years of experience on both sides of M&A transactions agree that experience working with companies in your targeted size range and industries in critical.
Mark Miller is a former vice president at Huron Capital, a private equity firm focused on businesses with revenues up to $200 million.
“We use a variety of advisors,” says Miller. “I would say the common thread is that they have core expertise in middle market and lower middle market mergers and acquisitions. You have to have an advisor who has, first and foremost, the highest level of expertise working with companies that are in that size range.”
Beyond that, Miller stresses that it’s important for the deal team of an investment bank to have a thorough understanding of the portfolio company’s business model and deep experience in the industry. He looks for a banking advisor that comes to the table with similar experiences with companies that have similar business models, so they know how to position those businesses in the market place.
“The similarities between our portfolio company and the previous companies that those investment banks have worked with…that knowledge base is invaluable,” says Miller.
He also looks for advisors with a strong commitment to the deal, so he knows it is a high priority for senior members of their team. According to Miller, “We want a river guide who’s passionate about working with us.”
Jeremie Bacon points to industry experience as a key advisor trait as well, but he also focuses on relationships. He has 13 years of experience building SaaS companies and is the co-founder and CEO of Synap Software Labs.
“For me, I think the most important thing is the relationships those banks have with the acquiring companies. If, for instance, I know Microsoft’s a good acquirer for my business, I want to work with a banker who has done a bunch of transactions with Microsoft—someone who truly knows how they work there.”
Beyond experience with a particular company, Bacon looks for knowledge in a particular space.
“The last thing you want to do is spend your entire diligence process teaching your banker about your business and your industry and what you’re doing, and how you’re different. I think picking someone who’s got a very deep bench and deep specialized practice area focused on what you do is hugely important.”
When dealing with a large company, Bacon says the banker should not just know the people who are helping him from the M&A department. He says, “The banker should know the man or woman who’s running the business that should acquire my business. I think you’re more likely to have a successful transaction when you’ve got that level of depth of relationship that you can rely on.”
While expertise, experience and relationships are key drivers for those choosing advisors, Miller also looks for responsiveness.
“We would expect rapid, thoughtful responses to questions and requests that we as the private equity firm and deal team have for our advisors.”
Miller adds, “At the end of the day, these are important engagements and you’re going to get a response, but how rapid and how thoughtful are the responses? That can be the differentiator.”
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