The right business brokers or advisor can add significant value to an M&A transaction, but only if you take the time to hire the right one. These five interview questions can help ensure you have a great fit.
How does your firm structure payment?
You’ll likely get a pitch from several partners. But when it’s time to get to work, are you paying partner wages to get an associate or intern? Ask who gets paid for what, and get specific details about the compensation structure, too. In most cases, you’ll want to work with a few partners and a competent support team. A retainer coupled with a success fee ensures the firm is incentivized to sell the business, but only to the right buyer.
Do you have the right experience?
Experience in your niche is helpful, but not as important as having the right skill set for the deal. Most clients know to ask about relevant experience, but few focus on the skills the firm has for maximizing value. The firm you choose must have significant experience with the type of deal you plan to pursue and must be well-equipped to work with you to drive and create value.
Can you manage complex board dynamics?
A successful deal demands that your team be able to manage your side, not just the buyer’s. An advisor should be able to bring outside input and a different perspective on the deal. This makes it easier to wrangle boards and shareholders and to manage conflicts of opinion. Different views are often the product of different economic perspectives, so the team you choose should be economically savvy and able to justify their perspective. Ask how the advisor has managed conflicts in the past, then get references who can speak to this specific concern.
Can you provide examples of successful complex deals?
Higher value deals commonly rely on deferred payment structures such as earn-outs. This can add significant value, but can also be a source of significant conflict. The risks are difficult to overstate. Poorly structured deals create only stress and acrimony—not to mention potential litigation. Ask for experience managing these deals, and for references who can attest to the ultimate success of the deals. Understanding the thought process the team brings to the table when assembling such a deal can also prove helpful.
What will be the role of each team member?
Just as you want to ensure you’re getting what you pay for in terms of partner hours, you also need to get specific details about the senior attention your deal will command. In most cases, just three to four people drive the deal, even at large advisory firms. Ask for the firm to outline in specific detail each component of the transaction and the team members who will participate at each stage. Be wary if the firm promises only that a partner will “oversee” the deal since this oversight is often little more than signing off on someone else’s work. Once you have a list of who will be involved in the deal, interview each member of the team to ensure you can work well with them.