The Best Way To Sell A Larger Business, A Corporate Entity, An Enterprise, A Mid-Market Business

The World's Most Comprehensive Guide To Selling Corporate Businesses

For the mid-sized business with turnover of £5m and above, selling the business is a very, very different affair to selling a small business like a corner shop or cafe. Unfortunately, much of the information online, on the topic of selling mid-market businesses, is fluff, misleading or surface skimming. Here we dive into the depths of selling larger businesses.  

This article was written by Clinton Lee, a consultant to UK mid-market firms, from his 40 years of experience in business and thousands of real life experiences advising, specifically, middle market businesses.

What is a middle market (mid-market, mid-cap, mid-size or corporate) enterprise? 

There's no one definition but these are considered to be larger businesses with many employees and a sizeable revenue.

As a general rule of thumb, any business with under £5m in turnover is not a middle market firm. In fact, many professionals in M&A wouldn't consider a business with less than £1m in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) a mid-market firm. At the upper end of the middle market, various parties consider the cut off anywhere between £50m and £500m in turnover and / or EV (Enterprise Value).

There are hundreds of M&A firms in the UK who take on larger clients. Out of the 40 or so topmost firms - like Houlihan Lokey, Lazards, Rothschild, Zaoui & Co, Alexa Capital (energy) and Qatalyst (tech) - most turn away, as too small, any client with an EV of £500m (yes, £500 million) though some like Moelis and GP Bullhound will go as "low" as £100 million! Leaving out top firms, there are hundreds of other players for mid-market enterprises, not all of them suitable to all clients. More later.

This article is in two parts:

Differences with selling a larger, mid-market business compared with a micro business
and
How to sell mid market businesses for the best price

Differences with selling mid-market businesses

Professionals needed for the transaction are different, the method of selling is different, even the terminology is very different. So, in this section:

The language and terms used is different for mid-market firms

Professionals involved in selling corporates / enterprises are different

Time scales are different with selling mid-cap businesses

Fees and fee structures are more complex in the middle market

The process of selling larger enterprises is unlike the process of selling smaller entities

The type of deals available to middle market organisations is different

Success rates are different with mid-cap businesses going to market

Terminology matters when selling larger businesses

Micro-businesses are sold. Business brokers, the ones who typically handle micro-businesses, put them up for sale on various marketplaces. Sometimes they offer the business as a bolt-on.

Mid-sized firms are not 'sold'. Instead, they are open to discussing strategic options because the board are considering a disposal or dilution. Shareholders get involved in an exit, an equity event, a majority re-capitalisation, a hive-off, a spin-off, an IPO (initial public offering) or some other equity transaction or asset sale (as in, for example, the disposal of a non-core division).

Mid-cap businesses are not listed for sale, but they may be seeking strategic partners. They don't have a business broker selling the business, they have a transaction advisory or deal advisory or corporate finance firm playing a lead advisory role and advising them through the process and managing the opportunity (in effect, yes, the advisory firm is 'selling' the business).
Middle capital businesses don't have an asking price, they invite expressions of interest.

Acquirers in this market are not looking for a business to buy. They appoint professionals, or they build in-house teams, to work on deal origination / deal sourcing to find them the right targets.

Micro-businesses going to market are looking for the best price. Mid-sized corporates and enterprises, on the other hand, are looking for the best deal and deal structure. Advisories don't negotiate price for their client, they seek consensus on deal terms (which includes price, of course).

High level financial expertise is not required to sell the micro-business. With mid-market businesses, detailed understanding of financial metrics, financial projections, budgets, complex spreadsheets etc., is a must as is with calculations of DCF (Discounted Cash Flow), working capital requirements (and 'excess' working capital), EV (Enterprise Value), EV to Equity bridges, financial ratios, completion accounts vs closed box accounts and much more.

Language matters! Acquirers, at least the big ones, immediately recognise if there is no transaction professional involved and they can exploit this in many sophisticated ways.

The people involved are different

While smaller businesses are sold by business brokers and business transfer agents, it's more complex with mid-sized firms.

Most business brokers would like to take them on, and some have self-titled 'corporate divisions' purportedly catering for this market, but most mid-market firms are not sold by the likes of business brokers.

A business worth, say, £10m, will almost never end up with a broker quite simply because brokers tend to not have the expertise or reach to handle the transaction. Acquirers can and will be swayed by the name / brand of the advisory behind the opportunity.

It's rare that the directors of a larger firm don't instruct proper transaction advisory / corporate finance professionals to handle the 'sale'.

Transactions for mid-cap businesses are handled by / assisted by what are broadly called  'advisory' firms. In various locations, the reader will find these intermediaries claiming to be corporate finance firms, equity advisers, transaction advisory firms, boutique investment banks, deal advisers, Rule 3 advisors, capital market advisories or equity capital market (ECM) advisories, M&A firms, corporate advisory boutiques, equity and debt capital market advisories, strategy solution providers, shareholder advisories and other transaction advisory firms!

More about all these professionals, and who does what, at this link. They are collectively referred to as advisory firms / advisories in this article but there is another umbrella term for them: intermediaries.

These firms will claim to provide advice on strategic partnerships, restructurings, spin-offs, re-capitalisations, divestitures, joint ventures, fairness opinions, mergers & acquisitions, demergers, IPOs and confidentially marketed public offerings, equity-linked capital raising (convertible bond and convertible preferred offerings), ATM shelf offerings and all kinds of other transactions including nondilutive solutions. They don't 'sell' no businesses. At least that's never what they claim to do!

The sale of small businesses is sometimes handled by accountants. With enterprises, it's not just accountancy knowledge that's required, but corporate finance and other expertise as well. Advisory firms are usually regulated by the FCA, the ICAEW and others (unlike business brokers who are not regulated by any industry or professional body).

They are also conversant with anti-competition law in the UK and usually, given that many larger deals are cross-border transactions, are familiar with the EU Directive 2005/56/EC on cross-border deals and EU anti-competition law (mergers and the Economic Concentration Regulation 139/2004) in addition to a lot of other laws and regulations around merger, acquisition and take over transactions.

An in-depth understanding of the tax implications of various deals and deals structures is also critical. A disposal event presents a complex tax situation involving dividends (drawing out surplus cash in the company's bank account), corporation tax, CGT and other taxes against various reliefs - Entrepreneurs' Relief (later called Business Asset Disposal Relief) for individuals, Roll Over Relief and Substantial Shareholding Exemptions for holding companies, and others.

These firms would also need to be conversant with tax law [[like section 138(1) Taxation of Chargeable Gains Act 1992 on share transfers and reconstruction on transfers (section 139(5) TCGA 1992)]]. If there are securities involved,  section 748 of the Corporation Tax Act 2010 and section 701 of Income Tax Act also come into play. There's often also a need to apply for and obtain advance HMRC clearance for CGT purposes.

All of this is specialist knowledge and usually outside of what the accountants of the business can provide (unless they are one of the larger practices with a corporate finance division).

'Buyers' are different, too. Small businesses are acquired by other small businesses, retired managers who have a bit of capital, couples seeking 'lifestyle' businesses, bored housewives, all sorts. Buyers tend to live local to the business (a buyer typically wouldn't move his family across the country to take over the running and managing of a business worth £50K).

Mid-market businesses are targets for PE (private equity) firms, family offices, HNWI (High Net Worth Individuals), UHNWI (Ultra HNWI), other large corporate entities and international conglomerates. These deals are often driven by acquirers in a different city and, often, a different country; a large percentage of these transactions are cross-border deals. Acquirers here also tend to be armed to the teeth with professional advisers, sharp M&A players and vendors need to be similarly represented to even the playing field.

Additional Services for mid-market firms

There are various additional services available for mid-market firms, services that are not used by, and not generally available to, smaller businesses.

Vendor due diligence is an example. A business with an EV (Enterprise Value) of several tens of millions of pounds may get advised by their lead advisory to appoint an arm's length firm to do vendor DD. Such due diligence report would be provided to potential acquirers to give them confidence in the quality of the business from the get-go.The third party so appointed would generally be a corporate finance firm with extensive experience in the client's sector.

On occasion, a Rule 3 advisor may be required (Rule 3.1 of the City Code on Takeovers and Mergers). Such independent advice would be required in, for example, MBO situations. For mid-cap businesses considering an IPO, there are NOMADs (Nominated Advisers) and others.

There is of, course, my own service assisting boards of mid-cap enterprises with finding the right advisory firms. Unfortunately, there is no such equivalent in the lower market. Smaller businesses are left to their own devices when it comes to 'finding a business broker'.

Timescales are different

Small businesses can often complete a sale within a few days of agreeing terms. With mid-market firms, it usually takes several months from agreeing terms to completion.

Due diligence (DD) for mid-cap firms is typically not conducted by the acquirer but by external professionals - their own buy-side advisory (or corporate finance firm), M&A lawyers and others. The process is more time-consuming as there's a lot more to check and verify. It is a very, very intrusive and in-depth process, a very frustrating process for most vendors, and it can take months more than originally anticipated.

Further, the acquirers themselves operate differently to buyers of small businesses. There's not one person taking decisions - there are whole deal teams, committees and other parties involved in even minor decisions which deliberations then get sent up the chain for supervisors to write off before being passed to directors for their approval. Key individuals are sometimes on holiday, there's the odd dissenter (those who feel the deal threatens their own job or power within the organisation) and complications from third parties (insurers, bankers / lenders, other vested interests) that delay deals.

Within the acquirer's business, the terms of the deal, the nitty-gritty, need to be signed off by HR (concerned about what the new employees will do to their diversity and inclusion targets, their salary structures, their rewards and incentives, what not), IT (concerned about integration of the target's tech, email platforms, what not), ESG team (who obsess about everything), in-house legals, accountancy and finance teams and numerous others.

It takes talented deal professionals (advisories / intermediaries) on the 'sell-side', with immense patience, to deal with acquirers and keep the deal on track to completion.

Even then, the stats show that 70% of deals collapse during due-diligence ie. after high-level agreement of terms between both sides! This is one reason why M&A deal professionals always generate multiple potential acquirers - they need backups for when the first party pulls out. The saying in the industry is that having one buyer is like having no buyers. Multiple buyers are also required for the advisory firm to build competitive tension.

While on the topic of timescales, there's another pertinent industry maxim: Time kills all deals.

It's the sell-side advisor's job to manage the process and avoid drag. This often involves chivvying not just the acquirers but also their own clients, the vendors, to provide answers, analyses, data, contracts, financials and whatever else is required during the course of the transaction.

Mid-market firms are charged differently when they are being sold

Smaller firms tend to pay a retainer of a few hundred pounds to a couple of thousand to a business broker or business transfer agent. When (IF) the business sells, they pay a success fee of anywhere from 5% to 15% of the sale price.

Middle market firms tend to go to different professionals, as described previously, not business brokers. The 'advisory firms' taking on mid-market mandates are firms with highly qualified accountants, corporate finance and other professionals. It is not unusual for them to have in-house tax experts, lawyers, qualified valuers and all manner of other talents. They therefore charge a much higher retainer, or sign-on fee, for all the additional background work and advice that goes into these transaction. Their retainer can be anywhere from a few thousand pounds to £100K+.

In addition to the retainer (sometimes payable in instalments), there are often milestone payments and the inevitable 'success fee' on the completion of the transaction. The success fee is a lot lower than what business brokers charge, coming in at approx 2% to 3% of the headline price (and sometimes under 1% for the larger firms - firms selling for, say, £50m+). Success fees are not always straight percentages. Lehman, Double Lehman and Reverse Lehman are scales used in the calculation of success fees, as are (bespoke and negotiated) ratchets where the advisory firm gets an excess reward for beating price expectations. These are not all the fees. There could be disbursements, warrants and other complications.

Fees and fee structures in the M&A industry can be quite involved. A detailed analysis is beyond the scope of this article, but both fees and fee structures in the mid-market are covered in-depth in our free download: White paper on fees and fee structures when selling a mid-market business (pdf).

Processes are different when selling mid-market businesses

The type of deals are different for a mid-market business

Small businesses sell their shares or their assets. That's it. The deals are rarely more complex than that. There may be some deferred payments, an earn-out, some external finance etc., but the deals are far less involved.

Mid-market firms, too, have the share or asset sale option, but there are many others. They may have a management team capable of an MBO (management buy-out) and may want to test the market for external offers to determine a fair price at which to execute the MBO.

There are also MBIs (Management Buy-Ins), BIMBOs (Buy-in Management Buy Out, where an external management team buys out current management), mergers and other options.

The enterprise might also be suited to an EOT (Employee Ownership Trust) with all the EOT tax advantages for shareholders (less so after the 2025 budget but still advantageous). An EOT is more complex, involves the setting up of a trust, getting HMRC's approval on the valuation and much more. So, it's more expensive, but there's a 50% concession (November 2025 budget) on Capital Gains Tax for the shareholders (subject to conditions) and may even be a way to take some of the spare cash out without paying dividend tax on it.

There are other options and, with larger enterprises, there may be even further options such as an IPO (Initial Public Offering).

Success rates are different

Most micro businesses going to market fail to sell, and that's over 90% of them!

It's hard to exaggerate how undesirable most small businesses are to business buyers. This is why business brokers don't spend a great deal of time on any individual client business. The probability of sale is low.

With mid-market firms, the probability of sale is higher, much higher, but only when represented by the right kind of advisory firm and one that is willing and able to put in the extensive effort required to get a deal over the line.

Success rates in the mid-market can be 80% or more, it's difficult to calculate success rate with any degree of precision, and not all rates quoted by advisory firms are calculated using the same calculation methodology (and so cannot be directly compared).

That said, success rates are higher in the mid-market for two reasons:

1. These firms are serious players with qualified accountants, corporate finance experts and M&A professionals. They know what they're doing. Further, they do take a hefty retainer so are covered, in part, for the foot work and hard slog that is required in the early stages.
   
   
2. Advisory firms / intermediaries are a lot more selective than business brokers with what they take on. As professionals, and professionals registered with various regulatory bodies like the ICAEW and FCA, they are cautious about what instructions they accept. They carefully vet every client before accepting a mandate and usually collect information from a client and have an internal meeting of top management to decide whether to accept the mandate. Many of these firms turn down far more clients than they accept! Being highly selective, and choosing just the cream of the crop, also does mean they have a higher probability of successfully executing the few disposal mandates that they do take on.
   
   

10 Steps To Sell A Mid-Market Business For The Best Price

Most mid-market firms considering an equity event are doing so because they don't have a succession plan such as the children of the owners taking over the business. So a transition to new owners becomes the obvious route to the shareholders retiring or crystallisation the value they've built in the business.

The owners are likely canny and experienced hands at business but have never (or rarely) been involved in a transaction of this nature, nor with hiring the right expertise to assist in a business disposal / capital raising. This section intends to give them a bird's eye view of the actions they need to take to ensure they extract maximum value.

1. How to prepare for sale;
2. What questions need to be decided internally;
3. Ensuring no major changes to the business;
4. Engaging the right advice and assistance to 'sell the business';
5. Using the advisory service;
6. Taking and implementing advice to prep the business for market; 
7. Ensuring business performance doesn't suffer and that targets are met;
8. Maintaining confidentiality right from the start;
9. Being flexible with deal terms and
10. Using other professionals where needed.
     
    

1. Before firing the starting pistol

Business owners need to know their objectives and be clear in what they want before starting on the process of selling mid-market businesses.

Their first response is often around money - 'we want the highest price'. However, the underlying objectives can be varied and include fear of bad health impacting on their ability to run the business, exhaustion and burn-out, upcoming regulatory changes, desire to retire / freedom from responsibility, lack of ability to grow the business and many more.

Also, the concessions they'd need to make to get 'the highest price', such as the price being paid over a long period of deferred payments, may not be acceptable. Similarly, it may not be palatable to them to tie themselves down by committing to run the business for several years post-sale (though this can push the headline 'price' up).

Identifying drivers and motivations at the start helps determine whether a "bite of the apple" approach - selling a percentage of the business to, for example, a private equity firm - is the best option. Or whether an EOT or MBO offers an exit more aligned with the owners' goals. If there's a pressing personal financial matter, and there's shareholders' need for liquidity in their personal lives, it may even be possible to restructure the business without losing any equity.

Tip: It helps to get shareholder consensus on the plans and goals before starting the process. A written agreement is preferable as often times transactions are disrupted because of internal dissent. If shareholders don't present a unified front, acquirers will hone in on this and take advantage.

Shareholders / directors may want to also discuss a budget for the attempt at market. The process is an expensive one, both in money and in time spent by management. Professional fees, at least part of them, need to be paid upfront with no guarantee of an eventual transaction down the road. Businesses would ideally need to appoint one internal 'deal manager' to liaise with the firm assisting with the sale; that firm will take a lot of the load but there's still a fair bit of time involved. The internal 'deal manager' would need to be someone senior enough to have extensive access to information and accounts.

My advice is to never start with a 'valuation'. While having some idea of what the business is likely to attract may seem like a good basis for a decision on when to sell, it's usually not. Valuations done by anyone the vendor appoints are worthless. No buyer is going to use them; they are going to value the business themselves and the figure they arrive at will depend on many variables that the vendor's 'valuer' would not have taken into consideration, including what turns up in DD, the vendor's appetite for deferred payments, the acquirer's own motivations, the synergies they see between their business and the target ...and a lot more.

Sure, it's worth getting a rough idea from advisory firms interviewed through the process but it's worth not laying too much store on the valuation any of them provide. If there's a wide variation in valuations, it's likely that the higher valuations have been artificially inflated in order to land the client.

2. Ask and answer the main questions internally

Some suggestions:

What is the minimum price we'd accept if it were an all-cash offer with a short handover period?
It's unlikely the deal will be an all cash deal but the question's a proxy for 'what is the lowest price we'd accept?'.

Are we looking for a financial buyer or a strategic buyer?
Strategic buyers will derive synergy and can therefore justify a higher price. They are more difficult to find and, often, more difficult to take to the finish line. Financial buyers are easier to find but they may demand that current owner/managers continue in post for several years.

What is our time-frame to sale?
Looking to sell as quickly as possible will mean settling for a lower price. A longer term plan, including one where the business works with an advisory firm to make some improvements, is likely to deliver better results for shareholders. There are always improvements that can be made to the attractiveness of the business, for market, as what buyers want is often different to what vendors think they want.

Do we have key players who are leaving?
If existing shareholders play a key role in the business, that depresses price as buyers will view the business as not likely to perform as well after their departure.

Would key players be willing to sign longer term employment / consultancy contracts with a buyer?
If they are, this improves the probability of sale and could influence price, but some of the value may be deferred contingent on the performance of the business post-sale.

Once professionals are appointed to assist with the transaction, they'll have other good questions more specific to the business and to the situation on the ground.

3. Don't make any major changes (just yet)

A mistake many boards make is implementing big structural, operational or personnel changes before speaking with an M&A professional. They assume that taking on another director, or creating a holding company or creating a new hi-level role and hiring someone to fill it, or signing on a big client on a 2-3 year contract will have a positive impact on the price they get for the business when they go to market.

It's usually does not!

After involvement in, literally, thousands of cases, my advice to clients is to never, never make any major change prior to speaking with their retained advisory firm. Many of these 'improvements' end up actually damaging value, as contrary as that may sound. In some cases, it makes the business unsell-able for at least a year or two while the change plays out and the business's performance, post-change, can be properly demonstrated.

In fact, if the draft accounts for the last financial year are ready for filing, it would be a good idea to hold off on filing and show the accounts to the advisory firm, and take their advice on tweaks to those accounts, before formally filing the accounts at Companies House. Advisory firms, as it says on the tin, provide advice. They are highly qualified people. It pays to use them to the maximum extent possible for all advice in relation to the transaction.

4. Engage the right mid-market M&A intermediary / advisory

A well known personality in the marketing world in the UK built a successful marketing business from scratch. He sold his business for £8 million in 2018 and was very proud for having managed to do it without an external adviser. After all, as he posted all over social media, he was an expert in marketing (and a pretty smart cookie by all accounts) so selling the business was a breeze for him. He dined out on this story for a few months till the acquirer of his business resold the business, that very same year, for £24 million!

Did the acquirer add £16 million of value in a few months? Unlikely. The marketer who sold his own business ended up with egg on his face as he, very obviously, had screwed up and not extracted the full value in the business. To save his blushes, his name is not published here but it is available on request.

There is nothing so critical to the successful extraction of value in a middle market business than having the right advisory firm handling the process. This is one piece of advice that's constant across all articles advising on mid-market business transactions.

It's not just about negotiation. Everything from the setting up of the 'opportunity' to attracting the right acquirers to the final structure of a deal (from retention of key employees to tax planning to incentives required to retain staff to success planning), relies significantly on expert advice from an M&A / transaction advisory firm. Finding the right firm is key to achieving the owners' exit goals.

It's very easy to find an advisory / intermediary. It's very difficult to find the top players, from the 1,000 odd firms in the UK, that are best placed for any individual business. These players have widely differing specialities, are experts in different sectors, operate in different ways, have widely differing success rates, have complex fees and fee structures and, well, it's not easy even determining the criteria on which to filter them.

It therefore pays for the management / shareholders to spend time and effort to research the vast collection of firms in the UK and to pick the ones best suited to their business. They need to then interview each firm on their shortlist; personal chemistry matters, too.

Sometimes mid-cap businesses need a firm to conduct vendor financial due diligence (a vendor assist report) or even a Quality of Earnings (QoE) report. These, when provided to investors, helps their teams make better offers earlier in the process. In addition to sell-side financial DD / QoE, vendors can also pre-pack independent reports on their tech, ESG, operations etc., to further assist in early offers and a speedy process.

I provide a service to assist with finding the right advisories / intermediaries for mid-market businesses looking to sell the business.  I use my extensive data on advisory firms and my experience having assisting numerous other mid-market clients. It would be worth booking an initial free call to raise questions / seek general advice (available only to UK businesses with turnover of £5m+ or net profit of £500K+).

But I am, of course, not the only route to finding the right advisers.

There is plenty of information on this site that should help those who want to attempt it themselves - from how to respond to offers to buy the business to this article on finding sector expert M&A intermediaries to numerous others.

Business owners can find a directory of some of the UK's mid-cap advisory firms here which could be a starting point when investigating advisory firms.

Over the years, I've developed and sharpened a list of great questions for clients to ask advisory firms when interviewing them, important questions that most vendors don't think to ask. Only a small selection of the questions are disclosed here, in the second tab below, for the reason that I don't want advisory firms to have prior sight of all of them. However, the list is free to anyone using my contact form to request it. Disclose, in the form, your mid-market company name (so I know you're not a business broker or advisory firm) and I'll email the list over. Your email address is NOT added to any mailing list or subscriber list.

5. Finding and engaging the right advisory is only half the story

6. Take advice in the right spirit

The operational, organisational and financial structures which served the business well over the years, or decades, may not be best suited to getting maximum value at market.

Some tweaks may be required.

There will be flaws in the business, road-blocks to a healthy sale, which owners and managers are not best placed to spot. A fresh pair of eyes, from an M&A professional, could lead to changes being made that have a big impact on both the probability of sale and the price achieved. As buyers value businesses based not just on profit but also on risk, or rather their perception of the risk involved, an advisory firm will normally suggest changes that will have the effect of reducing acquirers' perception of risk in the business.

Note that a good advisory firm will also have access to many professional tools to analyse and assess many aspects of the business - to compare against industry averages - and to come up with insights into how the business could be worth more with some, even minor, changes.

After speaking with thousands of owners of mid-cap business, I'll add a thought that is not always received well: It's important for business owners to recognise that there is no perfect business. Every business has areas that can be tweaked to make the business better appeal to acquirers.

7. Keep foot on pedal

What some businesses do is to try and make the profits look better by, for example, reducing spend on marketing. This is a mistake.

Any attempt at cost saving, whether reducing head count or cutting back on normal re-investment, will be plainly apparent to acquirers during DD (or even before!). They will view such changes as likely to have a negative impact on future profit and are conscious that what they're paying for is not past profit but their expectation of what profit will be in the future.

It's important to keep the machine running smoothly, ensuring good records and accounts, documenting processes and updating manuals, ensuring stock records are an accurate reflection of stock in hand (and work-in-progress), keeping on top of chasing debtors to pay invoices etc.

A business needs to demonstrate that running the sale process hasn't negatively affected the running of the business, that key people being pulled to deal with questions from multiple acquirers, meetings with them etc., didn't detract them from the running of the business. The eye needs to be firmly on the ball as buyers will inspect not just previous years' accounts but also latest monthly management figures and monthly / weekly tracking of KPIs.

It's vitally important that the business needs to run like it's not going through a sale process. All decisions taken during the course of running the business need to be decisions that would have been taken had the business not been 'for sale'.

8. Maintain confidentiality / control disclosures

It's important to ensure that confidentiality about the business being 'for sale' ...is maintained. Should staff, customers and/or competitors become aware of the business being 'for sale', that could have negative consequences.

Once signed up with an advisory firm, the advisory firm should manage confidentiality and require potential acquirers to sign an NDA (non-disclosure agreement) before getting any information about the business or even knowing the identity of their client. Subsequent to that, they should control the flow of information depending on various factors, such as a) whether the proposed acquirer is a competitor and c) the level of commitment the acquirer has invested into the process.

However, maintaining confidentiality starts even before that. My advice to clients is to setup a gmail address before starting the process of investigating advisory firms and to have all communications go to that address instead of their main business address. One doesn't need to monitor that throwaway address daily as it's possible to set up alerts and to redirect mail from there to a regularly monitored personal email address.

There's another reason for having all communications about the proposed transaction go through an email address that's not a business address. When and if the business is finally sold, the acquirer gets control of the business website and hosting. They will likely have access to the archive of emails stored on the server. Their ability to trawl through the previous owners' communications with professional advisers can cause all manner of problems. Even seemingly innocuous emails could be (mis)construed as the previous owners misrepresenting the true state of the business and could lead to the acquirers attempting to 'clawback' monies already paid.

9. Be flexible, be available, be pragmatic

Deals come in all shapes and sizes with different amounts paid on completion, a range of different deferred payment options, earn-outs and what not. This is not to mention other terms like handover periods, length of exclusivity and DD, indemnities and warranties in the final contract...the list is endless. 

Vendors would be wise to be guided by their advisory firm on deal terms and to be flexible if they want to maximise price.

It needs to be emphasised, at the expense of being repetitive, that someone needs to be available to spend the extensive time needed to progress the deal (and that's despite the advisory firm shouldering the bulk of the weight).

Deals fail. That's a fact of life. Even deals that look like they will definitely complete, often fail. A good advisory firm will take it on the chin and move on to the next preferred buyer. It's a hard slog, it's a long slog. Vendors need to appreciate that it can be a bumpy ride to getting the perfect deal closed.

10. Use other professionals where needed

A good M&A lawyer is not optional. No middle market deal should proceed without a good lawyer, a good M&A lawyer, on the team. This is something every advisory will advise.

It's not just someone who understand M&A deals, SPAs (Share Purchase Agreements) and the like, but also a firm that gets on with the job. Some lawyers are an absolute nightmare, they delay deals and often scupper them. Finding the right legal professionals is important.

Be aware that if you find your own M&A lawyer, you are taking responsibility for that lawyer being prompt and proactive. Should things go south, however, there's the risk of the legal firm and advisory firm blaming each other for the deal collapsing.

Tip: Asking the advisory firm to recommend lawyers to advise on the deal could work to the vendor's advantage. If it's a firm they've used in the past, a firm they trust, it would pay to consider using that firm instead of any other.

There may be other professionals required through the process. With larger firms, there may be the additional cost of hiring an arm's length firm to conduct vendor due diligence. This could cost a six figure sum in itself! Again, my recommendation would be to go with the 'lead' adviser's advice on whether you even need vendor DD and who to use to conduct this DD.

Conclusion

Is there anything missing? Any further information you'd like added to the above? Other questions you'd like answered directly on this page (or on a call)? Contact me or DM me in LinkedIn.