Selling your start-up: Should you hire an M&A Advisory firm, and why Yes?

When technology start-ups reach a stage where they have proven the commercial potential and value of their assets and their offer, it is natural for them to either raise money to grow independently or get sold to a bigger company to grow together.

I will not get into the discussion on whether or not you should sell your start-up at such a stage, because there is no magic recipe and every start-up is different. There are markets where the cost and benefit of growing alone might not be interesting enough. There are businesses who might get more out of synergies with a buyer then what they can get from the market directly. An early sell is a viable option for many start-ups despite the natural urge to keep your start-up baby for yourself and grow alone as much as you can, which is a strategy that pays off for so many entrepreneurs. Every entrepreneur knows best. This story is for those who have already decided to sell, and want to make the right choices about getting help from an M&A Advisory firm or going alone.

First reason: Time.

If you speak with anyone who ever tried to sell a company, they will tell you that it is an extremely time-consuming task. As an entrepreneur you already have a business to run and many things to take care off. When you start discussing with buyers (this often happens spontaneously, at the initiative of a potential buyer), you discover that these negotiations are a full-time job in itself and you are quickly compelled to choose between taking care of our growth and pursuing the M&A discussions. Companies who buy other companies often have dedicated M&A personnel, who has all the time of the world just to interact with you and the likes of you. It can quickly become overwhelming. Hiring and M&A Advisory will allow you to add an additional pair of hands to the job.

Don’t expect miracles. Expect volume.

A common misconception about M&A Advisory firms, is that thanks to their specialisation and expertise they will be able to sell your company better then you would, and miraculously find the dream buyer for you. While they do specialise in this job, and can get a lot of work done routinely, you are the only one who can actually sell your company. You will have to spend time to explain to your M&A agent the selling points of your company, and orient their buyer search towards the most likely buyers. M&A Advisory firms don’t necessarily have buyers waiting in line. They prepare a teaser presentation of your company and they reach out to potential buyers. The advantage is that, being specialised in this, they can screen hundreds of buyer targets quickly and reach out to dozens of them. When we were selling Sépage, our M&A Advisory compiled a list of more then 120 relevant buyers and reached out to maybe 30–40 of the most interesting ones. We ended up signing NDAs and getting into more serious discussions with 8 of them before we agreed on exclusive discussions with our final buyer. The advantage of such an approach is that every potential buyer that expresses interest in your company allows the M&A advisory to credibly make a buzz (while preserving the anonymity of the buyer), and get other similar buyers interested. This increases your chances of getting more out of the deal.

The unexpected

M&A agents are usually very curious and outgoing people. They tend to talk to everyone, know everyone and master the art of shallow acquaintance. Through this particular network, they are able to surprise you. They will talk about you to people that you would never imagine being relevant to you — but you might be relevant to them. I was honestly surprised by an introduction made by our M&A agent to a company that was a big name, but in my eyes would never have the ambition to venture into our market and buy us. It turns out that they had a secret plan for a new service, partially on our market, and we started talking. We did not do our final transaction with them, but this opening made me start looking at my options more broadly and was highly beneficial for the closing that happened later.

Patience

I have seen M&A deals happen over one single phone call, or in a span of a few weeks through only a few meetings. While this does happen, a typical selling process involves more interested buyers, and takes a lot of time. It also takes a lof time to the M&A agents to get to understand your business and start generating relevant contacts. Prepare for it.

As soon as you start attracting attention, you might get approached by M&A agents. Naturally you will not go with the fist who comes at hand, but you will want to make a choice. We considered 5 of them of different geographic location, different size and different track record. We finally signed with a medium-sized French firm that had done the most transactions in our market.

This story is published in The Startup, Medium’s largest entrepreneurship publication followed by +369,832 people.

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