How Advisors Add Value in the New Middle Market

M&A is finally emerging from the dark ages. Today’s middle-market CEOs have more transparency into deal-related information and relationships than ever before. Successful investors and buyers proactively connect with CEOs to discuss opportunities; peer networks and online platforms provide CEOs access to industry data and trends; and CEOs meet capital providers at industry events.

In this new landscape, what’s the role of a M&A advisor?

In the past, advisors’ primary value-add was their access to the information and relationships CEOs needed to transact effectively. That’s no longer the case.

In the new middle market, M&A advisors earn their keep by charging for two resources more scarce than information and relationships: time and experience.

Time is a zero-sum game. An hour spent one place is an hour that cannot be spent elsewhere. Optimizing company operations is the highest-impact activity a CEO can undertake to maximize his company’s valuation. Hours spent on other activities, like managing the nuances of such a complex transaction, can amount to dollars sacrificed at deal close.

When you consider that the loss of every dollar in revenue or EBITDA will be multiplied to calculate a company’s valuation, it’s easy to see how costly a distracted CEO can be. By hiring M&A advisors to run a deal, your buy yourself time to build a more valuable business.

Experience can’t be reproduced. In hiring an M&A advisor, smart executives are choosing to leverage years of transaction experience. CEOs want a seasoned advisor in their corner when building a book to market your business, sourcing potential buyers, navigating due diligence, negotiating final terms, and closing the deal.

A CEO’s counterparty is virtually guaranteed to bring representation in the deal. Just like you wouldn’t walk into legal proceedings without your own lawyer, walking into a deal without an advisor can put CEOs at a grave disadvantage.

For M&A advisors in today’s middle market, the key to earning great fees is focusing on areas where you can add true value. Those areas are no longer around general M&A information and relationships with capital providers. Instead, advisors need to focus on what they have that others don’t — experience from past deals, and the time to get them done right.