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m&a advisory

An M&A advisory firm guides businesses through the complicated world of mergers and acquisitions. If you are considering making a transaction that involves the buying, selling or merger of companies, you’ll probably want to work with an M&A advisory firm, which is comparable but different from an investment banking firm. We outline the process and differences below. You can also work with a financial advisor to help you determine how any potential merger or sale might impact your personal finances. 

M&A Advisory Firms: What Are They and What Do They Do?

Broadly speaking, M&A firms guide clients who need help with mergers and acquisitions, as well as debt and equity financing or succession planning.

“The more formal definition of M&A advisory firms is that they provide advice to buy- or sell-side clients as they enter a sale, financing event or corporate restructuring of some sort,” said Joel Keylor, CEO of Tresle, a platform that connects established private companies for sale with verified buyers.

Essentially, the M&A firm acts as a middleman in business sale transactions, either for the company initiating the sale or the buyer. Keylor said the typical M&A client is an individual or group seeking to sell some or all of their private company. Representing the buyer in these transactions can also happen, but it’s less common.

Mergers and acquisitions may be the main focus of an M&A firm’s activities but they can offer additional services, such as:

  • Advising on stock issuance and placement
  • Underwriting the issuance of securities
  • Investment advisory services for individuals

M&A advisory firms typically base their fees on a percentage of the sale transaction. The fee can vary, based on the type of company and its value. Some may also charge a flat retainer fee to secure their services.

How M&A Advisory Firms Compare to Investment Banks

m&a advisory

Investment banks and M&A advisory firms can perform many of the same duties in a buy/sell transaction involving a company or business. A key difference, however, is size.

An investment bank may cater specifically to clients with an annual revenue of or deal size of $250 million or more, while an M&A advisor may set the minimum revenue threshold much lower. That could make an M&A advisory firm a more attractive option for startups or smaller companies with revenues closer to the $5 million or $10 million mark.

In terms of processes, M&A firms and investment banks generally use the same methods to guide clients through the sale process. The overall goal is to create a competitive buying environment to ensure that the selling company gets the best deal possible and sells to the right buyer.

“It’s not so much about providing advice as it is presenting facts about the company that the seller provides, and negotiating on their behalf,” Keylor says.

Specifically, M&A firms work to:

  • Determine an accurate valuation for the company
  • Leverage the highest price possible for the seller
  • Marketing the company to prospective buyers
  • Avoid selling at below-fair-market terms
  • Help the seller choose the buyer that’s the best fit
  • Ensure the sale is completed while planning for contingency situations, such as a buyer being unable to secure capital to complete the purchase

M&A firms take an active approach to buying and selling transactions, rather than acting passively. They’re focused on helping the seller execute their exit strategy in a way that aligns with the company’s goal and objectives for the sale.

According to an M&A Fee Guide, M&A advisory firms add the most value to merger and acquisition transactions by managing the sale process from start to finish. Beyond that, they also prove valuable for negotiating transactions, sourcing buyers, limiting distractions to the owner/management team and establishing the seller’s credibility in the market.

M&A Advisor Regulation

m&a advisory

Like other advisory firms, M&A firms are subject to federal regulation. In 2016, the SEC approved a set of relaxed FINRA rules governing M&A firms and their activities. One thing that’s notable about M&A firms is that they’re not required to be licensed as broker-dealers and may of them are not. That’s a substantial departure from investment banks. The law requires investment banks to be licensed broker-dealers to act in a merger/acquisition transaction.

The Bottom Line

An M&A firm helps with the sale or acquisition of business transactions. If you’re considering working with an M&A advisory firm as a company with plans to sell, it’s important to understand the regulatory requirements, as well as what the firm can do for you. Look for a firm with a strong track record, experience selling within your industry and the technological capabilities necessary to assess the market environment. Carefully consider the fees an M&A firm charges, including the upfront retainer fee if any, and the overall cost of their services.

Tips for Finding a Personal Financial Advisor

  • If you’re looking for advice on retirement planning or saving for college, you’re probably better off working with a personal financial advisor. Some advisors even specialize in helping clients who are business owners. Finding the right financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • It is important to interview each advisor to determine who you may want to work with. Ask if they are fee-based or fee-only. Find out how often they communicate with clients and their preferred method of communication. Who is their typical client, and have they worked with investors who have a background that’s similar to yours? What’s their overall investing approach? Performing your due diligence beforehand can ensure that the advisor you choose is the right one to help you navigate financial planning now and for the long term.

Photo credit: ©iStock.com/gradyreese, ©iStock.com/PeopleImages, ©iStock.com/Natee Meepian

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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