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Critical Element For Success: The Advisor

By: George Spilka
Posted: March 5, 2008, from the March 2008 issue of GCI Magazine.

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Do not underestimate the value of an advisor who clearly articulates advice and ideas in a manner that provides strong guidance. The advisor must have the strength of will, the breadth of knowledge of the acquisition process and the ability to convey that to an owner or CEO to gain buy-in to his leadership in this process. Although the ceding of a minimal amount of control is often difficult for an owner or CEO, it is necessary if the seller is to maximize their transaction price. The proven advisor must guide and direct the process, though the seller should always retain the unqualified right to make all decisions regarding the acceptance or rejection of a specific deal’s pricing and terms.

Any seller foolhardy enough to want an advisor they can totally control is making a critical mistake. Realize that an advisor who can be dominated by his client will also be likely dominated by the acquirer. What the seller really needs is the rare advisor with the proven record of being able to control large, sophisticated acquirers and obtain premium prices for their clients.

If a company has multiple shareholders who have significantly different financial and personal objectives, for example, it becomes even more imperative to find a strong-willed advisor. The advisor must have the expertise to develop a solution to reasonably satisfy all shareholders and the ability to articulate why the compromises inherent in his solution will fairly benefit all shareholders. This mandates not only a strong and forceful advisor, but also one that has compassion and understanding. This will facilitate his appreciation of the significance of the personal reasons, objectives and conflicts that make certain divisive issues important
to particular shareholders. In this way, a compromise can be developed that will make all shareholders agreeable to the solution.

If it is necessary to transact a premium-priced deal, an advisor must be patient. You don’t want an advisor committed to a quick sale, regardless of price, as the objective is to consummate a deal only after a premium price has been obtained. Until that is realized, no sale should occur.

Although the normal time to transact a deal is usually six to 12 months from when an advisor begins evaluating the company, it may take two to five years to consummate a premium-priced deal in some situations. In these cases, probably about 5–10% of total deals, a much longer time is required if the seller’s legitimate objectives are to be fully satisfied. Therefore, experience with these time issues should also be discussed with a potential advisor. If they have not taken an extremely long time to successfully complete a few sales, it may be indicative of an interest in “churning deals” at less than premium prices, rather than in getting maximum value for their clients.