When businesses change hands, each side usually has a team of experts in their corner. Both buyers and sellers are looking to protect their interests and make sure they get the best deal they can.
Who are these experts? Which ones do you need as a buyer looking to complete a business acquisition? Let’s take a look at how deal teams are assembled, and at all of the different types of deal-team members you might want to retain to help you complete your business purchase.
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What is a “Deal Team” in a Business Sale?
For buyers, your deal team is the group of diverse professionals with M&A experience who assist you in deciding whether to walk away from a proposed deal or to close on your business purchase. Your pro lineup may also be referred to as an acquisitions team.
Organizations that make frequent acquisitions, such as private-equity firms, often have in-house acquisition teams made up of paid staff members. Their team is used to working together and has acquired in-depth knowledge of what that buyer wants in their due-diligence process and in their purchase agreement.
Buyers who are less active often need to assemble an acquisitions team for a specific purchase they’re undertaking. Too many inexperienced buyers simply rely on professionals they happen to know who may not have any M&A experience, or worse yet, decide to ‘wing it’ on their own. That’s not recommended–you want the best expertise you can find to advise you on your deal.
What Does an M&A Team Do for You?
Your deal team supports every phase of your business acquisition. Depending on your own expertise and past experience, your deal team may help you:
- Determine the goals and objectives of the purchase
- Organize the transaction process and create a timeline to closing
- Research the business’s operations and understand its finances
- Draw up and negotiate the terms of the purchase agreement
- Review any technology, intellectual property, or patents involved
- Identify and resolve problems or obstacles to closing the deal
- Provide industry-specific expertise in the niche of your acquisition target
In short, your deal team will do every task that’s needed in the transaction that you don’t have the knowledge or professional training to do yourself.
Why Having a Deal Team in an M&A Transaction Is Important
Buying a business is often the largest financial transaction you’ll make in your lifetime. A business’s purchase price may well be far larger than the price of your home. A lot of money is on the line–and a lot can go wrong.
It’s critical to have all the expertise you can get, so you don’t wake up post-sale and discover you bought a floundering business that wasn’t worth the money. Your deal team will help you determine if your seller is lying to you, or if their business is truly solid and has growth potential. Your business purchase agreement spells out what assets and liabilities you’re acquiring, the schedule of payments, and much more.
In the excitement that surrounds an exclusivity period, you have just a few weeks in which to verify facts and decide whether to move forward. Often, it would be physically impossible for a single person to do all of the research and verification needed to confirm the sale within the required timeframe. Having a deal team enables you to speed up the process and get your deal done, before your exclusivity expires and the seller is free to entertain offers from other buyers.
An Effective M&A Deal Team Structure
Now that you understand the basics, let’s look at each of the experts you might retain to work on your business acquisition. Some types of M&A expertise are absolute necessities, while others may or may not be required, depending on the type of business you’re buying and your knowledge of that sector. Each team member should be not only well-qualified in their profession but have specific experience in the M&A buy-side process.
Key Members of Your M&A Deal Team
- Attorney–An experienced M&A legal pro is needed to draft and negotiate the terms of your business-purchase agreement. Even if you’re an attorney yourself, if you don’t have M&A legal experience, it would be wise to retain an M&A legal expert.
- Accountant–An accountant is essential for understanding your proposed acquisition’s finances in-depth. Your accountant will scrutinize monthly profit-and-loss statements, review annual revenue trends, verify the validity of the seller’s future income projections, and much more to determine how lucrative the business is–and whether there are areas where expenses could be cut. As with hiring an attorney, even if you’re an accountant, you should hire an M&A-focused CPA to crunch the numbers in your deal.
- M&A advisor or business broker–If you’ve used a business broker to find this opportunity, that professional should be a key part of your deal team, sharing their past experience to guide you through the process. If you found this business on your own, you would do well to retain an M&A advisor who’s experienced in your business type. You want someone on your team who’s seen many similar business sales, and knows the red flags to watch out for.
Other M&A Deal Team Members
- Technical expert–If you’re buying a business that relies on or sells technology, you’ll want an expert’s eye for appraising and valuing these technical assets. Does legacy software underlie this business’s operations that will need to be updated or replaced? This role may include reviewing code, patents, chemical formulae, or the seller’s team’s knowledge of proprietary processes.
- Operations expert–One of the most important things to understand in a business acquisition is how the company makes money. How many people are needed, what sales and marketing approaches are used, and how is customer service delivered? An operations expert will look at the day-to-day workings of the business and help you understand the opportunities for improvement. If you haven’t previously operated a business in this industry, you’ll want an expert with hands-on operations knowledge.
- Industry expert–If you’re buying a business in an industry that’s new to you, it’s critical that you consult an expert in this sector. They’ll understand industry trends and know if this business is on the leading edge, or selling legacy products or services that will soon be obsolete. Perhaps the entire industry is headed for the scrap heap–remember video-rental stores? An industry expert helps ensure you don’t buy the next Blockbuster Video.
Depending on your own business experience and professional training, you may need more or fewer M&A team members. Think of your deal team as filling in the knowledge gaps you have that could lead to unpleasant surprises post-sale if you don’t have an expert’s counsel.
How to Manage an M&A Deal Team
Once you’ve assembled the various M&A experts you need, the challenge is to coordinate their efforts. You may oversee managing the deal team yourself, or you might designate one team member to gather input from the rest of the team and report to you.
It’s typical to have regular, weekly meetings with your deal team to assess the progress of due diligence and make sure everything stays on track.
Assemble Your Acquisitions Team
Consider what your own levels of knowledge, skills, and business expertise are for the company you want to buy. Then, reach out to qualified professionals who round out your knowledge. Smart buyers surround themselves with a deal team that will uncover any problems prior to close, protect your rights, mitigate risk, and help you make the best deal to buy a business that suits your acquisition goals.