Middle market M&A adviser Featured

2:55pm EDT June 1, 2011
Middle market M&A adviser

If you’re looking into an M&A transaction and/or looking to hire an investment banker, you’ve probably got questions. Luckily, we have answers.

Smart Business spoke with Albert D. Melchiorre, the president of MelCap Partners, LLC, about investment bankers, M&A advisers and the unique characteristics associated with the middle market.

Why should a business owner hire an investment banker?

There are many reasons why a business owner should consider hiring an intermediary to assist them with the sale of their business. As a business owner, you are only going to sell your business once; therefore, it is important that you select an experienced adviser with a successful track record of representing businesses similar to yours in terms of both industry and size. A good adviser will enable you to obtain top dollar for your business by identifying the best and most logical buyer for your company, whether that buyer is strategic, such as a competitor or customer, or whether that buyer is financial, such as a private equity group.

What should you expect from an M&A adviser?

Upon selecting an adviser, you should expect to receive expert advice from a firm that can navigate through the complex world of mergers and acquisitions. Your adviser needs to be both technically and financially astute, but also needs to be able to communicate the key acquisition considerations of your business to the interested parties — what do you do better than anyone else? They need to be able to “expect the unexpected” in order to avoid any deal-killer issues before they arise, and they need to work in concert with your other advisers on your deal team, as well as your attorney, accountant, banker, insurance agent, environmental adviser, etc., so that the transaction will go smoothly.

What are the unique characteristics associated with the middle market?

One of the greatest differences between the sale of a public or large multinational business as compared to the sale of a middle market business is the mentality of the owners. Very unique to middle market business owners is the emotional attachment to the business. As one of our clients said: “Selling my business is like selling one of my children.” When selecting an adviser, owners need a firm who is cognizant of the psychological implications during a transaction. For many owners it is very difficult to let go. A good adviser will not only help with the financial aspects of the transaction, but they will also assist in making the owner comfortable with the transition.

How is technology being used to process M&A transactions?

Many recent technological advancements have positively impacted the M&A transaction process and have changed the way firms acquire information, model financials and present information. One example of a recent technological improvement is the use of virtual data rooms (VDRs). The use of a VDR allows the dissemination of highly confidential information in a controlled environment or a monitored Internet site. It allows for a more streamlined process in that confidential information can be distributed instantly to a specific audience. As with the VDR, technological advances have allowed the M&A industry to become more efficient, more flexible and more productive.

What is the current state of the M&A market?

For the next year or two, we expect the market for mergers and acquisitions to be very robust. There are several reasons: an overall improving economy, increasing availability of bank debt, the extension of lower capital gains tax rates, record levels of cash on corporate balance sheets, ample private equity capital, low costs of capital, and strong corporate earnings. All of these factors should create a “perfect-storm” environment for business owners who are interested in maximizing the value of their businesses through a controlled, yet competitive sale process.

Are there any regulatory issues impacting M&A advisers and their clients?

All M&A advisers, intermediaries, business-brokers and investment bankers are subject to certain rules and regulations. When selecting an M&A adviser, it is important that they have the proper securities licensing from both a federal and state perspective. If they do not have the correct licensing, you as the business owner run the risk of having your transaction rescinded, as well as the possibility of receiving fines and penalties. After spending an entire lifetime building your company, it would be very unfortunate to have your liquidity ruined by improper licensure.

Albert D. Melchiorre is the President of MelCap Partners, LLC. Reach him at (330) 721-1990?or al@melcappartners.com.