“This year’s election is critical to the future success of our country,” says Albert D. Melchiorre, president of MelCap Partners, LLC. “The selection of the next president of the U.S. should be based on experience, track record and shared values. So too should it be with the selection of your M&A adviser.”

He says much like each election is pivotal to the country’s progress, selling your business will have grand implications on the rest of your life, so it’s wise to put the transaction in the hands of an expert.

“It’s a very involved process with many risks,” he says of the merger and acquisition process. “Making a mistake could result in a bad transaction, which is why it’s important to find help.”

Smart Business spoke with Melchiorre about the role of an M&A adviser and what qualifications to look for when

selecting one.

What is an M&A adviser, and what is his or her role in merger and acquisition transactions?

An M&A adviser is a financial adviser who has experience in completing merger and acquisition transactions. The role of this adviser is to represent the interests of the business owner in achieving their goals and objectives through either a merger or acquisition transaction. This adviser also quarterbacks the deal team, which typically includes attorneys, accountants and other advisers who help to successfully compete a transaction.

What does the resume of a qualified M&A adviser contain?

An experienced adviser should have a relevant and proven track record of successfully completing transactions in your field of business. They should also have an applicable education, as well as the proper financial securities license to complete the transaction. Additionally, look for an adviser who has the relevant industry experience necessary to understand the nuances of your industry.

There are a few ways to qualify potential advisers. One way is through a referral from the seller’s trusted advisers. Many M&A advisers are fairly transparent in their experiences, so you can conduct an initial screening by visiting their website to see the number of deals they’ve completed. Also look to see if they have experience in the industry in which you do business and that they have qualified personnel at the firm.

While you’re really hiring a firm, it’s equally important to choose the right individual. You can have a firm with a well-known name that has been through many deals, but you still need to know that each individual within the team is qualified to handle your transaction. You don’t want an inexperienced adviser on your deal.

How does a company decide whether an M&A adviser will help facilitate its sale?

In a sale transaction, one role of an M&A adviser is to help business owners achieve their goals and objectives, but also to maximize the value of their business. An experienced adviser can bring the appropriate parties to the table and create a competitive environment where that can take place.

There are many aspects to completing an M&A transaction. Having an adviser who can expect the unexpected will help you navigate through the land mines associated with completing the deal. This will likely be the most significant liquidity event you’ll ever face, and your adviser should treat it as such. Business owners in the middle market will only sell their company once, so it’s important that they’re hiring an experienced adviser who has a record of facilitating and closing transactions.

What are the risks of negotiating an M&A transaction without an adviser?

You should have an experienced deal team to ensure you’re not being taken advantage of through the terms and conditions of the deal. They can also help maximize the value of the transaction, while lessening the risk of not getting a transaction done.

It’s a very time consuming process that involves highly confidential information. As a deal is pursued, there is the risk that customers and employees could find out about the sale too soon, or a buyer could be brought to the table who is not serious, which is a concern when you’re talking to a competitor. An experienced adviser can make sure confidential information is properly disclosed and facilitate its secure transfer.

When do you bring in an adviser?

Bring in your M&A adviser at the forefront, before you even embark on the process. You need to make sure you’ve taken the steps necessary to prepare yourself for an appropriate sale and get a sense of whether your goals and objectives are achievable in the current market. Right now may not be the time to sell your business, but there may be some steps you can take to make a future sale both successful and efficient. A qualified adviser can present you with the best options and advice to achieve your goals.

On the buy side, an M&A adviser can help by assessing the value of the company you’re considering to ensure the offer is competitive. Your adviser can help you determine how you’re going to finance the acquisition and can also assist you with your due diligence as the process is closing.

An M&A adviser can make the initial contact with the company you’re interested in acquiring to gauge its interest. He or she can be there earlier in the process to help determine and develop your acquisition criteria, and use it as a basis for the search process by identifying companies through other intermediaries that may have companies for sale. Your adviser can also help you develop a list of suitable acquisition candidates and initiate contact with them.

Albert D. Melchiorre is president of MelCap Partners, LLC. Reach him at (330) 239-1990 or al@melcap.co.

Insights Mergers & Acquisitions is brought to you by MelCap

Published in Cleveland
Wednesday, 01 June 2011 14:55

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.

Published in Cleveland