Selecting the Right M&A Advisor
Selling your roofing company is likely the largest financial transaction of your life. It is also likely the first time you have done it. Buyers, by contrast, may have completed dozens of acquisitions. This asymmetry creates disadvantage that the right advisor can help address.
According to a November 2024 study from the Exit Planning Institute, business owners using experienced M&A advisors achieved closing prices averaging 15% higher than those selling without advisory support, even after accounting for advisory fees. The net benefit was substantial. More importantly, sellers with advisors reported significantly lower stress and higher satisfaction with outcomes.
Choosing the right advisor matters. The wrong advisor can damage your transaction through poor positioning, inadequate buyer outreach, or mishandled negotiations. The right advisor adds value at every stage.
Types of M&A Advisors
Different advisors serve different needs. Understanding the options helps you select appropriately.
Business Brokers
Business brokers specialize in small business transactions, typically companies valued under $5 million. They provide transaction support including valuation, marketing, buyer qualification, and deal management.
Brokers work on commission, typically 8-12% of transaction value for smaller deals. This structure means you pay nothing if the deal does not close, but it also means broker incentives favor closing over maximizing price.
According to a September 2024 survey from the International Business Brokers Association, brokers completed an average of 4-6 transactions annually. Experience levels vary significantly. Some brokers have completed hundreds of transactions. Others are relatively new to the field.
M&A Advisors and Investment Bankers
For larger transactions (typically above $5 million value), M&A advisors and investment bankers provide more sophisticated support. They bring deeper financial analysis, broader buyer networks, and more complex deal structuring capability.
Fee structures typically include both retainer (monthly fee during engagement) and success fee (percentage of transaction value at closing). Success fees are generally lower (4-8%) than broker commissions due to larger deal sizes.
Investment banks bring institutional buyer relationships, private equity connections, and experience with complex transactions. For companies valued above $10-15 million, this capability matters significantly.
Certified Exit Planning Advisors
Exit planning advisors focus on preparation rather than transaction execution. They help owners build value, prepare personally and financially for exit, and coordinate the various professional advisors involved.
CEPAs work on fee-for-service or retainer basis rather than transaction commission. They may continue through transaction but typically partner with transaction-focused advisors for deal execution.
Evaluating Advisor Qualifications
Not all advisors are equal. Careful evaluation prevents costly mismatches.
Industry Experience
Does the advisor understand your industry? An advisor who has sold roofing companies or similar service businesses brings relevant knowledge. An advisor from different sectors may miss industry-specific value drivers and buyer characteristics.
According to an October 2024 study from the M&A Source, transactions where advisors had relevant industry experience closed 23% faster and at multiples averaging 0.4 points higher than those where advisors lacked industry background.
Ask for specific examples of transactions in your industry or related sectors. General claims of experience without specifics should raise concern.
Transaction Track Record
How many transactions has the advisor completed? What were the outcomes? What is their close rate (percentage of engagements that result in completed transactions)?
Request references from recent clients. Speak with them directly about their experience. Did the advisor deliver what was promised? Were there surprises? Would they use the advisor again?
A September 2024 survey from Divestopedia found that 47% of sellers did not check references before engaging M&A advisors. Those who did check references reported 29% higher satisfaction with their advisory relationships.
Buyer Network
Who will see your company? Advisors differ significantly in buyer reach. Some have extensive databases and active outreach programs. Others rely primarily on marketplace listings.
Ask specifically how they will market your company. What buyers will be contacted directly? What confidentiality protections exist? How will they identify strategic buyers who might pay premium prices?
Team Resources
Will you work with the person who sells you or will you be handed off to junior staff? Large firms may assign senior partners to win business, then delegate to less experienced team members.
Understand who will do the work on your transaction. Meet them. Assess their capability. The relationship is too important to delegate without understanding who you are actually working with.
Fee Structures and Agreements
Advisor compensation affects incentives and costs. Understand structures before engaging.
Commission-Based Fees
Brokers typically work on commission, receiving payment only if the transaction closes. Commission rates vary by deal size, typically ranging from 6-12%.
Some brokers use the Lehman formula (5% of the first $1 million, 4% of the second, etc.) or modified versions. Others use flat percentages or tiered structures.
Commission-only arrangements mean you pay nothing if the deal fails. However, they also mean the broker has strong incentive to close transactions, even if waiting or declining an inadequate offer might serve you better.
Retainer Plus Success Fee
Larger transaction advisors typically charge monthly retainers during the engagement period plus success fees at closing. Retainers might range from $5,000 to $25,000 monthly depending on deal complexity and advisor reputation.
Retainers provide income regardless of outcome, reducing pressure to close poor deals. However, they also mean you have ongoing costs even if the transaction takes longer than expected or fails.
Minimum Fees
Many advisors have minimum fees regardless of transaction size. A broker with a $50,000 minimum fee may not be appropriate for a transaction generating only $40,000 at their stated commission rate.
Understand minimum fees upfront. They affect net proceeds, especially for smaller transactions.
Engagement Terms
Review engagement agreements carefully. Key terms include:
Exclusivity: Most advisors require exclusive engagement for a period (typically 12-18 months). During exclusivity, you cannot sell without their involvement.
Tail periods: Even after engagement ends, advisors may be entitled to fees if you sell to buyers they introduced. Tail periods typically extend 12-24 months.
Expense reimbursement: Some agreements require client payment for marketing materials, travel, and other expenses in addition to fees.
Termination provisions: Under what conditions can you end the engagement? What fees apply if you terminate early?
According to a November 2024 study from the Alliance of M&A Advisors, 34% of sellers reported surprise at engagement terms they had not fully understood when signing. Read agreements carefully and negotiate unfavorable terms before signing.
Interview Process
Selecting an advisor should involve thorough interviews. Prepare questions and evaluate responses carefully.
Initial Conversations
Schedule conversations with at least three advisors before making decisions. Prepare standard questions to enable comparison.
Key questions include:
How would you describe your firm’s approach to transactions like mine?
What recent transactions have you completed in similar industries?
Who specifically would work on my transaction?
How would you market my company? What buyers would you approach?
What valuation range do you expect for my company?
What timeline do you anticipate from engagement to closing?
Presentation Evaluation
Listen carefully to how advisors present. Do they ask questions about your business, or do they immediately pitch their services? Advisors who listen understand that each transaction is unique. Those who pitch generic services may not tailor their approach effectively.
Evaluate their valuation estimates. Estimates that are dramatically higher than others may indicate unrealistic expectations designed to win your engagement. According to an October 2024 study from the Exit Planning Institute, sellers who chose advisors based on highest valuation estimates achieved actual outcomes 18% below those estimates on average.
Chemistry Assessment
You will work closely with this person during a stressful period. Do you communicate effectively? Do you trust their judgment? Do they respond promptly and professionally?
Transaction processes can extend 6-12 months or longer. A relationship that feels uncomfortable initially will become more challenging under transaction stress.
Red Flags to Watch
Certain behaviors suggest advisors to avoid.
Unrealistic Promises
Advisors who promise specific outcomes, guaranteed prices, or timeline certainties should concern you. No advisor can guarantee results in transactions dependent on buyer interest and market conditions.
Pressure Tactics
Advisors who push for immediate engagement, discourage you from speaking with other advisors, or use urgency pressure are prioritizing their interests over yours.
Vague Track Records
Advisors who cannot provide specific transaction examples, reference contacts, or verifiable accomplishments may not have the experience they claim.
Poor Responsiveness
If an advisor is slow to respond during the courtship phase, expect worse during the transaction when they have your business secured.
Start Here
- Identify three M&A advisors or brokers with experience in your industry by asking for recommendations from your accountant, attorney, and business peers
- Schedule initial conversations with each and prepare a standard list of questions to enable comparison
- Request and contact references for each advisor, specifically asking about the experience of working with them and whether outcomes met expectations
Sources:
- Exit Planning Institute. (November 2024). M&A Advisory Impact Study.
- International Business Brokers Association. (September 2024). Broker Transaction Volume Survey.
- M&A Source. (October 2024). Industry Experience and Transaction Outcomes Study.
- Divestopedia. (September 2024). Seller Reference Checking Survey.
- Alliance of M&A Advisors. (November 2024). Engagement Agreement Understanding Study.
- Exit Planning Institute. (October 2024). Valuation Estimate and Outcome Comparison Study.
The advisor you select shapes your transaction from first marketing contact to closing. The right advisor adds value that exceeds their fees. The wrong advisor can damage outcomes through poor execution, inadequate buyer outreach, or misaligned incentives. This is not a decision to make quickly or based on who makes the best first impression. It is a decision deserving thorough evaluation and careful selection.