A supporting cast is key
By Rebecca Hanlon, Contributing writer
While buyers and sellers play the starring roles in any merger or acquisition, they are each supported by a cast of professionals who dive into the details of a deal to make sure their clients get the most out of the process.
These advisers include business brokers, attorneys, accountants and appraisers who navigate the inner workings of a business, examine industry standards and work out final numbers to help buyer and seller reach agreement. Without them, negotiations could sour, or the buyer or seller could get a bum deal. With them, the negotiation can become a smooth process on the way to a successful sale.
In most transactions, a banker, lawyer, accountant and appraiser, if real estate is included in the sale, will be brought on during the deal, said Lou Santangelo, president of Sans & Co. Intermediaries in Derry Township.
A banker typically determines the buyer’s qualifications, which can determine pretty quickly if the sale will be successful. A banker also might review information about the seller to determine additional prospects, as well as market value and industry standard.
An attorney, who often comes on board right away to start things off with a letter of intent, is often the one who drafts the purchase agreement, Santangelo said. The attorney focuses on examining data to ensure it is true and complete, often done during the due diligence process.
An accountant is often brought into the process to analyze financial statements and help determine the value of the selling business. An accountant also might perform an audit for the buyer and assist in the attorney with the due diligence process.
Cleaning things up
Martin Gilligan Jr., owner and principal consultant at Martin & Associates in York County, is called on to assist with mergers and acquisitions in several ways, including helping to “clean up” corporate records, go over terms and conditions, and evaluate an entity’s market value.
Gilligan often helps sellers in the early stage — what he calls the decision stage — of putting aside emotional attachments to their businesses, assessing their true value and identifying areas that need sprucing up before
a buyer is brought in.
Getting the timing right
Ronald Myer, president of Summit Advisory in Strasburg, Lancaster County, specializes in mergers and acquisitions in the middle market, companies ranging in size from $10 million to $100 million in annual sales. As the “quarterback in the transaction,” Myer said, his firm helps the buyer or seller know when it’s time to pull in the other players, such as a CPA, attorney or even family members.
“You can’t have three people leading the negotiations,” Myer said. “There is a time and place and a set party that should be involved in each step of the process. If you jump to one of those processes at the wrong time, it can ruin the whole deal.”
Dividing the cost
Many attorneys and accountants work at an hourly rate or offer a one-time service fee, much as they would in any other aspect of their profession, said John Stoner, a partner at Reinsel Kuntz Lesher LLP in Manheim Township, Lancaster County. He often sits down with clients to determine what they want to accomplish and how they can tailor a game plan for people who charge hourly or have fixed rates.
“A lot of people want to avoid those transaction costs, but they could end up signing a bad deal because they didn’t invest enough up front,” Stoner said.
The amount a buyer or seller can spend on a transaction can vary widely depending on the size of the company and the work needed to provide due diligence, Myer added. He suggests working with a consultant who can help identify who might work on retainer, such as a CPA, and how attorney fees might be minimized by bringing them in for specific services.
“Having the right players behind you is worth the time and the cost,” Myer said. “When it comes to mergers and acquisitions, you want the right people looking out for your best interests.”