Checklist for Hiring Transaction Advisors
- Brandon Chicotsky
- 6 hours ago
- 10 min read
When selling a business, choosing the right transaction advisor is critical. Advisors help with valuations, buyer networks, negotiations, and deal structuring. Here’s a quick checklist to guide your decision:
Experience: Focus on advisors with a proven track record in deals similar to yours, especially in the last 3-5 years.
Industry Knowledge: Look for advisors with expertise in your sector to better assess risks and valuation multiples.
Confidentiality: Ensure they follow strict protocols to protect sensitive information.
Fee Structure: Clarify upfront costs, success fees, and potential "tail" clauses in the agreement.
Network Access: Choose advisors with strong connections to M&A attorneys, CPAs, and potential buyers.
For businesses under $25 million EBITA, firms like God Bless Retirement offer tailored services like free preliminary valuations, buyer sourcing, and access to a vetted professional network. The right advisor can make the difference between a smooth transaction and a missed opportunity.
Checklist for Selecting Transaction Advisors
When it comes to choosing the right transaction advisor, you need to dig deeper into their qualifications, approach, and overall fit for your specific needs. Here are five key areas to evaluate, starting with their experience in handling similar deals.
1. Experience with Similar Transactions
An advisor's track record can tell you a lot about their ability to deliver results. For deals ranging from $500,000 to $20 million, M&A boutique firms often outperform larger investment banks. Ask for a list of transactions they've completed in the past four to five years, focusing on companies similar in size and structure to yours. Don't shy away from asking about deals that didn't close - questions like, "How many transactions have you worked on in the last three years that didn’t close, and why?" can provide valuable insights into how they handle setbacks and challenges [7][8].
2. Industry Knowledge
Sector-specific expertise can significantly impact your transaction's success. Advisors with deep industry knowledge can better assess valuation multiples, identify unique risks, and understand the competitive landscape. As Axial puts it:
Specialists are "intimately familiar with challenges, players, and needs in your industry. These firms are best able to recognize and articulate your distinct advantages that aren't easily replicable" [10].
Make sure to evaluate their grasp of industry trends and ask for references, especially from CEOs who have successfully exited businesses in your field [7][9][4].
Once you’ve confirmed their industry expertise, move on to their confidentiality practices.
3. Confidentiality Procedures
Protecting sensitive information is non-negotiable. A reliable advisor will enforce strict confidentiality through non-disclosure and non-circumvent agreements with potential buyers before sharing any detailed information about your business [1]. Blind listings - marketing materials that describe your business without revealing its identity - are another essential tool for maintaining anonymity during the early stages [6]. Be sure to ask about their confidentiality protocols, how they vet potential buyers, and the systems they use to securely manage data during the due diligence process [3][4].
4. Fee Structures
Understanding how your advisor is compensated ensures their goals align with yours. Clarify upfront retainers, monthly fees, and success-based percentages. As Matt Gilbert from GaP Transaction Advisors points out:
A seller can keep alignment with an advisor by ensuring that the bulk of the advisor's earnings only come when the seller's goals are achieved [1].
This alignment can help keep everyone focused on achieving your desired outcome.
5. Professional Network Access
A strong advisor doesn’t just bring expertise - they also bring connections. Their network should include M&A attorneys, tax specialists, CPAs, and wealth managers [7][4]. Additionally, verify their relationships with strategic and financial buyers within your industry [10][3]. Ask whether they can assemble a complete deal team or if you'll need to source certain professionals on your own. Keep in mind that an advisor with a full support team can typically handle four to five transactions at once, while those with fewer resources should ideally manage only two or three to maintain focus on your deal [8].
Types of Transaction Advisors
A successful business transaction often requires a team of specialized professionals, each offering unique expertise. Knowing what each advisor brings to the table helps you assemble a strong team and close any gaps that could derail your deal. Here's a breakdown of key advisor types and their roles to help you align their expertise with your priorities.
M&A Attorneys
M&A attorneys are the legal backbone of any transaction. They handle essential tasks like drafting and reviewing documents such as Purchase Agreements, IP Assignments, and Employment Agreements [11]. Beyond paperwork, they lead due diligence efforts, digging into compliance with state laws, employment issues, fiduciary duties, intellectual property, and more to uncover and address risks [2].
Brian J. Sharkey, CPA, CVA, CEPA, and Director-in-Charge at Kreischer Miller's Transaction Advisory & Business Valuation practice, highlights their importance:
Attorneys are essentially mandatory in any M&A transaction... Not only do attorneys draft all the documents needed to consummate a transaction, but they also make sure that any potential risks associated with a transaction have been properly vetted and mitigated prior to closing [2].
M&A attorneys also review Letters of Intent (LOIs), negotiate terms, and often act as mediators during tense negotiations [12]. When hiring, ensure you understand their fee structure and how costs are handled if the deal doesn’t go through [11].
Accountants and CPAs
Accountants and CPAs play a critical role in ensuring the financial accuracy of your transaction. Their primary task is conducting a Quality of Earnings (QoE) analysis to verify the financial health of the business. This includes reviewing sales, profitability, and normalized earnings to ensure the financial data used for valuation is accurate [13]. They also calculate adjusted EBITDA by identifying non-recurring expenses, assess net working capital, and structure the deal to optimize tax efficiency while identifying any hidden tax liabilities [13].
As Brian J. Sharkey points out:
Tax due diligence is another key element of preparing a business for sale or acquiring another business. Confirm that all tax liabilities are thoroughly vetted to prevent last-minute issues [2].
For sellers, accountants help prepare accurate financial statements. For buyers, they validate the seller’s financial data - a crucial step, especially if bank financing is involved. Completing a QoE analysis early can help address any financial concerns before negotiations begin [13].
Business Brokers
Business brokers oversee the entire transaction process, from valuation to closing. They create marketing materials like Confidential Information Memorandums (CIMs) and may use blind listings to maintain confidentiality while attracting buyers [6]. Brokers also vet potential buyers, assess their financial qualifications, and guide the Letter of Intent process [3].
Although hiring a broker is a significant investment, their expertise often leads to a higher final sale price. Brokers typically charge success fees ranging from 10% to 15% of the sale price for smaller businesses or 6% to 15% for mid-market deals [5]. Some also charge preparation or retainer fees, which can range from $5,000 to over $50,000, depending on the deal’s complexity [3]. When choosing a broker, interview several candidates to evaluate their valuation approach, marketing strategies, and track record in your industry. Look for someone who meets your checklist criteria for experience and network access [3].
How to Hire and Work with Advisors
Define Your Transaction Needs
Start by clearly defining your transaction goals. Consider the size of the deal, your strategic objectives, any industry-specific factors, and the level of confidentiality required. For smaller deals (with revenues in the 6-7 figure range), an M&A advisor or broker is typically sufficient. Larger transactions (8 figures and above) often call for the expertise of investment bankers [3]. Think about your ultimate goal - whether it's retirement, expanding into new markets, or consolidating your position. Also, account for industry-specific requirements. For instance, selling a SaaS company involves different valuation methods and buyer networks compared to selling a brick-and-mortar restaurant [3]. Confidentiality should be a top priority in your planning process. To ground your expectations, conduct a pre-sale valuation to ensure your price aligns with market realities [1].
Shortlist and Evaluate Advisors
Once you’ve outlined your needs, focus on finding advisors whose skills match your objectives. Look for professionals with experience in your specific industry and check their track record with recent deals. This is crucial since valuation methods can differ widely across sectors [3]. Request a preliminary valuation from potential advisors to gauge their approach and reliability. Additionally, reach out to their past clients to learn about their performance during high-stakes negotiations [3][4]. Since advisor engagements often last 24 to 36 months, choose someone you trust to represent your interests under pressure [1].
Sign Engagement Agreements
After narrowing down your options, formalize the partnership with a clear and detailed engagement agreement. This contract should outline the fee structure - whether it’s a flat fee, based on the Lehman formula (where percentages decrease as deal size increases), or includes an "accelerator" for surpassing certain benchmarks [19]. Keep in mind that about 81% of investment bankers charge an upfront retainer fee in addition to success fees [8]. For a $5 million deal, success fees typically fall between 6.1% and 8% [8]. Pay close attention to the "tail" clause, which ensures the advisor is compensated if a deal closes with a buyer they introduced, even after the agreement expires [18].
The agreement should also specify which senior and junior professionals will manage your account day-to-day. This helps avoid "bait-and-switch" scenarios where less experienced staff handle your deal [14].
As Matt Gilbert from GaP Transaction Advisors explains:
The bulk of the advisor's earnings only come when the seller's goals are achieved. That formula should be very plainly spelled out in the engagement agreement [1].
Advisors generally require a minimum of six months to account for the average market time, which typically ranges from 6.5 to 8 months [18]. Make sure the agreement includes a detailed timeline with milestones for each stage of the process [9].
Using God Bless Retirement's Network
Business Brokerage Services
God Bless Retirement uses a family-led approach to help businesses with under $25 million EBITA transition smoothly. They kick things off with a free preliminary valuation and consultation, giving you a clear picture of your business's market value without any upfront fees. Once you move forward, their full-service listing includes certified business valuations, detailed marketing materials like Confidential Information Memorandums, and active buyer sourcing through exclusive private seller networks.
Their marketing and outreach team doesn't just wait for buyers to come to them - they proactively follow up to speed up the process. Meanwhile, their deal valuation experts ensure that any opportunities presented are thoroughly vetted for viability. As God Bless Retirement puts it:
Our team has access to private seller networks that provide an advantage when searching for a business. Furthermore, our marketing and outreach team works alongside our deal valuation experts to ensure opportunities are viable [21].
This method prioritizes confidentiality, which is essential during business transactions. By tackling key challenges like valuation and buyer sourcing, their services align seamlessly with broader advisory needs. Plus, their extensive network ensures all the transaction support you need is immediately available.
Access to Professional Networks
God Bless Retirement’s network is built on strict confidentiality and specialized expertise, offering easy access to top-tier professionals. Their vetted network includes CPAs, financial planners, private equity specialists, escrow attorneys, closing experts, and financing resources.
As the company explains:
Utilizing God Bless Retirement as your business acquisition partner provides expertise throughout the buying process. We help navigate legal requirements, due diligence, and connect you with trusted resources such as escrow attorneys, closing specialists, and financing resources [21].
This means you don't have to waste time hunting for and vetting individual advisors. The connections you need are already in place, ready to support your specific transaction needs.
Conclusion
Choosing the right transaction advisors is crucial to safeguarding your interests and maximizing the value of your exit. As Alexis Grant, founder of They Got Acquired, aptly states:
The right partner can help maximize your sale price and guide you through a successful exit, while the wrong one could cost you time, money and opportunities [3].
When selecting advisors, focus on those with proven experience, industry knowledge, strict confidentiality, clear fee structures, and strong professional networks. These qualities are the foundation of a successful transaction. Considering that roughly 80% of businesses listed for sale never actually sell [4], having skilled representation is essential. A capable advisor offers expertise in areas like valuation, buyer sourcing, and deal structuring - skills that are difficult for one individual to master alone. Be thorough in your selection process: review their track record, ask for references, and ensure they align well with your team’s working style. These steps will help you build a relationship based on trust and competence.
For businesses earning under $25 million EBITA, God Bless Retirement provides a personalized, family-driven approach. They offer certified valuations, confidential buyer sourcing, and access to a vetted network of CPAs, financial planners, and legal experts. Plus, their free preliminary valuation allows you to gauge your business’s market value without any upfront commitment.
Your choice of advisor will influence every stage of your transaction, from the initial valuation to the final closing. By investing the effort to find the right partner, you’ll position yourself for a smoother process and a more rewarding outcome.
FAQs
What steps can I take to ensure my transaction advisor keeps the process confidential?
Maintaining confidentiality is a key part of any business transaction. To protect sensitive information, the first step is to have your transaction advisor sign a confidentiality agreement. This agreement should spell out their obligations, including how they’ll handle and share private details.
It’s also important to work with an advisor who has experience managing confidential transactions. Ask about their methods for keeping information secure - things like using encrypted communication tools or restricting access to sensitive data. A reliable advisor will treat confidentiality as a top priority, safeguarding your business interests throughout the process.
What factors should I consider when reviewing an advisor's fees?
When assessing an advisor's fees, it’s important to understand how their payment structure works. Many advisors use a success-based model, which means they charge a percentage of the transaction value - commonly between 6.1% and 8% for deals around $5 million. Additionally, you might encounter upfront retainers, typically ranging from $26,000 to $50,000, or monthly fees that usually fall between $5,000 and $10,000.
Make sure the fees are reasonable for the size and complexity of your deal and compare them to industry norms. Clarity is essential - ensure you know exactly what services are covered and how the advisor’s compensation is linked to helping you achieve your objectives.
Why is it important for a transaction advisor to have expertise in your industry?
Industry knowledge plays a key role for a transaction advisor. It enables them to grasp the specific challenges, trends, and valuation factors unique to your market. This understanding supports precise evaluations, strategic negotiations, and deals that align with your business goals.
Advisors who specialize in your industry can also spot opportunities or risks that might go unnoticed by others. Their insights help simplify the transaction process and improve the chances of achieving successful outcomes.
