7 Reasons to Hire an M&A Advisor When Selling a Software Company

As one can imagine, selling a software company poses significant challenges. The endeavor demands substantial time and effort, burdening decision-makers and the wider management team. The pressure to execute the transaction flawlessly adds an intense layer of stress.

Complicating matters further is that when those involved in the M&A process lack familiarity with the intricate nuances of the sales landscape, the entire process can become convoluted. This complexity raises the risk of deals falling through or sellers potentially forfeiting millions, if not tens of millions, of dollars.

Enter the M&A advisor.

By the time a founder and management team decide to explore a majority transaction for their software company, they are likely already aware of M&A firms. They may have even been approached by firms trying to win their business. But their ubiquity doesn’t quite answer a fundamental question: “Why should you hire an M&A advisor when selling a software company?”

When you have a SaaS business for sale, it pays to get it right. We’ve broken down a few key responsibilities of M&A advisors to clarify why using these services can be a massive value-add during your liquidity event.

1. M&A Advisors Can Help Maximize Your Valuation

The most compelling reason to work with strategic M&A advisors when selling a software company is to get the best outcome possible. Experienced advisors know how to position your company, find the right buyers, and optimize your chances of a higher valuation and better deal terms.

On the other hand, by running a process independently, a company is more likely to close a transaction that leaves money on the table, includes unfavorable terms, or doesn’t fully maximize the company’s potential.

2. M&A Advisors Focus on Reducing the Deal’s Risk

As important as the financials are, they’re not the whole story when selling a software company. By not bringing in an advisor who can favorably present information, build a solid process, and de-risk deal dynamics, founders and management teams risk jeopardizing the transaction altogether. Delegating the M&A process to a firm with sell-side M&A expertise helps ensure the deal happens as smoothly as possible.

As experts who execute transactions for a living, M&A advisors can eliminate the risks of running a process alone by providing you with the following:

• Acting as a sounding board for how best to internally approach an M&A process with employees, clients, and other stakeholders
• Analyzing and presenting information and data to buyers
• Building competitive tension with buyers
• Leveraging the right resources at the proper stages before going into due diligence to help avoid red flags, re-trading, or the deal falling apart
• Negotiating key deal terms to ensure that the transaction is fair, transparent, and acceptable to all parties
• Ensuring buyers are doing the appropriate level of diligence to understand business dynamics

3. M&A Advisors Leverage Their Relationships

An M&A advisor’s social toolbox is invaluable for maximizing a transaction’s potential. When selling a software company, you may prefer to run a broad process or a targeted buyer search; either way, your advisor has access to a comprehensive list of potential buyers and insight into their preferences and behaviors.

They can strategically leverage those relationships to bring added value to a transaction. Not only can they create a competitive sales environment with their unique understanding of the landscape, but they also know how to market to attract the attention of their relationships and serve as a matchmaker if you’re picky about who buys your business.

Better yet, an advisor with industry-specific expertise can understand and strategically position complex businesses, ensuring a curated buyers list that leverages their expertise to maximize opportunity.

LEARN MORE: 5 Types of Mergers and Acquisitions for SaaS Companies (& Examples)

4. M&A Advisors Allow You to Focus on Your Business

Founders and management teams already have packed schedules. Hiring an advisor allows founders to focus on what they do best: growing their business. Performance often suffers when they have to manage an M&A process on top of everything else. A large part of the M&A process is contingent on the continued performance of the business; underperformance makes it challenging to complete a transaction, especially in a competitive market, and can drag out the process for longer than needed.

Founders who utilize a trusted advisor to guide an M&A process so they can allocate as much time as possible to running their company have a clear competitive advantage.

5. M&A Advisors Know How to Strategically Position Your Business

Advisors undertake extensive work preparing marketing materials to position the business strategically, utilizing industry knowledge and creativity to craft a clear picture.

To drive a competitive process, advisors structure the stages and timeline so potential buyers have ample time to understand the opportunity and get up to speed on a similar timeline. Redistributing these responsibilities allows CEOs and other key stakeholders to avoid unnecessarily dealing with transaction obstacles—or accidentally becoming them—when they could exert their energy elsewhere in their business.

6. M&A Advisors Provide Expert Guidance from the Start

Drawing from a wealth of experience, pattern recognition, industry relationships, and a devoted team, advisors have the sole responsibility of completing transactions. They can devote all their focus and energy to your company’s M&A process. Because of this, they can have a constant pulse on market trends, buyer appetites, and the most critical metrics and deal considerations.

A typical M&A process involves 50 to over 200 targeted buyers, multiple lawyers, accountants, management teams, and other third parties. Managing communications and relationships, the information and analysis shared, and the timing and steps of a transaction are some areas where advisors can add tremendous value.

Experts know what levers to pull when, how to reduce the risk of a transaction, and how best to drive competitive dynamics when selling a software company. Depending on how involved you’d like to be in the process, they can serve as translators and help you understand the financial jargon and regulatory requirements.

7. M&A Advisors Empower You as a SaaS Founder

Most entrepreneurs are technically capable of executing an M&A transaction independently, but going it alone reduces efficiency and time spent on the core competencies of the business. Self-representation drains the time of founders and management teams who typically don’t have expertise in running an M&A transaction and ultimately leads to a lower probability of closing a deal and a lower valuation.

By bringing in a trusted team of dedicated experts, you can be confident that your company will remain focused on its business performance while working toward a favorable outcome.

8. The First Step in Selling a Software Company

The ultimate measurement of success in an M&A process is knowing that the best possible outcome has been achieved, and therefore, hiring the right advisor is critical.

Whether you are ready to sell your SaaS business or are curious to see what M&A outcome is possible for your company, reach out to learn how SEG adds value for our software clients.