In the first part of our “7 Reasons to Hire an M&A Advisor in 2022” blog, we explored the key reasons founders and software entrepreneurs hire an advisor when exploring an M&A process and the value such a partnership can provide. Simply stated, advisors provide access to a broad list of buyers, maximize value, and reduce the risk associated with completing a transaction. They also allow founders and management teams to efficiently spend their time and energy elsewhere in the business while leveraging advisor expertise to successfully execute a transaction.
Even in the years prior to a merger or acquisition, businesses can benefit from working with an M&A advisor like SEG. Software entrepreneurs face many challenges when looking to sell a business. In addition to having to navigate industry standards and evolving technologies, they also have to manage their customer relationships, keep their data organized, and generally keep innovating.
The advice an M&A firm can offer prior to a sale can be a tool for major growth, allowing entrepreneurs to confidently focus on and grow their businesses instead of being consumed by the M&A process itself.
SEG’s advice helps businesses indirectly grow by helping them fill their knowledge gaps and enhance the facets of their businesses that might be faltering or preventing growth.
If selling all or a majority of your business is part of your exit strategy, working with an advisor can unlock many new opportunities. Through our M&A services, SEG wisely and skillfully advises clients to achieve or surpass their financial, strategic, and operational objectives and delegate responsibilities strategically so they can focus on what they do best: running a business.
To highlight the additional benefits of hiring an M&A advisor before and during a sale or majority control transaction, we interviewed two SEG clients who completed M&A transactions to better understand their decision to hire an advisor, where in particular SEG provided value, and other information founders consider when exploring a transaction.
When and how did you decide to hire an advisor? What were you considering when seeking advisors, and why did you ultimately select SEG?
“I had been operating my business for many years and was approached by buyers who seemed to be floating unrealistic offers and valuations during my preliminary discussions. I spoke with multiple tech entrepreneurs who suggested hiring an advisor to assist with the process. I wanted a firm that specialized in software and SaaS with which I could work cohesively. SEG’s expertise and easy-going demeanor enabled me to ‘click’ with the team, making the decision to work with them a no-brainer.”
“While operating my business, I received several inbound inquiries from different buyers. I took a few of these calls and quickly realized that I didn’t know enough about the M&A process to make a wise decision and select the right buyer. I didn’t have the expertise or time to immerse myself in the core competencies of what advisors provide. We sought an advisor who understood businesses like ours from a size, industry, and ownership perspective. SEG demonstrated a clear understanding of our business and end market, and we knew we could trust them given their experience working with businesses like ours.”
What aspects of the M&A process would have been the most difficult to go through without the guidance of SEG? Where did SEG add the most value throughout the process?
“Having an advisor was crucial throughout the entire process, but without SEG, we would not have been prepared for what was coming next at each stage of the process, whether it was preparing materials at the beginning or pushing through diligence towards the end. Having a dedicated team in SEG to help drive the process forward at every step was invaluable.”
“SEG was a value-add at every stage of the process. It is an extreme version of trying to sell a house without an expert. You need help at every step: how to stage the house for visits, what buyers are looking for and valuing, what trends are happening in real time, and how to structure the process to engage buyers and drive value. Without SEG, we would have tried to tell the story of our business to potential buyers the same way we sell to potential customers. With help from SEG, we learned to sell the value of the business, market, and future opportunities to potential buyers.”
How important were SEG’s B2B software and industry expertise throughout the M&A process?
“Very important, and one of the reasons SEG was a clear choice. SEG’s expertise enabled us to best position our story and history to best attract buyers and maximize value.”
“Integral. The fact is that we didn’t know how to speak the same language as buyers until we began working with SEG. I wish we had begun utilizing SEG’s expertise years earlier to help us get prepared for a transaction so that we could properly organize reports, track data, manage accounting and be able to produce the information for software investors and buyers. SEG enabled us to bridge the gap in our knowledge.”
Did utilizing SEG to assist with a transaction allow you and your team to properly operate the business on a day-to-day basis in an efficient way?
“Having run an [M&A] process during COVID, I can confidently say we would not have been able to execute a transaction independently and run our business simultaneously. Working with SEG allowed us to keep our eye on the ball during an uncertain time so we could continue to perform.”
If you had to pick an area where SEG’s expertise added the most between 1) buyer relationships, 2) value maximization, and 3) managing risk, which would it be?
“Buyer relationships. SEG intuitively understands the buyer universe and has deep relationships with buyers. Mixed with their expertise, they were able to strategically leverage their relationships to lead to the best possible outcome.”
“All three. But specifically, regarding value maximization, SEG’s ability to manage negotiations is first class. Having a trusted advisor to shield the founders from negotiations directly with buyers is pivotal for those of us who don’t have experience doing so. SEG was able to communicate with both the buyer and ourselves throughout the process, managing the pace and levers throughout the process to drive value. This itself is worth cold hard cash to founders.”
We know understanding the jargon of the financial world is made significantly easier with the help of an advisor, so we pride ourselves on serving as your translator in this often confusing landscape. Members of the SEG team have unparalleled experience in helping you confidently navigate the M&A process while still being able to focus on your business.
Advisors exist to strategically guide entrepreneurs and manage teams through those potentially stressful, emotional, and complex M&A processes. At SEG, our fundamental goal for every partnership we embark on is to get the “hug” from our clients. That is, our team aims to leave the companies we work with feeling not just supported, but so thrilled with our work that the results they see make them want to hug us. We strive to create enduring relationships with our clients that warrant positive feedback they want to share with others, and we’re humbled to have such a referenceable pool of entrepreneurs we have worked with.
If you would like to learn more about how SEG adds value for our software clients or have questions about the M&A process, don’t hesitate to reach out.