The Role of the Sell-Side M&A Advisor in Investment Banking - dummies

The Role of the Sell-Side M&A Advisor in Investment Banking

By Matt Krantz, Robert R. Johnson

Although the sell-side M&A advisor will perform many of the same functions in investment banking as the buy-side advisor, there are some fundamental differences, depending upon whether the firm wants to be acquired.

How to prepare the company for sale

Many companies who are acquired were actually looking to be acquired — they welcome the overtures from potential buyers. In fact, increasingly, the dream of many entrepreneurs is to found a company, operate it successfully, grow the business, and then sell out to a major firm in the industry for a handsome profit.

If that’s the case, the sell-side investment banking advisor will prepare an analysis of the company and recommend steps that should be taken prior to the firm looking for potential suitors to make the firm more attractive.

Like buy-side advisors, sell-side M&A advisors prepare a detailed valuation report on the company, specifying a range of values that the firm should conceivably sell for. Where warranted, this analysis will also provide a summary of selling part of the company in lieu of the entire company.

In fact, the firm may find that by selling off parts of the firm, it may be able to command a higher price than by selling the entire firm to one buyer.

Marketing the firm

Sell-side M&A advising focuses on marketing the firm. Therefore, sell-side advisors provide clients with advice on a business plan that makes the firm more attractive to potential buyers. This relationship may start several years in advance, because the company generally prepares for the day when it will be sold. Sell-side advisors also prepare detailed marketing materials for distribution to potential buyers.

A major part of marketing the firm involves initiating contact with potential buyers and gauging levels of interest. Connecting the buyer and seller is one of the most important functions of the sell-side M&A advisor; all the avenues detailed earlier for the buy-side advisor may be utilized by the sell-side counterpart.

If, on the other hand, the firm does not want to be acquired, the sell-side M&A advisor consults with firm management and the board of directors on a game plan to enact some takeover defense strategies.