Selecting A Merger And Acquisition Advisor

In my prior business experience in the information technology industry, it was a very common practice for potential buyers to submit a Request for Proposal in order to make a purchase decision. After several years as a Merger and Acquisition advisor, I finally got an RFP. A light bulb went off.

This is the most important "purchase decision" a business owner will ever make, and yet the process of selecting an advisor in a multi million dollar transaction was generally less diligent than the purchase of a $200,000 software product.

I gave this a great deal of thought and came to a conclusion. These business owners are very smart and accomplished people, but they generally will only sell one business in their lifetime. They knew how to evaluate every other product or service relating to their business because they had made those purchase decisions multiple times over the years.

It occurred to me that they did not have the experience to know the right questions to ask in order to objectively evaluate one M&A firm against another. Their instincts are generally pretty good, so in the selection process we normally go through, they bring in the 3 or 4 firms for presentations, check a few references and make a decision on a gut reaction.

The purpose of this article is to provide those business sellers that possess great instincts an additional tool to objectively compare Merger and Acquisition advisors by asking the right questions. Below is a sample RFP that should be helpful in your selection process:

Request For Proposal for the Merger and Acquisition Advisor

Sell Side Engagement for XYZ COMPANY, INC.

COMPANY DESCRIPTION

Briefly Describe your company

Approximate 2005 Revenues - ?

Responding Company Name

Responding Company Description

Years in Business

Primary Contact Name for this Engagement

Phone Number

Email address

Company Address

Company Web Site

1. In the past 24 months what transactions have you completed?

Company Name Nature of Engagement Industry Description of Client

Example

XYZ Company Sell Side Engagement Healthcare information technology

2. How many Investment Bankers work for your Firm?

3. Who would be working as the lead on my engagement? Please include Bio.

a. Include any professional designations i.e. Series 7, CBI

b. Include any industry associations i.e. IBBA, local business broker chapter M&A Source, etc.

4. Is your firm known for a particular industry niche? Transaction niche? Please describe.

5. What steps do you take to insure the confidentiality of the sale process?

6. Please Send a sample of your deliverables:

a. Blind Profile

b. Confidentiality Agreement or NDA

c. The Book, Memorandum or Executive Summary

d. If you do a mailing - typical contents

7. Describe your process of marketing your sell side engagement with a typical timeline from start to finish: i.e. day 1 sign engagement agreement, 1 Week submit first target database for approval, Week 2 submit draft of Profile/NDA for approval.............Confidentiality Agreements Signed, Executive Summary is completed, etc.

8. Describe the Marketing Process - is it posted on Internet Sites, emails, mailing campaign, direct telephone calls, etc

9. What is the profile of the "A Target" buyers for my company? Briefly describe.

10. If you have any client reference letters from the past 24 months, please include 2 or 3 in your package.

11. As one of our final selection criteria, will we be able to speak to references?

12. Detail your fees.

a. Up-front payments

b. Monthly fees

c. Minimum Cash at Close

d. Expenses

e. Other

f. In lieu of this, please submit your agreement with the fees as they would be set for this sell side engagement.

13. What is your philosophy on putting a price tag on my company?

14. Describe your process of keeping your client informed on the progress of the sale.

g. What reports do you submit to the client? Include samples please.

h. How often are reports submitted?

15. How will I know that I am getting the best price and terms if your firm represents my company for sale?

16. Does your contract call for exclusivity?

17. If I don't think you are doing a good job, what options do I have?

18. What about a "tail" on the agreement? If your firm is fired, what prospects carry a tail for fees to your firm? How long is the tail?

19. Please explain why your firm is the best fit for our sale engagement.

20. What are your thoughts about valuations for our company/industry.

21. What would your firm do in to advise us on improving on our transaction value?

The RFP responses are due by May 24. If you have any questions please email them to _____________. Please note that this is highly confidential and my employees are not to be made aware that we are considering the sale of our company.