Questions

Can you recommend an A1 M&A firm (with UK/US presence) to help advise on exit strategy. B2C SaaS. And how's a typical arrangement structured?

UK based business (but strong international presence) with fast growth and potential interest from large organisations. Prompting consideration for early exit. Would like to establish how valuation might form and expected arrangement / fees / anything else to consider. Thanks!

3answers

Fast growing, UK B2C SaaS doesn't really give me enough information. The most critical piece of information is your revenue/growth rate or valuation. That's going to determine both who your potential acquirers are and who the best type of firm is to help you sell.

M&A firms tend to be broken into four big groups, generally based around size: full service investment banks, boutique investment banks, M&A advisors, and business brokers.

At the top are Full Service Investment Banks. These are firms like Goldman Sachs, Morgan Stanely, JP Morgan, etc. They work on the biggest and most complex deals, usually nothing less than $1 billion in transaction value (their 'midmarket' teams will do $500M transactions occasionally, but not often). They also tend to offer more than just advisory, including providing funding, other capital markets transactions, banking services, etc for massive corporations. When Dell was taken private by Michael Dell and Silver Lake, bankers from Barclays and Parella Weinberg advised them. JP Morgan Chase advised Dell, the company. Barclays was also one of the four banks to provide the $15 billion in loans to finance the deal along with Bank of America Merrill Lynch, Credit Suisse and RBC Capital.

Parella Weinberg is an example of the next level down - a boutique investment bank. Boutique investment banks tend to focus on larger transactions as well, usually in the $300MM-$50B range. Some firms, like Parella Weinberg, Jeffries, Moelis, etc will be the boutique bank attached to a very large deal like the Dell deal. Most often though, boutique banks are running their own transactions in the $100MM - $1B range. Boutique banks also tend to focus on a few industries where they have expertise or will have teams of bankers focused on specific industries for mid-market companies. Piper Jaffray and Cowen both have Technology, Media and Telecom (TMT) focused banking teams, for example. Boutique banks won't provide financing most of the time, unless they're a merchant bank, as they're specifically focused on helping you close a deal.

Below boutique banks is a group of people called M&A advisors. They'll often refer to themselves as investment bankers, but in most cases they aren't actually registered with FINRA as an investment bank. Or they will be registered, but through a different firm. M&A advisors tend to work deals in the $20-100MM range, though they will occasionally work larger deals. Typically the larger, more complex deals are run alongside a boutique bank, in some ways similar to how boutiques will run alongside a full service bank. Once you get to this level of advisor/banker, there starts to be thousands of bankers who all have different expertise. Some of the advisors used to work at boutiques or full service banks and decided to go out on their own so they have very good contacts. Others started out in a very small advisory and have worked their way up. You're going to want to make sure you really vet their contacts and understand what deals they've *closed* in the past (not just worked on). GrowthPoint Technology Partners is an example of a good bank of this size that is focused on technology deals. M&A advisors tend not to have a lot of deals happening at once, so they'll spend more time with you helping you value your business, structure the pitch deck, etc.

The bottom rung of the ladder is what are called business brokers. Brokers tend to be more focused on volume than strategic buyers. They're going to help you widely advertise that your business is for sale and then will help you manage the process of dealing with buyers. Relative to the other options, they're going to feel a little bit more like a real estate agent. A technology example of this is FEInternational. They'll help you sell your website/business by advertising it widely to other individuals who would potentially be interesting in buying from you. Their average sale prices are in the $100k - $10MM range. At this level, they'll have expertise helping you close the deal, but mostly as a straightforward transaction. It's unlikely to be a stock for stock sale or have any complexities other than some sort of escrow and a bit of due diligence.

One of the best ways to figure out how you should value your business, who you should be chatting with, and how to get the most value for your business would be to work with Axial (http://www.axial.net). They have a network of 20,000 investment bankers, private equity groups, and corporations.

Axial has put together a very good guide that will help you better understand your options, what you should be doing next, etc as you prepare to sell: http://www.axial.net/forum/ceo_library/

I hope that helps. I'm happy to chat more in-depth if you have further questions, just connect with me here on Clarity. Good luck selling your business.


Answered 5 years ago

I went through something similar trying to sell a B2B PaaS company. A few comments:

1. Fees were structured as a small retainer up front and upon a transaction, either a % of the deal or a flat fee whichever was less. So the M&A firm was guaranteed a minimum amount for closing a deal. The retainer was about 20% of the minimum amount upon execution of a sale. The % fee for the M&A firm was tiered so that it dropped if the sale price was above a certain level.

2. Make sure you put in place a carve out for any potential acquirers you already have a relationship with or are talking to.

3. Watch closely to make sure they are able to get the right conversations with the right people quickly. It's a warning sign if they struggle to get calls returned.

4. Depending on how you structure it and how well plugged into the industry you are, you might consider working with a banker or getting advice from your existing "team" ( Board, investors, etc.) and just letting them advise you vice paying an M&A firm. This is sort of related to my earlier point in watching out for whether you are already talking to the right acquirers yourself (you said there has already been interest, so perhaps this is the case).

5. Assuming you are the CEO, plan to invest a lot of time in this yourself no matter who you hire or how you structure it. IOW you'll spend less time & attention running the business while you run this process instead. Make sure you are OK with this, and that your Board is as well.

Good luck, have fun, and let me know if you'd like to talk further.


Answered 5 years ago

There are a number of great organizations whose membership is probably worth a small investment if you're thinking about a seven figure or greater exit.

The best, in my opinion, is BEI, which is an association of advisors HEAVILY focused on exit strategies for mid-size companies. I'll be attending their conference myself in August.

Links to other organizations to look at joining and/or reaching out to for help.

www.exitplanningforadvisors.com
http://www.acg.org/
http://www.amaaonline.com/
www.axial.net
http://masource.org/
www.mergernetwork.com


Answered 4 years ago

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