In the complex world of mergers and acquisitions, the significance of a robust deal team cannot be overstated. A high-performing M&A deal team is essential for navigating the intricacies of these transactions, ensuring a smooth process, and ultimately achieving a successful outcome.
Key Players in an M&A Deal Team
Dean McDonald, Principal at Walden M&A in Atlanta, emphasizes the critical roles within a high-performing M&A deal team. “You definitely want to have an M&A attorney on the deal team, possibly even a tax attorney, depending on what the tax implications might be,” McDonald states. He further explains the necessity of a CPA or tax accountant.
According to McDonald, there are two sides to an M&A deal team: the sell side team and the buy side team. While there is some consistency between the two, there are also specific roles unique to each.
Key Roles on a Sell Side Team
The sell-side team typically includes an M&A advisor or investment banker, an M&A attorney, a CPA, and possibly a tax expert for deal structuring. McDonald also notes the potential inclusion of a financial advisor and an insurance professional, depending on the deal’s complexity.
Key Roles on a Buy Side Team
Buy-side teams often involve more due diligence work, necessitating an audit or transaction team from a CPA firm to conduct the quality of earnings report. “You’re going to have a lot more due diligence work like insurance, marketing, and legal,” says McDonald. If the buyer is a private equity group, there may be one or two key contacts from the group involved.
Requirements for an Effective M&A Deal Team
Given the potential size of these teams, which can include ten or more professionals, clear communication and effective collaboration are paramount.
Streamlined Communication
McDonald highlights the importance of the M&A advisor’s role. “We’re like the quarterback helping move the ball down the field,” he explains. This involves ensuring everyone is on the same page, keeping the seller informed, and conducting regular update calls to discuss progress, outstanding tasks, and priorities.
Experienced Advisors
McDonald also cautions business owners to avoid hiring advisors with insufficient experience. “One time I had a seller that tried to use their family attorney to do a transaction for them, and that was a little bit of a challenge, to say the least,” McDonald recounts. Inexperienced advisors can result in delayed timelines, increased costs, and other complications.
When selecting advisors, business owners must prioritize qualifications and experience. For attorneys, it is crucial to work with a firm possessing the skills for advanced transaction work and potential tax issues. McDonald stresses the importance of having a team with the requisite knowledge and skill set.
Economic awareness is also vital, with teams needing to educate clients on economic factors influencing deal-making. “Sometimes you have to make adjustments because of economics or other situations,” McDonald notes.
Adaptability
McDonald shares a client story illustrating the challenges that can arise during a transaction. In one case, the buyer went through three different sets of attorneys. “Luckily for us, the attorney working with our client – the seller – had done a lot of advanced M&A work and pivoted to the new firm seamlessly,” McDonald recounts.
The deal also involved complex tax issues. Throughout the process, the deal team had to make changes on the fly, adding different professionals at various stages, including those specializing in insurance and marketing. This situation also presented additional hurdles, including an employee with a problematic background and the need to switch lenders mid-stream due to the altered tax structure.
Reflecting on the communication challenges during this complex deal, McDonald says, “I was in regular daily communication with my seller and the buyer.” He highlights the importance of flexibility and open communication in navigating unforeseen changes.
No Undisclosed Surprises
McDonald cites an instance where a client owed the IRS money, which was discovered during due diligence. Fortunately, they were able to resolve it with no impact on the deal. It’s imperative to disclose all information that may be pertinent to the deal with your trusted M&A team to avoid disrupting the deal timeline.
“If there’s any kind of skeleton in the closet, it needs to be revealed in advance. That way, at least, the buyer is aware of it. But, when the buyer finds out about it deep into the deal, problems can arise. They start wondering if there’s something else they’re missing.”
The Importance of an M&A Advisor
Beyond attorneys and financial professionals, M&A advisors play a crucial role in successful transactions. McDonald points out that some business owners attempt to navigate transactions themselves, unaware of the complexities involved. “They really don’t know what they don’t know,” says McDonald.
A strong M&A deal team is indispensable for navigating the complexities of mergers and acquisitions. It requires a combination of experienced professionals, clear communication, and proactive problem-solving.
Walden M&A’s Approach to Managing Complex Deals
Walden M&A employs several strategies to manage complex transactions effectively. These include advanced preparation, ensuring all necessary documents are obtained early, keeping the team informed, and proactively addressing potential issues.
Preparation involves walking clients through the Walden process, setting expectations, and providing ongoing support. “And just making sure that they know they have a trusted advisor by their side to assist them,” McDonald adds.
