All sellers of middle market aerospace and defense companies obviously want to sell their companies for the highest price possible, as this event often represents the culmination of their life’s work. While there are no magic shortcuts, there are ways to accomplish this objective. One of the best ways is to hire a team of seasoned professionals to help ensure that you plan properly and execute optimally.
To hire seasoned professionals does cost significant money but, in our experience over 21 years, sellers always earn back multiples on the fees they pay for the right professionals. The optimal team consists of: i) an investment banker with deep experience in your niche, who will lead the process, ii) a seasoned M&A attorney and iii) talented chief accounting officer within the company or a retained accounting expert, separate and apart from the company’s auditors.
This team is required to assure that the sale preparations are complete and to help the company defend itself in exhaustive buyer due diligence. Additionally, this team will be called upon to support the company through the negotiation of definitive terms, including but not limited to tax structuring, working capital calculations, and third-party conditions precedent. By far the best way to assure the optimum price for your company is to have a rigorous process in place early, to optimally prepare. These preparations should be led by experienced professionals and must be exhaustive and include, but not be limited to: financials, operations, human resources, contracts, information technology, environmental, etc.
In regard to the cost of M&A professionals, last quarter (Q1 2022) we conducted a survey of company owners, accountants, attorneys, investment bankers, and consultants and asked them about their recent experience with M&A professional fees (a/k/a Transaction Costs). On a $50 million sale in aerospace and defense, the average total of professional fees was 3.8%, which equates to $1.9 Million (survey details via link below). While this is a lot of money, especially to owners of a privately held company, in our experience over the past 21 years, sellers always recoup multiples of professional fees, through higher prices – when they hire the right team.
M&A Survey Q1 2022 – Transaction Costs
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Managing Director, Defense