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A third-party advisor such as Foros is crucial for providing objective, strategic guidance, and can also offer perspective on the types of deals available, from spot acquisition to synergies with third parties to create instances where, as Foros' Auerbach put it, "one plus one can equal three."
Where many companies get tripped up in the M&A process is in cultural alignment. It's also important to avoid the types of deals that may look good in theory but stumble in practice, he said.
"Joint ventures look good on paper, but time and time again, they are very hard to execute and very hard to unwind," Auerbach said. "Many times they are there to avoid the key question of why not just get married?"
Other things to pay attention to, according to Auerbach, are how a potential deal can disrupt the organization, from employees to customers. Solution providers should also be wary of trying to find every potential deal partner there is -- an approach that may miss the "wild card buyer," but is much more targeted and less likely to create competitive advantages among other industry players that know you're for sale, Auerbach urged.
The criteria solution providers should look at when choosing an advisor include a strong reputation, superior M&A experience, unbiased advice, extensive experience with complex transactions, tech industry experience, experience with founder-owned and founder-controlled companies, and commitment to the mandate. The type of advisor, Auerbach said, is also important. Industry brokers, for example, can match buyers and sellers but don't much get involved in the deeper things like cultural alignment. And, tech M&A experts know the industry, but they're also apt to talk to everybody to gather information and may reveal your secrets to competitors, Auerbach said.
"Make sure they have your interests in mind versus somebody just trying to get a deal done," he said.
PUBLISHED OCT. 17, 2012
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