The Different Types of M&A Advisors Explained

A merger or acquisition (M&A) is one of the most complex processes that your business will have to contend with - and the process is most likely to profoundly impact the trajectory of your company.

Whether it’s strategic expansion or improved market share, the long-term benefits of a successful M&A are numerous.

But they’re also fraught with risk.

As you and your leadership team navigate the complexities of an M&A, you’re likely to encounter any of the following hurdles.

Understanding regulatory requirements
Complying with relevant legal frameworks
Financial considerations
Workforce integration and employee transfer

Mergers and acquisitions are a critical part of corporate growth at all company sizes, and working with an M&A advisor can help your company actively design and arrive at future success.

The Basics of M&A Advisory

Before we explore why you need it, let’s pause and clarify: what is M&A advisory? As a category of consultancy, M&A advisory is unique from investment banks and financial advisors, although it may fall under the category of boutique investment advisory.

The role of an M&A advisor can be to:

Act for both buy-side and sell-side companies
Advise throughout the M&A process, from strategy to global onboarding
Serve small to medium-sized companies in lieu of large investment advisors
Offer unique, niche, and regional contacts and industry knowledge to support a company’s merger and acquisition strategy

Because they have comprehensive industry knowledge and analysis, M&A advisors can provide support across the range of tasks needed for success. They can even help you begin the process by short-listing potential companies for a merger.

Once the process is underway, however, advisors will primarily support the following:

Creating pitches, decks, and other marketing tools
Initiating confidential first contact
M&A valuation and due diligence management
Transaction pricing and structuring, as well as negotiation
Document review and preparation
Onboarding after the transaction

On top of this, an M&A advisory firm provides access to their network. Knowing who to connect with and which companies are ready for an approach is an essential part of how M&A advisors help companies prepare for the future.

The Dynamic Evolution of M&A Advisory Services

As its own industry, M&A advisory tends to be cyclical—peaking during economic growth and opportunity with a downturn during struggling times. The providers of this service are roughly grouped into:

Dedicated M&A advisory professionals and consulting firms
M&A departments within major investment banks
M&A law firms and attorneys, usually limited to due diligence

M&A advisory services from investment banking firms became popular in the 1990s. With a rise in corporate consolidation leading up to the early 2000s, companies needed help often negotiating tricky legal manoeuvres. Demand fell off during the 2007–09 financial crisis, rebounding shortly in 2010 and experiencing some ups and downs before a historic spike in deal volumes in 2021.

The jump in interest rates and other economic factors have hit M&A, causing a significant drop in 2022 and, to a lesser degree, 2023 activity. However, this year promises a recovery—one survey of business leaders anticipates corporate M&A to increase by about 12% in 2024.

The Benefits of Working with an M&A Advisor

Working with a leading M&A advisor is similar to adding any other specialist to your team. Instead of the same internal leaders with limited familiarity, you’re engaging someone with tested knowledge and hands-on experience tp help mitigate common M&A risks. M&A advisory provides:

Deep Industry Knowledge

While your business and marketing analysis certainly includes competitive awareness in terms of products, trends, and changes in leadership, it may not delve into the level of internal structures, physical or intellectual material sourcing, or resource management. M&A advisory isn’t just looking outward at the competition and their products and services but at your industry’s underlying mechanics and moving parts.

Critical Networks

You can reach out to almost any company worldwide, but do you know who would have critical data related to corporate valuation or what pain points to address in early negotiation? M&A advisors develop contacts beyond the front line of businesses, either in their fields of specialty or regions, or both.

Efficiency

M&A advisory services are designed to help with the full process from start to finish. They can:

Ensure critical functions, communications, and milestones aren’t neglected
Oversee project management and internal communications
Promote internal acceptance, support, and engagement

Decision Consulting

One of the most critical aspects of M&A is understanding when to work through barriers, when to keep negotiating, and when to cancel a deal.

All of the involved members of your leadership team—as well as your legal team—may offer opinions based on their perspectives and mandates, but an M&A advisor understands what signs to look for. They can:

Interpret the importance of different obstacles
Identify which negotiation tactics will have the greatest chance of success
Evaluate the pros and cons of pressing forward versus changing direction

The Different Types of M&A Advisors Explained

There are many components to a successful M&A. This also means that there are also many numerous kinds of M&A advisory services that your company may need to utilise during this delicate process.

Financial M&A Advisory Services

At the heart of any M&A transaction lies a robust financial analysis and valuation process. Financial advisory services in this realm are typically provided by two main types of firms: investment banks and specialised M&A advisory firms.

The key difference between these two types of providers is size.

Investment banks, such as Goldman Sachs, Morgan Stanley, and J.P. Morgan, offer a full suite of financial services, including M&A advisory. Their strength lies in their ability to provide comprehensive solutions, leveraging their expertise in areas like capital markets, trading, and underwriting. However, some companies prefer to engage dedicated M&A advisory firms.

M&A advisory firms, (sometimes referred to as boutique investment banks), are solely focused on mergers and acquisitions. These firms offer a more specialised and tailored approach, with a deep understanding of the M&A process and industry-specific expertise.

Both investment banks and M&A advisory firms provide critical services such as:

Development of marketing materials (teaser, pitch decks, investment memorandums)
Buyer and target company valuation
Deal origination
Creating target company longlists and shortlists
Approaches to buyers and sellers
Conducting Initial approaches and negotiations with third parties
Deal closing
Capital raising
Company restructuring

Legal M&A Advisory Services

Legal complexities are inherent in M&A transactions. This means that many companies benefit from the expertise of legal advisory services.

Legal advisory service providers can help you with any of the following:

Regulatory compliance
Legal due diligence
Contract negotiation and drafting
Antitrust and competition law considerations
Intellectual property and licensing matters

Strategic M&A Advisory Services

Beyond the financial and legal aspects, strategic advisory services play a pivotal role in ensuring the long-term success of an M&A transaction.

Strategic M&A advisors conduct in-depth market analysis and industry research, facilitating target identification and screening processes at the start of the process.

They also contribute to integration planning and execution, as well as post-merger management and restructuring efforts. Their strategic insights and recommendations help align the transaction with the overarching business objectives and ensure a seamless integration of operations.

Examples of strategic advisory services would include companies such as:

Management consulting firms (e.g., McKinsey & Company, Boston Consulting Group, Bain & Company)
Specialised M&A consulting firms (e.g., L.E.K. Consulting, Cornerstone Research)
Industry-specific consulting firms (e.g., Altman Solon for telecom/media)

HR M&A Advisory Services

In the realm of human resources advisory services, a unique and increasingly valuable solution has emerged: the Employer of Record (EOR) model.

During an M&A transaction, the integration of acquired talent can be a significant challenge, particularly when dealing with cross-border workforces. An EOR can streamline this process by acting as the legal employer of record for employees across different countries and jurisdictions.

By taking on the administrative and compliance responsibilities associated with employment, an EOR ensures that all applicable labour laws, regulations, and local employment practices are adhered to, minimising the risk of non-compliance and potential legal ramifications.