Retirement is the most common reason owners in the lower middle market exit their businesses. Yet many of these owners have given little thought to what comes next, or even to when they will retire. A wealth advisor is critical to these mergers and acquisitions. They can also be an invaluable asset across the continuum of M&A. Owners and buyers should consider consulting a wealth advisor before each and every transaction. Investment bankers can increase the odds of a successful transaction by encouraging them to do so.

The Role of a Wealth Advisor in Mergers and Acquisitions

A sale usually means a large influx of cash—or in the case of a buyer, a significant new asset. A wealth advisor helps people understand the long-term financial implications of these transactions. This includes how they might affect retirement planning, best and worst case scenarios, how much money a person needs for retirement (or another long-term plan), and how the merger or acquisition aligns with that goal. They take a process that is often amorphous, and assign clear, specific figures that allow all parties to make intelligent decisions.

Who Needs a Wealth Advisor?

Sellers almost always need a wealth advisor. A buyer might need one, too. Some specific scenarios in which a wealth advisor is key include:

  • A seller is either selling because they are retiring, or they intend to retire within the next 5 years.
  • A first-time buyer is investing in a business and does not know how the investment will affect their retirement.
  • A buyer plans to retire in the next 5 years.
  • A seller is weighing the options for selling or retiring from a family-run business.
  • A seller does not have specific expectations about pricing, but says they need enough to retire or start a new business.
  • A seller intends to embark on a new project, such as buying another business.
  • Either a seller or a buyer has done very little financial planning, or plans to radically change their retirement plans.
  • A seller intends to agree to an earnout provision, and needs to assess how this might affect their retirement and financial plans.

How Wealth Advisors Shepherd Transactions to Closing

When sellers think they’re not getting enough money or buyers get anxious about the business’s liabilities, transactions fall apart. An early consult with a wealth advisor can help assess the true needs of the seller, and sometimes the buyer as well. By gathering specific figures and establishing benchmarks for retirements or other personal wealth goals, wealth advisors make it easy for parties to assess the value of a transaction. Because if a business owner is hoping to retire and a transaction won’t support that choice, it immediately becomes less valuable to them.

A good wealth advisor works hand in hand with a thoughtful investment bank. Together, the two protect the seller’s interests and ensure they walk away from the transaction with the cash they need. Early engagement with both can ensure optimal sale value, and a painless sale process.

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