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The M&A Partners Working Behind the Scenes

While business development professionals and investment bankers are at the forefront of dealmaking, M&A partners are working behind the curtain to narrow down targets, prepare companies for sale and effectively complete due diligence

The M&A Partners Working Behind the Scenes

Private equity business development teams and investment bankers are on the front lines of deal sourcing, with a variety of tools at their disposal to find opportunities. Many of the M&A Business Development Professionals to Watch in the Spring 2024 edition of Middle Market DealMaker show how the origination function in M&A has grown and matured over the years. Behind the scenes, however, there are a host of M&A partners supporting these activities.

Experts say these providers, including accountants, attorneys and wealth advisors, usually play a secondary but crucial role in the transaction process.

They’re involved in preparing companies for sale, helping clients narrow their funnel, facilitating buy-side due diligence, lining up acquisition terms and closing transactions.

In a slow or volatile market, like the one we saw in recent years, some of this work becomes even more important.

This article will appear in the Spring 2024 issue of Middle Market DealMaker, out next month.

Did you know: M&A partners were involved in more than 3,500 meetings at DealMAX, ACG’s annual conference. Register today at dealmax.org for access to the scheduling tool. 

“The advantage of an M&A third-party professional is that they see so much deal flow year to year,” says Peter Kahn, senior partner, M&A, for business and technology consulting firm West Monroe. “Our firm looks at over 600 deals a year, so we are part of the majority of transactions in private equity. If a company is being bought or sold, there’s a good chance we’ve looked at it before. That’s a lot of inherent market knowledge. We might be part of the buy- side diligence and indicate that this target is stronger compared to another target.”

While investment banks are most likely to bring forward acquisition targets, M&A partners play a critical role in culling the wheat from the chaff, narrowing the focus, minimizing risk and doing up-front work to ensure deals close faster or with better terms.

“There is a big funnel [of potential deals],” Kahn says. “Third parties come in to help the private equity investor narrow that.”

There is a big funnel [of potential deals]. Third parties come in to help the private equity investor narrow that.

Peter Kahn

West Monroe

Easing the Search Process

While M&A partners don’t typically help with sourcing deals, some provide their clients with tools designed to make the search and filter process more efficient.

Paul Aversano, managing director with business management consuling company Alvarez & Marsal and global practice leader for its Global Transaction Advisory Group, says his firm is often brought in by investment banks working to sell private equity portfolio companies.

Over the years, Aversano noticed that many clients were asking for help finding transaction opportunities and that methods of tracking and targeting deals were often informal: using industry connections, Excel spreadsheets and operating partners familiar with specific sectors.

To help address clients’ deal sourcing needs, Alvarez & Marsal created the Data Intelligence Gateway (DIG), which uses proprietary technology to search publicly available information and gain insights on private companies. DIG generates a customized visual dashboard that enables M&A professionals to filter and sort through data gathered from public sources about company size, growth trajectory, company ownership and other items.

“We do a lot of custom or bespoke searches for add-on acquisitions,” Aversano says. A client might be looking for add-on potentials in a specific industry that fit certain size or geographic parameters, for example. “We are able to start with a population of say hundreds of thousands and put it through a funnel and say, ‘Here are 160 companies that generally meet your criteria,’” Aversano explains.

Aversano says DIG searches are usually done for companies that are already clients that use the reports as they wish. Rather than deal sourcing, Aversano describes DIG as an idea generator.

Stages of Diligence

Identifying potential deals is one business development challenge; closing them is another. Completing deals in a timely manner is no small feat, and it’s another way M&A partners can aid clients.

“There’s an old adage that time kills all deals,” says Stephen Rossi, senior managing director and head of investment banking for Palm Tree, a hybrid consulting and investment banking firm, which combines multiple functions like accounting and advisory work under one roof.

Related content: Delivering Dividends: Investing in Accounting Firms

He says his company helps in business development by working on the front end to anticipate and answer questions that might come from an investor during the diligence process.

“If they [an acquiring company] come in for diligence and it takes the seller three months to get back to them, the buyer starts thinking there’s a problem,” Rossi says. “If a buyer gives you their request list, and the seller has answers next week, then the process moves smoothly, and the buyer feels the target is being credible.”

Palm Tree provides accounting services for companies planning a sale and prepares narratives that position the company as an attractive investment.

“We do the [accounting] work up front, so when a buyer comes in, we know the numbers are accurate,” Rossi says. “While that work is performed, my team is preparing marketing materials to correctly position the company, so that … everything is buttoned up.”

Korean beauty brand The Crème Shop was one deal that struggled in a sale process before Palm Tree took it on. It was ultimately sold to LG H&H, an affiliate of Korean conglomerate LG Group, in 2022. The $250 million deal came about after an attorney for The Crème Shop called Palm Tree because the beauty company had lingered in an auction for about a year.

Mitchel Nakken, senior managing director and co-head of consulting for Palm Tree, took a deep dive into The Crème Shop’s financials—a process he compares to fixing the structure of a house versus simply staging it for sale. “If there are any true underlying issues someone is trying to cover up or distract from, our involvement will uncover those items and speed up the process,” he says.

If there are any true underlying issues someone is trying to cover up or distract from, our involvement will uncover those items and speed up the process.

Mitchel Nakken

Palm Tree

Identifying and presenting a company’s upsides is another way that M&A partners can move a deal forward or achieve better terms. “If you can present company performance in a way to make the underlying asset more understandable, or are able to delineate better profitability metrics or other value drivers, buyers will pay a premium,” Rossi says.

Sell-side and Buy-side Legal Help

When it comes to closing deals, legal advisors can help buyers go over a company’s documents and financials to avoid any risks or pitfalls. “On the buy-side, our due diligence process is geared to make sure that our clients have a full understanding of what they are purchasing and are able to assess the magnitude of the risks involved,” says Alec Watson, partner at law firm Troutman Pepper. “Things are going to move rapidly, so we work efficiently and as quickly as possible, but not at the expense of being thorough.”

Troutman Pepper works with clients on both the sell- and buy-sides. Some of this work of getting companies’ “houses in order” is often prepared on the sell-side—before a process starts—to account for any questions a buyer might have, Watson explains.

“Once a company actually goes to market, things move really quickly,” Watson says. “The last thing a client wants is to see a deal get bogged down because of some issue that could have been addressed earlier, had they known about it. Timing is critical in these situations, so our goal is to minimize the number of obstacles that could create friction and delay the process.” Kristian Herrmann, partner in the Private Equity and Mergers & Acquisitions Group at law firm Proskauer, says the role of a transaction lawyer is to be “a deal facilitator as opposed to a deal obstructionist.”

Like Watson Herrmann says his law firm works with clients to dig into their business months before a sale process is initiated.

“That allows us to identify problems, risks or exposures the business could have that might cause a buyer to have a bit of heartburn,” Herrmann says. “With enough lead time, many problems can be mitigated, if not entirely resolved, before a sale process kicks off. And this upfront work often results in a smoother process.”


Annemarie Mannion is a former reporter for the Chicago Tribune and a freelance writer who covers business.


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