M&A Advisory for Lower Middle Market Companies

M&A advisors and M&A investment bankers advise buyers and sellers of businesses.

Wayfinder specializes in advising sellers of businesses, which typically entails:

• Assessing valuation and reviewing potential strategic alternatives with the existing shareholder(s)
• Preparing the business for sale, including reviewing adjusted EBITDA and developing the company’s story
• Drafting marketing materials, including an anonymized teaser and confidential information memorandum
• Recommending the list of potential buyers to existing shareholders for their review
• Designing and executing a sale process to maximize potential buyer engagement and competition
• Managing confidential outreach to potential buyers, including obtaining NDAs
• Managing buyer communications, bid deadlines and helping existing shareholder(s) compare value, structure and terms of bids received to determine which buyers are most likely to meet the seller’s objectives
• Preparing management for meetings with buyers and facilitating those meetings
• Coordinating the due diligence process between the seller, buyer and advisors
• Collaborating with seller’s counsel to optimize final pricing and transaction terms for the seller

Sellers often seek to maximize sale proceeds, minimize the time and distraction of a sale, ensure continuity for employees and customers or more likely, a combination of these objectives. An M&A advisor or investment banker draws on their experience managing M&A processes to help the seller achieve their objectives.

Wayfinder works with owners of U.S. companies in the lower middle market. We are generalists, with deep experience in industries where private equity firms are building platforms through acquisitions.

A Wayfinder full sale engagement takes approximately six months for businesses valued below ~$15-20 million and can often take between six to twelve months for businesses in excess of this value. Our Founder and Managing Partner is deeply involved with each step of the process.

• Preparation (3–8 weeks). The success, speed and ease of your sale process post-launch is heavily influenced by the degree of preparation pre-launch. Understanding your objectives is, of course, paramount. We will discuss your price expectations, considerations around personal and business timing, your role after the sale, and objectives regarding employees. We examine your business as a buyer would to refine investment highlights and anticipate potential buyer concerns. We review your financials in detail to identify EBITDA adjustments to maximize your defensible EBITDA. We also discuss and agree on sale process design and the buyer list.
• Marketing materials (occurs in parallel with broader sale preparation). We prepare an anonymized teaser document and confidential information memorandum that tells your company’s story and positions it to attract maximum buyer interest.
• Buyer outreach & initial review (4-6 weeks). We contact the agreed list of potential acquirers. Interested parties sign an NDA before receiving any confidential information, which they then have 4-6 weeks to review.
• Indications of interest. Buyers submit non-binding proposals by a deadline we set. We draft a comparison summary so you can evaluate which proposals best achieve your personalized objectives and how they each compare on value, structure and terms. We make recommendations and you ultimately decide which potential buyers progress to the next phase of the process.
• Management meetings, due diligence and transaction documentation (4-8 weeks). The shape of each sale process post-IOI can be highly bespoke to your company’s circumstances. Bidders that have been progressed will be provided access to a data room to facilitate their due diligence. Your executive leadership team will meet and present to this limited group of bidders to personally tell your company’s story. Most processes involve negotiating and signing an LOI prior to negotiating definitive transaction documentation such as the purchase agreement. Our objective is to negotiate the strongest terms possible before granting a single bidder exclusivity. This is a particularly demanding stage of any sale process because no matter how much assistance a banker provides, management will still be involved in responding to buyer diligence questions in addition to their day jobs running the business.

More detail on each step: Process & Timeline.

Most lower middle market companies sell to one of six buyer types.

• Strategic acquirers. Businesses that are either direct competitors, customers or suppliers of yours, or in an adjacent business, and are looking to acquire companies like yours
• Private equity backed strategics. PE-backed operating companies in your industry who are actively buying competitors
• Private equity firms. Private equity funds that would invest capital into your business directly instead of through an existing portfolio company they own. Private equity firms typically expect a business they acquire directly to have a strong management team that has been with and will continue to lead the business. The size of your business must also fit with the size of their fund and consequently the target check size they need to deploy
• Independent sponsors. Investors who raise capital deal by deal and will either expect existing management to remain with the company or may have their own operating partners who can fill management gaps
• Family offices. Long-term investors deploying their own family capital. They typically own companies for longer periods than private equity firms and independent sponsors and have more investing and operating flexibility
• Search funds. Investors who raise capital to buy a single company that they will own and operate

Each buyer type values your business differently based on different constraints and return requirements. Each has different diligence requirements and access to capital, which impacts the timing, complexity and process of getting a deal closed. An experienced M&A advisor provides knowledge and judgement to determine which buyers to include in outreach and which to progress at different stages of a process.

Most sell-side advisors in the lower middle market charge a success fee paid at closing, and many also charge a monthly and / or upfront retainer that may be credited against the success fee. A full sale process requires substantial investment of time and resources from the M&A advisor. Since few charge by the hour, as attorneys and CPAs do, the retainer is meant to align incentives and ensure the advisor receives some basic degree of compensation for the meaningful resources they allocate towards you.

Wayfinder’s fees are in line with market best practices. Fees are agreed in writing as part of an engagement letter so there are no surprises.

The best time to talk to an M&A advisor or investment banker depends on the current state of your business.

Businesses already well positioned and prepared for sale, as defined by the characteristics below, are best served by speaking to an M&A advisor or investment banker 3-12 months prior to wanting to engage a banker to run a formal sale process.

• Steady or increasing revenue and margins
• 3+ years of fully documented, QoE ready financials that tie to tax returns
• Leadership team that can or does operate the business without owner involvement
• Fully documented operating procedures
• Readily accessible and organized business documentation including, but not limited to customer contracts, supplier contracts, other contracts such as debt documents and lease agreements, employment agreements, employee census, employee handbook and policies, tax documentation (returns, audits, IRS correspondence, sales tax licenses, etc.), schedules of all tangible and intangible assets including fixtures, furniture & equipment, trademarks, IP, etc., copies of sales programs and marketing materials, schedules of IT vendors and costs

Businesses not exhibiting the characteristics just described would be best served by speaking to an M&A advisor or investment banker 24-48 months ahead of an anticipated sale process to ensure adequate preparation.

Speaking to an M&A advisor with enough lead time ahead of a sale process gives you the opportunity to understand any attributes of your business that may lower value or deter potential buyers and provides enough runway for you to adjust those areas to maximize value.

It also makes sense to speak to an M&A advisor or investment banker when:

• You have received an unsolicited offer and want to know if it is fair
• A private equity backed strategic, private equity firm, competitor or other potential acquiror or investor has asked to learn more about your business
• You are thinking about a partial sale or recapitalization
• A partner / member / shareholder, family circumstance or health issue is forcing the question of succession

An early conversation is free and confidential, and there is no obligation to sell.

• Wall Street Expertise & Judgement. Few M&A advisors or investment bankers serving the lower middle market have advised on $40bn of closed M&A transactions, $7bn of debt restructurings or $5bn of capital raises
• Senior-Focus. Our Founder and Managing Partner, Aaron Eisenberg, personally leads every engagement, is involved at every stage of the assignment and is highly invested in your success
• Buyer Board Room Perspective. Few lower middle market advisors have sat in the Board Room of a $500m or multi billion strategic or private equity backed platform as they set their acquisition strategy and their blueprint to sell themselves. We have. We understand what your buyer is thinking, how your company fits into their M&A playbook and broader strategic vision. We can use this perspective to protect and advocate for you.
• Sale Process Specialists. How do you maximize buyer engagement and competition? How do you compare seemingly similar proposals that might actually be quite different? How do you deal with a bidder cutting value or re-trading in diligence? A sale process entails countless strategic and tactical decisions that can individually and cumulatively lead to very different outcomes. Selling businesses is what we do, and we have spent our careers learning how to handle each of these specific situations.