When it comes to selling or refinancing your company, many pet industry owners have questions about the benefits of using an M&A advisor, also known as an investment banker (assuming they have the appropriate FINRA designation). The reasons are simple. An advisor can dramatically improve success in securing the right type of financing for the business and will make a sale process far more productive. Here are three basic reasons why.

1. A Higher Valuation
The advisor is an expert in their field. You are an expert in yours. Just as you would trust a healthcare expert to guide your medical decisions or a contractor to complete a building project, an experienced M&A advisor will be able to achieve a far better valuation or purchase price because of their experience. An advisor can help an organization make the right financing decisions upfront, before discovering a costly mistake. Navigating these hurdles can be difficult without an experienced guide.

2. Focus on the Business
In addition to a higher success rate and valuation, it can take hundreds of hours to sell a company. Most pet industry owners do not have previous experience selling a business, and many additional hours can be lost trying to navigate the choppy waters. When a business owner runs their own sale or refinancing process, precious time is diluted away from the operations of the company. Most owners cannot afford to take that time away from the day-to-day operations. Not only is this unhealthy for the business, but any loss of efficiency or profitability will hurt the value.

3. Knowledge of the Industry
As soon as you begin thinking about the sale process or raising outside capital, consulting an advisor will result in a more successful transaction. A good advisor will work with you, knowing how to make your company highly attractive to buyers or investors. They will look for areas you can improve profitability, smooth transitions and capitalize on new opportunities. When done thoughtfully and correctly, this process can take a year or more.

Advisors who specialize in a particular industry certainly have an advantage. This is especially true in the pet industry. An advisor that knows the players and what makes businesses attractive to key investors is ahead of the game before they even begin. A great pet industry advisor will know the answers to questions like, “Who is looking to buy?”  “Who is looking to sell?” and “What private equity groups are interested in that particular market segment?”

I have several conversations a week with strategic and financial buyers looking to place additional capital into the pet industry. And while the business owner has become successful by focusing on building their business, a good advisor is successful by knowing where to go and what to do when selling a business or raising capital.

The right advisor will minimize the brain damage that can occur during a capital transaction and even make the process fun and enjoyable. It’s their job to minimize the stress and time-suck of a transaction. The business owner’s full focus should be on the continued success of their operation, because the more efficient and profitable that business becomes, the more successful a sale or transaction will be.

 

Carol Frank of Boulder, CO, is the founder of four companies in the pet industry. As a Managing Director at SDR Ventures Investment Bank, she is a registered Investment Banker and  leads the team in executing pet industry transactions including M&A, capital formation and strategic advisory services.  She is also the owner of BirdsEye Consulting, the consummate source for pet sector consulting expertise in market research,  licensing, executive recruiting, and sales channel strategy. She can be reached atcarol@carolfrank.com