m&a community logo
What is M&A advisory? Key roles and their functions
Back to Insights

What is M&A advisory? Key roles and their functions

na M&A

When deciding to purchase or sell a company, business owners face lots of issues to solve during the potential transaction: from deal sourcing to smooth negotiation and quality market analysis. 

At this point, they might need the assistance of outside advisors, whose expertise facilitates the deal.

Who is an M&A advisor? What function do they have in the M&A transaction? And what’s the cost of the M&A advisory services? Find all the answers in this article.

What is M&A advisory?

M&A advisory is an advisory service provided by third parties during M&A transactions or capital raising. Such third parties are typically represented by investment banks, boutique advisory firms, or specialized M&A advisory firms. 

Some of the largest world M&A advisors include Goldman Sachs, Morgan Stanley, and JPMorgan Chase & Co. The full list of top 2023 M&A advisors by deal value is in the image below.

Source: Statista

Note: Still, there’s a slight difference between advisory services performed by an investment bank and a dedicated M&A advisory firm. Investment banking companies generally work with large transactions valued at billions of dollars. M&A advisory firms, in turn, target middle- and small-market deals. 

The variety of services offered by an M&A advisor ranges from advising clients on the development of merger and acquisition strategies to identifying potential targets and assisting with due diligence or post-merger integration planning. We will discuss this in further detail.

Is there a difference between an M&A advisor and a business broker?

Though both business brokers and M&A advisors specialize in similar advisory services, they’re still different. 

A business broker typically assists small businesses or individuals with various issues, including listing a business for sale, marketing a business, qualifying potential buyers, facilitating negotiations, and assisting in the due diligence process. Business brokers can also help with the valuation processes, though it’s typically less detailed than those offered by M&A advisors.

By contrast, mergers and acquisitions advisory firms typically handle larger, more complex transactions, such as mergers, acquisitions, divestitures, corporate restructuring, joint ventures, cross-border transactions, and more.

Key roles in M&A advisory

First of all, M&A advisory firms can be divided into those that work with buy-side clients and sell-side clients.

Buy-side advisory for M&A is responsible for providing M&A advice for the buy-side of the transaction through the process. On the other hand, sell-side M&A advisory firms assist the sell-side of the deal. 

Regardless of the side they work on, the M&A advisory teams generally consist of specialists such as strategy consultants, valuation experts, legal advisors, tax advisors, IT specialists, or integration specialists. Each role corresponds to the field of M&A they specialize in. 

When it comes to the hierarchy of the M&A advisory team, the roles are generally the following:

  • Managing director
    This is the highest-ranking member of the team, typically responsible for client acquisition, relationship management, and overseeing the overall strategy and execution of deals.
  • Director
    Often acts as the project leader for specific transactions, overseeing day-to-day deal execution and managing client relationships.
  • Vice president
    Plays a key role in executing deals, managing detailed aspects of the transaction process, and supporting senior team members.
  • Associate
    Acts as the primary support for VPs and directors, handling much of the analytical work and ensuring the smooth running of various transaction components.
  • Analyst
    This is typically the entry-level position, focusing on analytical and research components of mergers and acquisitions.

M&A advisor functions

Now, let’s see what M&A business advisors actually do. Some of the main tasks and challenges mergers and acquisitions advisory firms help with include the following:

TaskDescription
Strategic planningAdvisors help companies develop strategies for growth, whether through acquisition, merger, or divestiture. This includes identifying potential target companies or buyers and assessing the strategic fit.
Market analysisThanks to their expertise, M&A advisors provide the latest insights into market conditions, competitive landscape, and industry trends that can impact the transaction and help identify opportunities.
ValuationM&A advisors provide expert valuation services to determine the fair long-term value of a business. This involves analyzing financial statements, market conditions, and comparable transactions.
Deal structuringAdvisory firms also assist in structuring the terms of the sale transaction to ensure it meets the client’s financial and strategic objectives. This includes negotiating deal terms, financing options, and legal issues in mergers and acquisitions.
Due diligenceMerger advisors assist in conducting thorough due diligence to identify transaction risk and potential associated liabilities. This process involves examining the target’s financial, legal, operational, and strategic aspects.
NegotiationM&A advisors play a critical role in negotiating the terms of the deal with the other party. Their expertise and experience help in achieving favorable terms for their clients.
FinancingAdvisors help arrange financing for the transaction, which may involve raising debt or equity capital. They often know what banks, private equity firms, and other financial institutions are better to contact for this.
Legal complianceAdvisory firms also provide advice to ensure the transaction complies with all regulatory requirements or antitrust laws and obtain necessary approvals from relevant authorities.
Integration planningUpon deal closing, M&A advisors also assist in planning and executing the integration of the acquired company to ensure a smooth transition and realization of synergies.

Importance of M&A deal advisory in transactions

Research shows that 60% of dealmakers attribute deal failure to poor due diligence, which is only one of the M&A risks the MA advisory firm can help with during the M&A process. 

Simply put, the main role of M&A advisors in the M&A transaction is deal facilitation through multiple ways. They help to establish smoother negotiations, enhance deal value, and ensure strategic and regulatory compliance thanks to the following:

  • Extensive experience
    M&A advisors bring specialized knowledge and experience to the table, which is invaluable in navigating the complexities of transactions. They understand market conditions, valuation techniques, modern M&A tools, and negotiation strategies, helping to ensure the best possible outcome for their clients.
  • Market and industry knowledge
    Advisors have deep insights into specific industries and markets, enabling them to identify trends, benchmark performance, and provide context for the transaction. M&A advisors’ understanding of the current market is invaluable when developing a strategy for the acquisition. This is especially relevant considering that unclear strategy is a reason for a deal failure in 34% of cases.
  • Valuable contacts
    Experienced M&A advisors have contacts with hundreds of potential financial sponsors and targets within a specified industry. As a result, they can find verified buyers for public and private companies much faster than a client would do alone. This, in turn, helps to facilitate the transaction.

Cost of M&A advisory services

M&A advisors typically charge their clients based on two main types of fee structures: 

  • Retainer fee
    This is a non-refundable retainer fee paid upfront. It can range from $25,000 to $100,000 or more depending on the firm and the deal’s complexity.
  • Success fee
    This is a percentage of the total transaction value paid only in cases of a deal’s success. The percentage paid typically ranges from 1% to 5% but can be even higher for smaller deals.

The table below comprises the key differences between these two fee structures.

In terms of the annual salary of an M&A advisor, this can range from $102,000 to $150,000 for an Associate, according to Glassdoor.

In summary

Let’s summarize the main points from the article:

  • M&A advisory is an advisory service provided by outside parties during an M&A transaction.
  • M&A advisory services vary from advising clients on strategy development to searching for potential targets and assisting with due diligence or post-merger integration.
  • M&A advisory firms are typically represented by investment banks or boutique advisory firms.
  • M&A advisory services fees can have two main structures: a retainer fee, paid upfront regardless of the deal’s outcome, and a success fee, which is percentage-based and paid only after the successful closure of a deal.
Tags
M&A NA