How Do M&A Consulting Firms Differ from Investment Banks?

Summary: Mergers and acquisitions can happen to any business, big or small. Using a M&A firm is the best way to navigate the transaction

If you have ever worked in accounting or a law office, then you know that lawyers and accountants often deal with corporate restructuring. However, the details are a little less clear. Can you choose to use an accountant or a lawyer? Or do you need both? This seems like a lot to think about, so why not just go to an investment bank? The truth is, no one place has all the answers, unless you use an experienced merger and acquisition consulting firm.

The Basics

What exactly are mergers, acquisitions and corporate reorganizing? All of these words sum up to the same outcome, which is growth. A business grows either by expanding internally or externally. An internal expansion could be through choices such as franchising or adding new products to your line. A lot of research, development and capital can be invested into internal growth and it’s not the fastest return on investment. In other words, it can take a few quarters before you find out if your gamble on internal growth strategies has paid off. External growth, on the other hand, occurs when a business expands by buying another business, combining with another business, etc. External growth is expensive to achieve but allows the business to grow exponentially faster. Usually, the financial benefit of this growth strategy is realized immediately.

Now that we have the basic concepts locked down, it’s easy to see why you would need a lot of legal and financial advice to pull off external growth plans. So, how do you decide who to consult with?

Investment Banks

Investment banks are great because they offer a lot of in-house services and can easily facilitate the massive amounts of capital that need to change hands during mergers or acquisition deals. Investment banks offer merger and acquisition consulting for a living – it’s their bread and butter! You will definitely find a wealth of support and knowledge, on top of great analytics at an investment bank. The one thing your investment bank will likely be unable to do for you is to provide legal advice or counsel, and perhaps to assist with accounting issues. They will outsource this work to trusted affiliate entities or experts.

Merger and Acquisition Consulting Firms

Also known as M&A consulting firms, these guys are sort of the flip side of the investment bank. Again, these firms do this for a living so they will have great analytics for you and a lot of very necessary advice. The major difference is that these consulting firms are comprised of a mix of people and professions. A merger and acquisition consulting firm is likely to have lawyers, accountants, financial advisors and analysts all under one roof. In many ways they are a one stop shop, except for your actual banking needs, which means you will need to have an investment bank lined up to handle the actually financial transactions, should your M&A be successful.

Mergers and acquisition consulting firms will handle everything from screening potential targets to due diligence and valuations. Members of their team will be engaged as needed to ensure the deal gets done, and while an investment bank can offer similar assistance, many of the additional services will be outsourced.

The Importance of Mergers and Acquisitions Consulting The idea of growing your business in this manner can seem intimidating, and statistics suggest that about 50 per cent of all merger attempts fail – but don’t be dissuaded! With the proper use of a mergers and acquisition consulting firm, you won’t have to worry. Their finance and legal experts will help determine the financial outcomes of merging or consuming another business. They will determine your worth, their worth and the combined worth to figure out if the blending of the two businesses actually generates more revenue than they do individually (synergy). If they do, then you have the makings of a great deal on your hands and the right team to help you cross the finish line.