Cashing Out – What Advisors Do I Need and What Are Their Roles?

There has been an explosion of consultants who offer some form of Exit Planning advice. Most have some value to add to the process. However to guide you through the landscape of services available to you, I’ve highlighted the key roles to achieve the following:

  1. Improve the probability that the deal will close, at an attractive price
  2. Ensure that shareholders have achieved the most tax efficient deal structure
  3. Ensure that shareholders can sleep at night without worrying about horrendous warranties and indemnities
  4. Ensure all shareholders are happy with their roles in the business and in life, post completion

I’m also going to make an assumption on size. At the point that potential acquirers review the business, trailing sales and profits for the previous 12 months are at least $10m and $1m respectively (I’m not saying businesses don’t sell at figures way under this, because they clearly do, but my advice here is aimed at the $1m profit and above market).

Let’s break the advisors down into functions to make it clearer. Also you need to be clear who is the client. For example, the main shareholder’s personal tax advisor can’t be appointed by the company. However the Board of the company, representing all shareholders should appoint the Investment Bank to sell the business. Just watch the conflict of interest issue. Be clear on who is appointing which advisor.

Roles – 24 months Pre Sale (Preparation Prior to Investment Bank Appointment) 
  1.  Tax Advisor
    • As the main shareholder, the earlier you can review tax planning options, the more you can reduce the risk of overpaying taxes. Time is tax planning’s worst nightmare and its best friend. The longer the runway the better.
    • It’s really important to meet prospective tax advisors that have experience structuring M&A deals, especially the tax consequences of earn-outs. You may have a superb tax advisor in place for day to day stuff but the world of M&A, selling the family silver – that’s a whole world of specialized knowledge gathered over 20 years plus of war wounds.
  2. CPA
    • Again the earlier you can clean up the books of accounts the better.
    • A recognized regional firm with experience of the exit process is essential.
    • Preferably you would have them complete 2 full year-end audits prior to appointing the investment bank. Given it can take 12 months to sell a business, this gives you around 3 years of solid data to support attractive valuations.
  3. Operational Consultancy & Quarterback role
    • This is really the only external advice (perhaps tax advice as well) that can literally add millions of $ to the price. Advertisement time! This is a core service of The Portfolio Partnership. There really is a great danger that superficial changes to the business, made 3 months prior to buyers looking at the business is well, ……..just lipstick on a pig.
    • Through a short but sharp Discovery audit, done by really experienced operators (over 50 transactions completed within the team) it is possible to identify the value drivers that make or break deals. But the issue for owners isn’t what these are. No the issue is how to change them. We call that know-how and frankly it’s obtained the hard way by building and selling lots of businesses.
    • We believe that with a light touch, the operational consultancy can also act as the project manager of the exit process and the steward of all the roles needed. This quarterback role needs a firm hand. It is essential that the project manager has completed many transactions and is sensitive to the objectives of the client, the skillset of each advisor and the significance of the timing of great advice.
  4. Wealth Management/Financial Advisor
    • It is likely that all the main shareholders will have existing trusted financial planners and wealth management advisors. However they need to be brought into the tent. Your financial advice needs to be holistic.
  5. Transition Planning Consultant 
    • often a coach or business consultant, who can guide the owner to answer these two fundamental questions:
      • What are my goals for the business?
      • What is the future of my life – i.e. what do I want to accomplish during the rest of my life?
    • This role can become crucial where an owner is really agonizing over selling. It can be a nightmare for all involved when the owner changes his mind literally 5 minutes prior to completion. Better to really deal with the psychological pain of cashing out as early as possible to get the head straight.
Roles – 12 Months Prior To Sale
  1. Investment Bank
    • It’s key that you beauty-parade a selection of Investment Banks. I would want the bank appointed 12 months prior to your ideal sale date.
    • You are looking for key characteristics to make the experience successful and enjoyable.
    • Build your own checklist by all means, but ensure you can answer these questions:-
      • How many deals have you completed in my specific industry?
      • Who will personally lead the assignment?
      • Do I feel comfortable, as the main shareholder, with the deal leader, especially in terms of chemistry. You will be spending significant time together.
      • Did you achieve premium valuations, and if so, please explain?
      • Which deals have you handled that didn’t sell and why?
      • How many deals does the firm close in a year?
      • What is the average value of your deals?
      • Can I have three references that I can telephone if I regard you as my preferred choice?
      • Do I understand their methodology for finding appropriate buyers?
      • What’s their approach to confidentiality?
      • What are your fees under all circumstances?
      • What happens to fees if I change my mind?
      • How are you rewarded for the earn-out portion of the deal, if any?
      • What’s your involvement in the due diligence process?
  2. M&A attorney
    • Again most owners have their trusted attorney in place. However the need for really specialized advice is key. Experience in cross border deals is essential because it is likely that the buyer could be foreign.
    • Timing of this appointment can wait until after the sales process has started. Ideally it is becoming clear that there is serious interest from a few strategic/trade buyers before the M&A attorney is appointed.
    • A similar checklist should be drawn up as in 6 above, to ensure the transaction is successful and enjoyable

  3. Insurance consultant, property adviser, IPR specialist
    • Before the formal due diligence approaches it will be important to review specific advice needed on specialist topics. This will vary from business to business but often insurance, employment contracts, property and IPR are key commercial issues in final negotiations.
    • It is important to get ahead of the curve and complete necessary housekeeping long before the buyer starts investigating the business in detail.

4. Due Diligence

    • This is an area often underestimated by sellers. Remember that your management team will get stretched during the sales process. They need to deliver historically high profits and sales at the very point that the buyer is asking questions 24/7!
    • Again at The Portfolio Partnership we have experience of consuming that role and handling buyer enquiries. As your contract COO we allow the other members of the team to focus on driving the results and delivering on the sales, cash flow and profit forecasts. Buyers need to be policed. Some questions are fair and some are out of bounds. Due diligence often reveals to the buyer how the management team can cope under pressure.
    • Alternatively use expertise from your CPA firm or your Investment Bank as a resource.

I hope this post helps to clarify the potential advisors you need to consider, and how to manage them to successfully complete the exit process.

We will be publishing a new e-book in the coming weeks – A Practical Guide to Cashing Out. Check in later for more details.


  1. Great article on hiring advisors early in the exit planning process and explaining the roles of each. Business owners often wait too long to get the right people involved because of the expense. But the right advisors can definitely save you more than they cost. I really like the questions you’ve provided when hiring an investment banker. It’s so important to make sure you get the right banker to help with the transaction. Also, I believe the financial advisor has an important and often overlooked role in the process (Note that I am not a financial advisor or any type of advisor looking to be hired). Because most business owners’ largest asset is their business, many of them don’t have a financial advisor yet and may not understand the role they can play in the exit process. Financial advisors are the most likely advisor to still be with the business owners AFTER the transaction, so owners should make sure they have someone that is competent and they can trust.

    • Many thanks Tensie – tried to cover most of the ground.

  2. I’d also advise the business owner to work with a consultant to maximize the value of the company’s/product’s brand. At least one study has shown that, for a mature company, up to 68% of its value is for the brand alone. Ideally, the savvy business owner has been attending to his brand right from the startup stage. But many do not. Think of the money being left on the table by so many sellers! At the minimum, one should bring in a consultant at 36 months pre-sale. It takes time to build up a brand’s value.

    • I agree Kevin. Scaling a business and creating real value including developing your brand takes time. Buyers can see window dressing, operational actions taken far too close to completion.


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