Critical M&A Questions All Owners Need to Ask: Part 4

Part 4: Questions to Ask Wealth Advisors

The first three parts to this series, ‘Critical Questions All Owners Need to Ask,’ broke down the most salient issues that business owners should ask themselves about what they want out of a liquidity event; some of the most common mistakes and misconceptions about the M&A process; and the most important questions that owners should ask of potential Investment Bankers to identify best candidates prior to selecting an advisor.

In Part 4, we wanted to take a closer look at the questions and expectations that owners should have for WEALTH ADVISORS before, during and after the M&A process. To be clear, it is critical to do up-front work with an experienced financial advisor who has access to estate planning strategies, tax planning and investment options specialized for individuals with liquidity levels similar to yours. In our experience, this is an area most often neglected by a business owner. But avoiding or delaying this work will result in an inefficient structure that can meaningfully reduce your net proceeds from a transaction, or worse post-closing put at risk the money you have worked hard to create for your nest egg.

It is important to note that talking to new advisors should not be viewed as removing or replacing the long-time advisors you have used and trusted over the years. Those professionals always play a key role in successfully completing an exit and possess invaluable institutional and historical knowledge about your business and personal goals. However, if your current advisors do not normally work on the type or size transaction you are anticipating, you should add to your team the specialists who do. I liken it to the analogy that you wouldn’t go to your primary care doctor for open heart surgery. M&A transactions carry significant tax ramifications and require very specific technical expertise that will incorporate long-term objectives around trusts, tax mitigation, liquidity management, philanthropic goals, estate planning, and more. 

It is imperative that certain powerful planning tools such as gifting into trusts, etc., be done well in advance of discussions with a potential buyer. The significant tax benefits of some planning strategies can be nullified and unwound if put in place too late in your sale process (for example, after you have a Letter of Intent).

Questions to ask when selecting an M&A focused Wealth Advisor, and why these topics are important:

The importance of establishing a good relationship with a professional wealth advisor who will have a direct impact on your wealth potential cannot be overstated. As with any relationship, it should be built on trust, mutual understanding, an alignment of goals, and confidence that they know what they are doing.

With the answers to these questions—and any others that address your specific concerns—you can determine which wealth advisory firm is the best fit for you, your company, and your family’s long-term plans. Planning early and revisiting often is always the best strategy, and failure to do so can result in significantly lower net proceeds from your transaction.  

Be on the lookout for future parts in this series in the coming weeks:

Part 5: Questions you should always ask Law Firms

Part 6: Questions you should always ask CPAs/Accounting Firms


Previously published parts in this series:

Part 1: What Matters Most to Me?

Part 2: Seller’s Valid Concerns and Common Misconceptions in M&A

Part 3: Questions to Ask All M&A Advisors You Interview

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