Sell-Side Advisory Services: When DIY Breaks Down
Founders who built successful companies typically have confidence in their ability to figure things out. They learned new domains, solved complex problems, and navigated uncertainty throughout their journey. So when it comes time to sell, the instinct to handle it themselves seems natural. How hard can it be to find a buyer, negotiate a price, and close a deal?
The answer, unfortunately, is harder than most founders expect. M&A transactions have evolved into complex processes with numerous mechanisms for value transfer between buyer and seller. Working capital adjustments, earnout structures, escrow provisions, and indemnification terms all affect what a seller actually receives. Buyers employ experienced deal teams who navigate these mechanics professionally. Founders encounter them once, often without realising their importance until value has already been lost.
Understanding when sell-side advisory makes sense, and what advisors actually do, helps founders make informed decisions about how to approach their most significant financial transaction.
The DIY Trap: Why Smart Founders Still Get It Wrong
The complexity of M&A transactions is largely invisible until you are in the middle of one. A founder who has never sold a company sees a negotiation over price. A professional buyer sees a negotiation over dozens of terms that collectively determine economic outcome.
Consider what buyers know that most founders do not: how to structure working capital targets that shift value at closing, how to use exclusivity periods to reduce competitive pressure, how to draft representations and warranties that create post-closing claim opportunities, and how to time information requests to maximise leverage. These techniques are not secrets. They are standard practice among professional acquirers who complete multiple transactions annually.
The founder who attempts DIY is not just negotiating with less experience. They are negotiating without awareness of what is being negotiated. They may celebrate a headline price while accepting terms that materially erode actual proceeds. They may grant exclusivity without understanding its implications. They may sign representations without comprehending the liability they create.
Legal counsel helps, but attorneys focus on legal risk, not deal economics. A lawyer will ensure contracts are enforceable and liability is appropriately limited. They typically do not advise on whether the working capital target is set appropriately, whether the earnout metrics are achievable, or whether the exclusivity period is reasonable. That guidance requires deal experience that most attorneys lack.
What Sell-Side Advisors Actually Do
The value of a sell-side advisor extends far beyond introductions and paperwork. Effective advisors contribute throughout the transaction lifecycle in ways that directly affect outcomes.
Process management creates competitive dynamics. An advisor runs a structured process that generates multiple interested parties, creates competitive tension, and maintains leverage throughout negotiations. This is the primary source of value creation: research consistently shows that competitive processes generate 50 to 100 per cent higher offers than proprietary sales to single buyers.
Buyer identification and outreach accesses opportunities that founders cannot reach alone. Advisors maintain relationships with strategic acquirers and private equity firms. They know who is actively looking, what they are looking for, and how to present opportunities that match buyer priorities. Cold outreach from a founder rarely generates the same response as introduction from a trusted advisor.
Valuation and positioning shape how buyers perceive the business. Advisors help founders present their metrics in the most favourable light, benchmark against comparable transactions, and articulate a growth story that justifies premium multiples. Current mid-market multiples average 7.2x TEV/EBITDA, but transactions in the $100 million to $250 million range command approximately 10.0x. The gap reflects positioning and process as much as business fundamentals.
Negotiation support protects value at every stage. Advisors who have seen hundreds of LOIs know which terms are standard, which represent overreach, and which are worth trading against price. They can push back on aggressive buyer requests with credibility that founders lack, because they represent the full market for transactions rather than a single seller's perspective.
The Working Capital Reality
Working capital adjustment is the mechanism most likely to surprise unprepared sellers. According to SRS Acquiom analysis, working capital purchase price adjustments are now virtually ubiquitous, present on more than 90 per cent of private target M&A deals. The average adjustment owed to buyers is roughly 0.9 per cent of transaction value.
This statistic deserves careful attention. In a $50 million transaction, a 0.9 per cent average adjustment represents $450,000 flowing from seller to buyer at closing. This is not negotiation; it is mechanics. The working capital target is established in the purchase agreement, actual working capital is measured at closing, and the difference adjusts the purchase price automatically.
DIY sellers often set working capital targets without understanding the implications. They accept a target based on a single month-end balance without considering seasonal variation. They fail to normalise for unusual items that inflate or deflate the calculation. They do not anticipate how buyers will interpret ambiguous definitions. The result is predictable: money flows to buyers who understand the mechanics from sellers who do not.
Experienced advisors prevent these mistakes. They analyse working capital patterns over multiple periods, establish appropriate targets, define calculation methodology precisely, and negotiate dispute resolution mechanisms that protect sellers. The value created by proper working capital negotiation often exceeds the advisor's fee.
Fee Structures Decoded
Advisory fees represent a significant cost, and founders should understand how they work. Industry data shows that many mid-market M&A deals in the $10 to $30 million EBITDA range land within the 3 to 5 per cent success fee zone.
The most common structure, used by 44 per cent of surveyed firms in 2024, is the Lehman formula. This declining percentage scale, typically starting at 5 per cent of the first $1 million and declining through higher tranches, creates a tiered fee that decreases as a percentage of larger transactions.
The accelerator formula is gaining traction, used by 20 per cent of firms in 2024, up from 16 per cent in 2023. Under this structure, the success fee percentage increases if the transaction exceeds certain valuation thresholds. An advisor might earn 4 per cent on enterprise value up to $50 million but 6 per cent on amounts above that threshold. This structure creates powerful alignment between advisor and seller interests around maximising price.
Monthly retainers typically range from $5,000 to $10,000. These payments cover the advisor's investment in process preparation, buyer outreach, and marketing materials. They also signal founder commitment, reducing the risk that advisors invest significant time in processes that never proceed to market.
When evaluating fees, founders should consider the value creation that effective advisory enables. A 4 per cent fee on a $50 million transaction is $2 million. If the advisor's competitive process generates even 10 per cent additional value compared to a DIY sale, that incremental $5 million more than justifies the fee. Research suggests the actual uplift from competitive processes far exceeds 10 per cent.
When DIY Makes Sense
Not every transaction requires professional advisory. Several circumstances favour founder-led processes.
When a known buyer approaches with a compelling offer, the dynamics differ from a market process. If you have an existing relationship with an acquirer, trust in their intentions, and confidence in the terms being discussed, engaging an advisor to run a competitive process may add cost without proportionate value. This assumes the offer is genuinely compelling and the founder understands enough about deal mechanics to evaluate it.
Very small transactions may not justify advisory economics. For businesses valued below $5 million, the percentage fee structures typical in M&A advisory may represent a significant portion of proceeds. Business brokers or simpler sale processes may be more appropriate for these transactions.
Founders with significant M&A experience from prior transactions may have the knowledge to navigate process complexity. Serial entrepreneurs who have sold multiple companies understand what they do not know and can supplement their own capabilities with targeted professional support rather than full advisory engagement.
These circumstances are narrower than most founders believe. The majority of transactions benefit from professional guidance, even when founders initially believe they can manage the process themselves.
The True Cost of Going Alone
The cost of DIY is not the advisory fee saved. It is the value left on the table through suboptimal process, unfavourable terms, and mistakes that compound through closing.
A founder who negotiates directly with a single interested buyer forgoes the competitive dynamics that drive premium pricing. A founder who does not understand working capital mechanics accepts targets that cost them money at closing. A founder who signs aggressive representations creates post-closing liability that may never materialise but represents real risk.
The experience asymmetry compounds over time. Professional buyers get better at acquiring companies because they do it repeatedly. Founders do not get better at selling because they typically sell once. Every negotiation advantage that experience provides accrues to the buyer when the seller lacks professional support.
The most expensive mistake is not knowing what you do not know. Founders often emerge from DIY transactions believing they achieved good outcomes, unaware of the value they left behind. They do not see the competitive bids they never received, the terms they accepted that a professional would have rejected, or the mechanics that transferred value invisibly.
If you are considering selling your business and want to understand whether professional advisory makes sense for your situation, we would be happy to discuss what the process looks like and where advisors add value.