5 Questions Family Businesses Should Ask Potential M&A Advisors

For the owner of any small business, deciding to bring in an M&A advisor or investment banker is a big decision. For family businesses, the decision can bring additional trepidation around questions of ownership, legacy, family leadership dynamics, and more.

Says Mark Kincannon of Confidential Business Intermediaries, which works primarily with family-owned businesses, family business owners “want to make sure that this business that has been their baby for many years, sometimes even generations, is placed in someone’s hands that will represent it the way that they desire.”

Here are a few questions to ask when evaluating advisors for a sale or capital raise. 

1) “In what specific ways will working with you add value?”

This question gets at the heart of every advisor’s sales pitch. To some extent, you should be able to predict an advisor’s answer — think increased ROI, an expedited process, more time to focus on your business, market/industry expertise, etc. However, the more detail an advisor provides off the bat, the better. You may uncover potential value-adds, like specific relationships or experience, that set one potential advisor apart.

2) “What does success look like for you?”

Frame this question broadly and pay attention to how the advisor answers. Do they talk only about achieving a certain return on investment? If you’re like most family business owners, you’re probably interested in financials and fit. Listen carefully to see if the advisor frames success stories in the context of each owner’s unique goals for the business and his or her family, as opposed to merely earning returns that meet industry standards.

3) “What work have you done with companies like mine?”

This question does triple duty — it should help you identify advisors who are well-versed with a) companies in your industry, b) companies of your size, and c) companies with similar goals. If you’re looking to raise debt, for example, that’s a lot different than looking to be acquired by a corporation — so make sure you engage an advisor who is poised to help you succeed.

4)“What issues have you encountered when working with family businesses in the past?”

This is a great way to understand the advisor’s approach and attitude when it comes to balancing family dynamics and business priorities, without necessarily airing your own business’s dirty laundry on an initial call. You may even get some free advice out of it!

5) “What do you see as the biggest challenges for my company in this process?”

This question can help you evaluate whether an advisor understands your business model and the unique factors impacting the road ahead. It will also show you whether they have done their research on your organization ahead of time. Their answer should also give you a sense of the advisor’s attitude toward conflict — will they be more likely to try to smooth things over or are they willing to voice and confront potential challenges head-on?