✒ When it comes to M&A deals, outside advisors are often a necessity. However, an analysis of market reactions to 10,000 U.S.-based acquisitions found that firms with a single advisor outperformed those with none — but firms which retained two or more advisors performed worse than those with just one.
Too many cooks can spoil the broth because…
1. Hiring more advisors slows down decision-making.
2. More advisors means more potential for leaks.
3. The middle ground can be the worst option.
4. The more people, the more egos.
But it is possible to manage a crowded kitchen…
1. Make teamwork a requirement when selecting advisors — instead of selecting the most prestigious firms or the most impressive resumes, emphasize that mutual respect and the ability to play well with others are non-negotiables.
2. Clearly define responsibilities — and enforce this division of labor by assigning an internal owner to “maintain ongoing clarity of each advisor’s project scope.
3. Involve senior leaders from the start — it’s critical for senior leaders to be actively involved from the get-go. As a corporate head of M&A explained, “you don’t want to mess around at the start and then regret things at the finish line.”
4. Align incentives — consider a “client satisfaction bonus” structure, in which the firm has the option to pay slightly more (a bonus) or less (a malus) than the agreed-upon advisory fees depending on the outcome, helps “avoid conflicts of interest and protect advisors’ objectivity.
5. Learn from your successes and your failures — proactively collect feedback from everyone involved throughout the project, and organize lessons learned sessions and post-mortem reviews with advisors, your own colleagues, and your counterparts.
6. Invest in relationships — while it may be tempting to shop around, the most successful deals tend to be conducted by executives and advisors who’ve already worked together and developed real, lasting relationships. “this is a first-name business.”