Dirty consultant tricks in M&A: Beware of the black sheep
Consulting works through trust. Unfortunately, there are always consultants who abuse trust and use dirty tricks to lure customers.
There are many examples in consulting, and especially in M&A, where the value of the transactions is high and you can supposedly make a lot of money. I have selected some of them here. Others have to do with remuneration. At the end of the article you will find a link to another article that you should definitely read before you hire an M&A consultant.
If an M&A advisor says this, end the conversation, turn around and leave:
❌ I know who the buyer is for your business
‼ The consultant cannot know this. It is one of many dirty tricks used by consultants. Every company is different. Finding a buyer has a lot to do with hard work, less to do with contacts and „special knowledge“ that supposedly only the consultant has. If he claims that he knows strategists or financial investors who are looking for the same kind of business, then that is a bait.
Every good asset can also be sold well. The best buyer, however, is the one who combines what is most important to the client. What exactly that is (apart from the high sales price) is usually not known to the consultant at the time of the statement. Only the sales process provides clarity for the buyers, nothing else. So don’t fall for it. These are dirty consultant tricks.
❌ I am well connected in your sector and have contacts at C-level
‼ That’s great for the consultant, but it’s also one of the consultant’s dirty tricks. When you hear statements like that, ask for the cell phone numbers of the CEOs of your three main competitors. Does the consultant have them? No. They are valid candidates for the company purchase. Contrary to popular belief, C-level contacts aren’t much use when selling a company anyway!
–> No CXO buys a company just because he knows the consultant. You can get access quickly even without direct acquaintance if the company that’s for sale is really interesting.
❌ I have just sold / already sold such a company
‼ Usually not true. And if so, then it is unlikely that the same prospective customers are interested in this company now. The companies are usually too different for that. The consultant only wants to score points with an impression of competence. Hence: dirty consultant tricks.
–> The personality of the consultant, his broad background in many industries and deal sizes, as well as his many years of experience is what counts.
❌ You get at least X for your business
‼ Beware of bait. Without a professional company valuation, the consultant cannot assess this and can never know. Many entrepreneurs have already fallen for these sayings. The consultant wants to arouse your greed so that you pay high retainers and do so for as long as possible.
–> Only the bids in the process ultimately provide information about the best purchase price.
In my opinion, this is one of the most reprehensible of the consultant’s dirty tricks. The consultant „anchors“ the customer and the customer in turn anchors himself. He may reject good offers because the „anchored“ sales price was unrealistic.
❌ We do this on a 100% commission basis
‼ Sounds good to many at first. But it isn’t. Because then the advisor has only one goal: a sale at any price and under any conditions. Is that in the best interest of the seller? A clear no. Can’t the seller control that himself? No, he can’t. The advisor subtly works towards a deal and talks to both sides to get it started.
–> The wrong advisor is primarily interested in his own advantage, not in the best deal for the client.
The consultant’s incentives will influence his behavior. The compensation model he proposes to you will also determine how he manages your project and how committed he will be to closing a deal that is optimal for you – or him.
The conclusion that must be drawn is that you should get to know the consultant personally in order to be able to assess what values he represents. Much better than questions about the process (how exactly do you do that?) are questions that show how the consultant behaves in conflicts or what principles he represents. For example, if I were a potential customer, I would ask: „What are examples of projects that did not go well? When were there conflicts with customers and how did you try to resolve them?“
If you want to know how consultants are intensified and what they cost, read on here .
The first step in selling a company is preparation. Here is the workshop : Prepare for the sale of your company in 5 steps. How to get a fair price for your company.
