An Industry Expert or Deal Expert: Which is the Best Choice When Transacting Your Business?

When talking with business owners about transacting their business, an issue that almost always arises relates to the appropriate deal and financial expertise of the transaction advisor.

The basic question is: Should we hire an industry expert for this transaction or a deal expert with experience in completing hundreds of transactions and engagements in a myriad of industries?

Industry Expertise vs. Deal Expertise

There are thousands of industry categories and subcategories; therefore, there are more industry categories than there are corresponding industry specialists.

Conversely, if an industry is large, it can have too many industry experts.

No matter the size of the industry, industry expertise is helpful. However, deal expertise is vital.

Therefore, if you hire an industry expert to value and sell your or your client’s business, be sure that the industry expert also has deal expertise.  Lessons learned by way of engagements across multiple industry sectors are too valuable to lose when your deal needs negotiating.

Deal Expertise

Deal expertise is attained from years of hands-on experience and knowledge of financial markets.  Deal and valuation expertise includes a working knowledge of complex financial theory. This enables deal experts to learn new industries quickly.

For example, at Mercer Capital, we have provided transaction advisory services and/or valuation services in more than 500 industry categories and subcategories.  Along the way, we have developed specific expertise in a number of industries, including financial institutions, insurance agencies, manufacturing-related companies, distribution-related companies, construction-related companies, as well as asset management companies.

If you are confused about whether to choose an industry expert or a deal expert for a proposed transaction, consider the following:

• A deal expert has a wide set of relationships.  An industry expert is such because they have knowledge of certain strategic buyers within the industry.  However, their knowledge of potential buyers outside the targeted industry is sometimes limited. Deal experts not only pinpoint strategic buyers within the industry but have relationships with other potential buyers, such as private equity groups. In fact, in many deals we have seen, private equity groups paid more than a strategic buyer.
• A deal expert has “seen it.” Because of their broad experience, deal experts see a wide set of business scenarios in diverse, as well as common, business models. This range of experience can be of great help if and when unexpected issues arise, and unexpected issues almost always arise. The deal expert can deal with each issue and move the deal to completion.
• A deal expert is also a financial expert.  The components of a transaction are often complicated.  A deal expert has the financial acumen to obtain the best financial outcome for the client because the deal expert possesses an understanding of the financial intricacies of the deal.

In our opinion, based on decades of experience, deal expertise combined with a broad base of industry experience is preferable to industry expertise alone.  If you or your client can obtain both sets of qualifications in one firm; so much the better.

Conclusion

The transaction advisor you employ to guide your transaction should be a deal expert, as well as have knowledge of a broad base of industries.  If you are considering an industry expert versus a deal expert, you owe it to yourself to achieve the added value deal expertise can earn for you.

If you are contemplating any type of transaction, contact Nick Heinz at 901.685.2120 or email him at heinzn@mercercapital.com.  Confidentiality is ensured.

Mercer Capital leverages its historical valuation and investment banking experience to help clients navigate a critical transaction, providing timely, accurate, and reliable results. We have significant experience advising boards of directors, management, trustees, and other fiduciaries of middle-market public and private companies in a wide range of industries. Our independent advice withstands scrutiny from shareholders, bondholders, the SEC, IRS, and other interested parties to a transaction, and we are well-versed in the new industry standards.