The short answer
Choose an M&A adviser on three things: relevant experience with deals like yours, the specific people who will do the work, and a written engagement letter that defines scope, deliverables and fees. In India, fee arrangements commonly combine a fixed or retainer element with a payment on successful completion, and the details vary widely, so compare proposals on what is included as well as on price.
The situation
A CA firm in Ahmedabad has a long standing client, a second generation family business in specialty textiles, that wants to sell. The CA firm can handle accounts, tax and some diligence work, but not a full sell side process. The family has met three advisers: a boutique investment bank, a large accounting firm's deals team and an independent dealmaker who knows the sector. All three were polished in the first meeting. The family and its CA need a fair way to compare them.
What to ask each adviser
Relevant experience
- Which deals of a similar size, sector and type have you worked on, and in what role?
- Who were the buyers, in general terms, and how were they found?
- Can we speak to a former client? A good adviser can usually arrange this with the client's consent.
Ask about deals that did not close as well. How an adviser explains a failed process tells you a lot about their judgement.
The team
- Who will lead the work day to day, and how much of their time is committed?
- Which senior person will attend buyer meetings and negotiations?
- Who prepares the information memorandum and the financial model?
Get names in the engagement letter. A senior pitch followed by junior delivery is a common complaint.
Process and approach
- How would you run our sale: timetable, buyer list, rounds of offers?
- How will you keep it confidential from staff, customers and competitors?
- What do you see as the main weaknesses of our business for a buyer, and how would you deal with them?
The answer to the last question is a good test. An adviser who only tells you what you want to hear will not help when a buyer pushes on price. See building a buyer list and information memorandum basics for what good work in those areas looks like.
Conflicts and regulation
- Do you act, or have you recently acted, for any likely buyer or competitor?
- Will you take fees from any other party to the deal?
- For listed companies or regulated activities, does the work need a SEBI registered intermediary, such as a merchant banker, and are you or your partner registered? Check registrations on the SEBI website.
How scope is usually defined
A clear engagement letter sets out:
- the mandate: sell side, buy side, fundraising, or a specific workstream
- the deliverables: valuation view, teaser, information memorandum, buyer list, data room management, negotiation support
- what is excluded: legal drafting, tax opinions and audit work usually sit with your lawyer and CA
- exclusivity and its length
- how either side can end the engagement, and what is payable if it ends
- confidentiality and data handling, including personal data covered by the DPDP Act, 2023
How fees are commonly structured
Advisers in India use a range of structures, often in combination. In general terms:
- Retainer: a fixed monthly or upfront amount, sometimes credited against later fees
- Milestone fees: amounts tied to deliverables, such as the information memorandum or signing of a term sheet
- Success fee: an amount payable on completion, often linked to the deal value, sometimes with a minimum
- Time based fees: hourly or daily rates for defined workstreams such as diligence support
- Expenses: travel, data room and third party costs, often reimbursed at actual cost
Points to agree in writing: how deal value is defined for a success fee (including debt, earn outs and deferred amounts), whether a fee is payable if the deal closes with a buyer after the engagement ends (a tail period), and whether GST is extra. Compare total expected cost across scenarios: a deal that closes, one that closes at a lower value, and one that does not close.
How Code Colonies advisory is bought
The Code Colonies consulting team works under the group's engagement models. Under O2E, the output based model, a signed specification defines what done means, and you pay after you accept the work. Scope is agreed in writing before work starts. Details of the models are on the engagement models page, and how it works shows how an engagement runs on Synerger.
How the Ahmedabad CA firm compares the three
In this sample case, the CA firm builds a simple comparison: named team, similar deals in the last few years, the weaknesses each adviser identified, scope included and excluded, and the total fee in three scenarios. The independent dealmaker knows the sector best but cannot manage a data room. The accounting firm's team is strong on process but has fewer textile buyers. The family chooses based on the written comparison, with the CA firm taking the diligence support work itself.
Where Synerger fits
Whichever adviser you choose, Synerger's engagements module holds the scope, milestones, status reports, deliverables and acceptance in one place, so the client, the CA and the adviser see the same record. For a conversation with the Code Colonies team, contact us.
General information; review any engagement letter with your lawyer before signing.