A business valuation can make or break your M&A deal, yet most companies pick an advisor based on a LinkedIn connection or a referral without knowing what to actually evaluate. The stakes are too high—whether you're selling for $5M or $50M—to leave this choice to chance. Here's what separates a capable advisor from one who'll cost you money in the long run.
Credentials Matter, But Experience Matters More
Look for advisors holding credentials like ASA (American Society of Appraisers), ABV (Accredited in Business Valuation), or CFA. These certifications require rigorous testing and ongoing education, which is a baseline standard. However, credentials alone don't tell you whether someone understands your industry. A valuation expert with 15 years in healthcare M&A will approach a biotech sale differently than a generalist who's valued 200 different companies across all sectors.
Ask how many transactions they've closed in your specific industry and what the typical deal size was. If you're selling a $30M SaaS company and the advisor's largest SaaS valuation was $8M, that's a red flag. Conversely, if they've worked exclusively on deals double your size, they may not understand the nuances of mid-market pricing.
Understanding Their Valuation Methodology
Business valuations rely on three main approaches: comparable company analysis, discounted cash flow (DCF), and precedent transactions. A strong advisor won't rely on just one. When you meet with a prospective advisor, ask them to walk you through a sample valuation report—ideally one from a company similar to yours (with confidential details removed).
Red flags include:
- Vague methodology: If they can't clearly explain how they arrived at a valuation range
- No sensitivity analysis: Good reports show how valuation changes with different assumptions (EBITDA multiples, discount rates, growth rates)
- One-number answers: Valuations should come as a range, typically 10-20% wide, not a single point estimate
- Outdated comparables: Market multiples shift quarterly; they should use data from the last 3-6 months
Fee Structure and Transparency
Typical advisor fees for M&A work range from 0.5% to 2% of transaction value, though this varies widely. Some charge hourly (often $200–$500/hour), retainers ($10K–$50K+ per engagement), or contingency-based fees (higher risk, higher reward). Understand upfront what you're paying and when.
The fee structure should align with your interests. A contingency fee can motivate an advisor to maximize your sale price, but it can also create conflicts if they're incentivized to close quickly rather than strategically. A retainer-plus-success fee hybrid often works well: you pay a fixed amount for the valuation work, then a smaller success fee if the deal closes.
Ask whether fees include follow-up support during negotiations or if additional costs apply. Some advisors quote a valuation fee but then charge extra for buyer meetings, tax planning consultation, or due diligence support.
Track Record and References
Request at least three recent client references—ideally from companies of similar size and industry to yours. When you call them, ask specific questions:
- Did the advisor's valuation hold up during buyer negotiations?
- Were there surprises during due diligence that the valuation missed?
- How responsive was the advisor during the deal process?
- Would they hire the same advisor again?
Also check if the advisor publishes valuation data or whitepapers. This shows market knowledge and keeps them sharp on current trends (like how SaaS multiples have compressed or what's happening in your sector).
The Advisor as Your Advisor
The best valuation advisors don't just hand you a number—they function as deal strategists. They'll help you understand what buyers care about, identify valuation risks, and think through structuring questions (earnouts, reps and warranties insurance, etc.). During your initial conversation, notice whether they ask thoughtful questions about your business, growth trajectory, and risk factors, or if they're just collecting data points.
Platforms like Mercoly make it easier to compare and vet business valuation advisors side-by-side, reviewing credentials, fee structures, and client feedback in one place.
Frequently Asked Questions
Q: How long does a business valuation typically take? A comprehensive valuation for M&A purposes usually takes 4–8 weeks, depending on data availability and deal complexity. Simpler valuations for internal planning may take 2–3 weeks.
Q: Can I use a valuation from an accountant instead of a specialized M&A advisor? Your accountant may be qualified to prepare a valuation, but M&A advisors typically have deeper deal experience and market intelligence that leads to more defensible valuations in negotiations.
Q: What should I do if my valuation seems low compared to industry benchmarks? Request a detailed walkthrough of their assumptions. If their multiples or growth projections differ materially from market data, push back—a good advisor will explain the difference or adjust their analysis.
Start vetting advisors now, before you need to sell.