Business Broker, M&A Advisor Or Investment Banker?

Picking The Right Intermediary For The Sale Of Your Business

 

You are ready to sell your business. You ask around and find that some businesses are sold by Business Brokers, some by Mid-market M&A Advisors, and some others by investment bankers. The difference in intermediaries can make difference of 20% to 40% or more in what you can take away in many situations. So, picking the right intermediary can have a major impact on your nest egg. Which one of these is right intermediary for selling your business? Who should you use?

The following table shows the applicability of these intermediaries based on various metrics.

  Business Broker Mid-market M&A Advisor Investment Banker
Size Of Business

Less than $2M

$1M – $100M

$50M and higher

Type of Business

Mostly Retail

Distributors, Manufacturers, Healthcare, Technology, Large retail, B2B companies

Public or large private companies

Typical Representation

Seller & Buyer (DUAL AGENT)

Either Buyer Or Seller

Either Buyer Or Seller

Typical # Of Employees

Less than 10

Tens or Hundreds

Any size

Typical Acquirers

Individuals

Corporations, PEGs

Public Companies or Large PEGs

Typical Sale Type

Asset

Asset or Stock

Stock or Mixed

Business Valuation

Street Multiple / Rules of Thumb

Strategic Value, DCF

Strategic Value, DCF

Transaction  Complexity

Simple

Complex

Very Complex

Size of contracts

A few pages

Tens of pages

Hundreds of pages

Typical Fee Structure

10-12%

Double Lehman / Negotiated

Negotiated

Upfront Fees

No

Maybe

Yes

Typical Multiples

2-3x DCF

3-7x EBITDA

P/E>10

The deciding factor in selecting the right intermediary is type of business you have. For small companies with revenues under $1 million and for large companies with revenues over $100 million, the choices are obvious.

If your business is a small retail or service business and there is no strategic value in the business, any competent business broker may be able to get the job done. However, since there is a substantial  negotiating component in deals this size, your interests are likely to better served if you choose an intermediary to represent you exclusively (i.e. not a dual agent).

An M&A Advisor is the right choice if your business is larger, complex or has a high component of product or service specialization. A competent M&A Advisor can unlock the value in your business, represent you exclusively, and get your business the higher value it deserves. This is extremely important if your business has untapped strategic value or has intellectual property subject to a broad interpretation of value in the marketplace.

2 Responses to “Business Broker, M&A Advisor Or Investment Banker?”

  1. Great post! I’m a Toronto-based M&A lawyer and just posted similar content at http://tinyurl.com/687fpp4

  2. M&a advisor says:

    The flow chart representation of selling business Vs the type of business is very much self explanatory and can be understood very quickly. Your blog post correctly pointed out the various components on which the categorization should be made. There is no doubt that if you want to sell your business in a proper manner you have to choose the right agency for the same cause.

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