Picking The Right Intermediary For The
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 |
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.
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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.