Choosing the Right M&A Intermediary

For entrepreneurs and middle market business owners, the sale of your business could very well be the biggest deal of your life. It is probably the only time you ever go through the M&A process, so enlisting the help of a trusted expert is a crucial step in securing the best deal possible.

These intermediaries run from business brokers on the low end to Wall Street investment banks on the high end. While they all serve the same purpose, creating a transaction between a willing buyer and a willing seller, they have different business models, payment structures, and experience. It’s important to explore the options available and choose one that will best meet your needs over the long run.

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Business Brokers: Business brokers are sometimes called “Main Street Business Brokers” for an obvious reason; they tend to sell the sorts of businesses that you would find along your city’s main streets. These intermediaries tend to represent dozens (or even hundreds) of clients at a time, charge commissions for successful sales, and do most of their marketing via internet sources like www.bizbuysell.com. They are completely appropriate for small “mom and pop” sorts of businesses that will likely be sold to individual entrepreneurs.

Merger & Acquisition Advisors: M&A Advisory firms tend to be focused on company sales in the middle market. Often, they are staffed by senior professionals with a great deal of experience in transactions around sophisticated sellers that are ultimately sold to either financial (e.g., private equity) or strategic acquirers. These intermediaries tend to take a much more individualized approach at client representation, therefore handling only a few clients simultaneously. They often also charge on a commission based approach, but do sometimes charge retainer fees. M&A Advisory firms are a good choice for deals in the $5 million to $100 million expected value range.

Investment Banks: Investment Banks tend to be larger firms that provide a broad array of services, including advisory services, debt raising, capital raising, IPOs, bankruptcy support, and M&A. They are most often staffed by both senior professionals and larger staffs of junior professionals. They almost universally charge significant retainers along with a success fee. Investment Banks are excellent choices for large companies (over $100 million in expected value), corporate carve outs, or other more unusual transactions.

If you would like to learn more about choosing the right intermediary, read my recent article “How to Find an M&A Adviser Without a Conflict of Interest.”

Michael Schwerdtfeger’s eBook “The Inner Workings of a Deal: Tips for a Successful Transaction” is now available for download on his website. Get your free copy here: http://mbsmergers.com/downloads/

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