When it comes to selling your business, it is
important to work with an adviser who has the
proper knowledge and expertise to manage your
transaction. After all, you only get one chance to
sell your business and selecting the wrong adviser
could cost you part of your retirement. Today,
such intermediaries are frequently referred to as
business brokers, mergers and acquisitions
intermediaries and investment bankers.
All business intermediaries work towards one
common goal, to help the owner manage the
selling process by evaluating the business,
confidentially marketing to find the best buyers,
negotiating the deal and closing the transaction.
However, the methodologies and expertise
required could differ greatly depending on the
business’s size. Because each group of business
intermediaries specializes in a specific “bandwidth” of the market, the key is to find an
intermediary that fits you and your company.
Business Brokers
A “business broker” commonly assists small
business owners selling companies with less than
$1 million in annual revenue. These lowermarket
or “main street” businesses are usually
local service establishments, such as restaurants,
convenience stores, dry cleaners and other small
service-related businesses, where the individual
buyer will most likely become an “owner-operator.”
Because these projects typically have smaller
success fees, business brokers usually handle
numerous engagements simultaneously, often
with as many as 10 businesses for sale at any
given time. As a result, they can only provide
clients with limited attention, and their marketing
capabilities are usually confined to posting “listings” for sale on various Web sites, including
their own. In addition, the educational
background and experience of these individuals
are often limited. Even some residential and
commercial real estate agents “dabble” at
business brokerage.
M&A Intermediaries
Merger and acquisition intermediaries are
advisers working with owners of businesses with annual revenue between $1 million to $50 million.
These professionals have experience attracting
the attention of strategic buyers and private
equity groups, in addition to high net-worth
individuals, and they are familiar with a wide
array of financing sources to facilitate the more
complex capital structures in larger transactions.
Typically managing only one or two engagements
at any given time, M&A intermediaries create indepth
marketing materials for each project and
spend significant amounts of time with each individual client.
Because of the complex nature of larger deals,
M&A intermediaries often work with a business
owner’s team of professional advisers (attorneys,
accountants, financial planners, etc). Together,
this “deal team” can assist each other and help
ensure a successful sale.
M&A intermediaries may charge a retainer at the
beginning of the engagement to compensate for
the significant amount of work involved in
evaluating and preparing the marketing materials
during the planning stage. However, reputable
intermediaries collect the large majority of their
fees upon the successful sale of the business,
usually by a scaled percentage formula. Be wary
of any intermediary asking for a large
upfront fee.
Investment Bankers
Investment bankers operate in the mid-market to
upper-market range, serving owners of public and private businesses with annual revenue of $50
million or more. These firms regularly network
with businesses and private equity groups wishing
to acquire larger companies. However, while
professional and knowledgeable, investment
bankers typically lack the network of buyers
looking to acquire smaller companies.
In addition to offering strategic advice in mergers
and acquisitions, investment bankers also help
clients raise debt and equity capital, recapitalize
and refinance. Fees for investment bankers are
negotiated and can vary depending upon the
conditions in the contract.
The business intermediary is a key player in
facilitating the successful sale of the business,
and it is important to interview several before
deciding who is most suitable. A business broker
who sells convenience stores and ice cream shops
may not know how to handle a larger
manufacturing, distribution or construction
business. Ultimately, the right intermediary is
someone whose specialty is a good fit with your
needs.
