What are the primary differences between a business broker and an M&A Advisor?
The big differences are:
Approach
Business Brokers will typically treat a business as a commodity (like a realtor with a home). They will learn the minimum amount necessary “to list” a business and they will often times sell a business well below market value to collect (scrape) a fee. They will typically accept every type of client regardless of the quality or profitability of the business. It is a throw it at the wall and see what sticks approach.
M&A Professionals provide technical and professional consultation to business owners that are contemplating selling their businesses. Due to their level of professionalism, they do not encourage or discourage a business owner to sell or not sell. They see their responsibility as providing the business owner with high quality contemporary information so that the business owner can make a fully informed decision about whether to proceed or not. Quality Information shared includes market conditions, buyer analysis, evaluation of the owner’s business, business valuation and likelihood of selling.
Experience
Business brokers educational and experience backgrounds vary dramatically. There are numerous business brokerage firms (many franchised) that consider brokering as a sales role and not a technical professional role. They train (teach a vocabulary) people from all walks of life and send them out into the market to convince business owners that they should represent them for sale.
M&A advisors many times have a college business degree and numerous years of high-quality M&A related experience. They have the education and actual work experience (savvy) to determine the appropriate value for your company and to be a highly effective market-maker to achieve the maximum value for you.
Process
Here is where you can really start to see substantial differences between brokers and M&A advisors. Ask questions that require clear specific answers. Questions such as:
- Can you share your education and work experience?
- Can I see the standard forms that you use?
- Can you describe your data management techniques such as receiving, formatting, filing and presenting to buyers?
- Do you use a digital data room or a physical data room?
- What sell side due diligence do you do before you list a new client?
- What do you require of a prospective client to list them?
- What is your sales process?
- What is your process to maintain full confidentiality?
- How many buyers would you anticipate engaging for this company sale?
- What is the likelihood of achieving a successful closing?
- What do you anticipate will be the biggest impediment to achieving a sale?
- Please share details about your last five successful closings?
Selecting your representative is one of the most important decisions that you will make in your entire life. You have spent years or decades pouring sweat equity into your business and you deserve to receive the full amount you deserve for all of your efforts. Do not take this evaluation or selection process lightly. Often times there is multi-generational wealth at stake.
It is highly recommended that you interview at least five brokers/advisors so that you can get a really good read on the differences between each and their approach to the market. Use your experience, judgement and intuition to ascertain whether you are speaking to a high-quality professional or a salesperson that is trying to tell you everything you want to hear. This is not the time for convenient hearing.
It is the time for a rigorous intensive evaluation process to ensure that the real value of your company is properly represented and achieved.