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M&A Advisor or Business Broker?
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 and some by Mid-market M&A Advisors. 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

Size Of Business                      Less than $2M                                             $2M - $100M
                                                    Less than 10 employees                              Tens or Hundreds of employees

Type of Business                     Mostly Retail (aka “Main Street”)             Distributors, Manufacturers, Healthcare, 
                                                                                                                              Technology,  Large  retail, B2B companies

Typical Representation         Seller & Buyer (Dual Agent)                        Either Buyer Or Seller

Typical Acquirers                   Individuals                                                       Corporations, Private Equity

Typical Sale Type                   Asset                                                                 Asset or Stock or Mixed

Licenses                                  Real Estate (RE)                                             Securities & RE

Pre Sale Planning                  No                                                                     Yes – Extensive

Business Valuation                Street Multiple / Rules of Thumb              Strategic Value, DCF, Dilution

Transaction Complexity       Simple                                                             Complex

Size of contracts                     A few pages                                                    Tens of pages

Typical Fee Structure           10-12%                                                              Double Lehman/Negotiated

Upfront Fees                          No                                                                     Maybe

Typical Multiples                  2-3x Discounted Cash Flow                         3-15 EBITDA

Variability In Value              Low                                                                   High

The deciding factor in selecting the right intermediary is type of business you have. For small companies with revenues under $2 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 typically no strategic value in the business, any competent business broker may be able to get the job done. However, if you expect the deal size to be higher than $2M, 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.