Souuld you use a Business Broker or an M&A Firm

Most business owners only sell one business in their lifetime. The results of that sale can have a major impact on the financial future of the family. For most business sales we recommend that the seller engage a professional specializing in business sales to assist. There are two broad categories of professionals that engage in business sales - business brokers and merger and acquisition advisors.

What should the seller be looking for? This article will discuss the type of services offered by both groups and help the business seller decide which professional to use. The first criteria is type of business. Generally, business brokers specialize in "Main Street" types of businesses such as dry cleaners, gas stations, restaurants, and convenience stores. M&A advisors specialize in more B2B types of businesses such as manufacturers, distributors, information technology firms, etc.

Complexity of Transaction - Business Brokers are generally selling to individual buyers that have a finite approach structuring the transaction. The contracts are usually fairly straight forward and the negotiations focus on price, financing, and seller notes. For the Merger & Acquisition Advisors the targeted audience is the corporate buyer with vast experience in acquiring businesses. They employ both an internal legal team and outside council and make the purchase contracts quite complex. The number one goal is protecting the corporation. The contracts are 35 pages of complex legal language and schedules of reps and warranties. The seller will need someone that is familiar in navigating in that environment. Corporations generally send in a due diligence team that is well versed on finding every little wart in a seller company and will attempt to reduce transaction value during the process. The seller will need good advisors to offset these pros.

Exclusivity - because the Business Brokers are targeting individual buyers, their audience is vast so exclusivity is sometimes required and sometimes not required. Business sellers often engage multiple non-exclusive Business Brokers to insure the broadest coverage in presenting their business to the buyer audience. Business Brokers are often part of a network of Business Brokers to help broaden this exposure. Sunbelt Business Brokers and BBN are two very good networks. Merger & Acquisition Advisors require exclusivity because they are targeting corporate buyers and the audience of potential buyers is finite. These corporate buyers have M&A departments or sometimes the president handles the process. If a target is presented to a corporate buyer by more than one professional the credibility immediately drops and the chance of serious interest drops significantly.