Key Differences: M&A Advisors vs. Business Brokers
If you’ve felt confused about the differences between a business broker and a merger and acquisition (M&A) advisor, you aren’t alone – particularly in the middle market. Over the course of owning and growing a business, it’s not unusual for an owner to interact with both types of professionals. That said, understanding the key differences will help you to make an informed decision about whom you should work with for any given transaction.
Here is a quick breakdown of the basics:
|M&A Advisors||Business Brokers|
|Geographical scope||National or global, potentially experienced with complex mergers with multiple locations||Small/local/regional scale, single stand-alone businesses|
|Deal size||Multi-million dollar deals||$1-2M, sometimes up to $5M|
|Client profile||Mid- to large-sized organizations||Small firms, individuals/entrepreneurs|
|Valuation methods||Experienced with a variety of complex valuation needs||Lean towards simple valuations|
|Compensation||Tend to earn a fee based upon the transaction value; also typically require an initial retainer for the upfront work required to take a company to market||Tend to earn a fee based upon the transaction value; fee is typically 100% contingent with no initial retainer payment required|
|Relationship||Long term with a typical M&A advisor focused on a handful of engagements at a given time||Short term with most business brokers managing a dozen or more clients at a given time|
Business brokers are commonly used. In fact, some estimates suggest that business brokers handle 80 percent of M&A deal volume but less than five percent of total deal value. They are the dominant intermediary used by smaller family-owned companies or single-entity partnerships.
M&A advisors bridge the gap between business brokers and investment bankers. (Most national, and even regional investment banks, aren’t interested in deals smaller than $250M.) M&A advisors often act as deal partners, working with clients to prepare them for their exit, including succession planning and liquidity maximization.
So, while business brokers can sometimes appear to provide great value for your money, it is important to remember their limits. Your relationship with them will likely be short-term, and their scope of experience may be narrow. For a mid-sized company, an M&A advisory firm with experience in your industry would likely be a better fit for your more complex needs.
If you are considering selling your business, please contact us for a confidential discussion of your specific situation. We have experience helping business owners across a variety of industries sell their businesses, as well as relationships with buyers who are interested in new opportunities.