What Is The Difference Between An M&A Advisor And A Business Broker?
When you are about to sell a business, you have a few options regarding how to do it, and whose expertise to enlist. Many people confuse M&A advisors with business brokers. While there are some similarities, they are not one and the same.
Scale & Clientele
Business brokers usually operate on a smaller scale, often regional or local. The transactions they broker typically involve individual, autonomous businesses in smaller deals under $2 million. In contrast, M&A advisors typically work on a much larger scale, with larger companies in transactions that are national or global in scope, and even spanning multiple locations or countries.
Services & Valuation Methods
Business brokers tend to deal with companies that are easier to assess. Much of the work that goes into a sale falls on the shoulders of the seller, including the preparation of financial statements, due diligence, and creation of marketing materials. M&A advisors are accustomed to working with more complex transactions that pose more complicated valuations because they include factors such as future potential growth, strategic buyers, investment analysis, and valuation of physical and intellectual assets. They often assist with exit planning, succession planning, and the maximization of liquidity, and they have experience with several financing options.
Buyers
A business broker has a much more limited pool of buyers than an M&A advisor because they usually prefer to work within their geographical reach, and post the listing online to find buyers and see who bites. M&A advisors work on a highly strategic level to find the most optimal fit with access to buyers that can be anywhere from local to worldwide. They typically have access to connections that brokers do not.
Compensation
Business brokers work with the intention of getting a deal done and receiving a predetermined commission that is a percentage of the deal value. M&A advisors can also work on percentage payouts, but they play a much longer-term role, and can earn additional compensation for enhanced services that they provide in order to facilitate the most successful transaction. While a business broker may seem like the cheaper option, you should look at the value that you will ultimately be provided. You could also be leaving money on the table in a deal because M&A advisors go above and beyond to help you drive up the value of your company. They are also experienced at avoiding pitfalls and identifying red flags in the sale process, which could end up saving you from making a costly mistake.
What is Right for You
The way you choose to go about selling your company can make a huge difference in how much you benefit from the transaction, so it is important to get it right. Take the time to really understand the differences between business brokers and M&A advisors so that you can make the right call and get the value you deserve.
