Mergers and Acquisitions

Mergers and Acquisitions

Business Broker or Merger and Acquisition Advisor?

How many owners of a shopping center, industrial warehouse or office building would hire a residential realtor to sell their property? Conversely, how many homeowners hire a commercial real estate firm to sell their home? In the realm of real estate sales most people understand that there are distinct differences between residential and commercial real estate firms in terms of expertise, type of buyers and the marketing process each employ.

Nevertheless, most business owners and many business advisors are unaware that similar differences separate business brokers from merger and acquisition advisors. It is vital to retain the right firm for the sale of any particular business.

Highlighted below are differences between business brokerage and merger and acquisition firms.

Business Brokers Typically: Merger & Acquisition Firms Typically:
Represent main street and upper main street businesses valued well below $2 million, such as dry cleaners, restaurants, beauty salons or franchises Represent owners of businesses valued in excess of $2 million, including manufacturers, distributors or service businesses
Market businesses mostly via businesses-for-sale websites, doing little buyer research and almost no direct prospecting to select buyer candidates Market businesses mainly to other businesses,  usually by creating a thorough “package” with analysis and write-up, targeting interested buyers
Sell companies mainly to private individuals who will typically run it themselves Sell companies to other businesses and/or private equity groups with a separation of owners and management
Do not charge a fee up front but must maintain quite a few simultaneous listings to be profitable

 

Charge a retainer or consulting fee up front but have far fewer engagements than business brokers and spend considerably more time on each deal
Have a background in real estate or general business, with limited knowledge of the finance, accounting, tax and legal issues that impact the transaction Usually have degrees in business, finance or law, and often an MBA or law degree with prior experience in banking or private equity before becoming an M&A advisor
Work alone, even if the broker works for a larger organization Usually work as a team
Spend far less time per deal than an M&A professional, primarily because they cannot afford to, given the smaller size (and fees) of each deal Do up-front researching of the industry, packaging the business and preparing it for sale, proactively contacting and working with buyers, and managing the deal through closing

If you own a business and wish to sell, you certainly want the best possible representation. We have seen multi-million dollar companies represented by business brokers who didn’t know how to effectively market that type of company. We have also referred many main street businesses to business brokers who market very well on “business-for-sale” websites and to individuals.

Consider the cost benefit. An M&A firm will charge significant fees for representing your business. The good news is the better M&A firms will increase the value of your business sale by many multiples of the fee charged.If you own a business and wish to sell, you certainly want the best possible representation. We have seen multi-million dollar companies represented by business brokers who didn’t know how to effectively market that type if company. We have also referred many main street businesses to business brokers who market very well on “business-for-sale” websites and to individuals.

We focus on the synergistic and strategic value that a particular business might have to others in addition to its “financial value”.  If your business is valued north of $2 million, you want a firm that focuses exclusively on larger deals. Such firms will be much more likely to have the education, experience and network that match your opportunity. A good M&A firm will be capable of adding considerable value to your deal.

Contact us for more information on First Beacon’s Merger and Acquisition services.