16 Jul M&A Advisory: Business Broker or Investment Banker?
What are the differences between business brokers and investment banker? To put it in simple terms, the business broker is more beneficial for small “mom and pop” family owned business, while the investment banker is better for larger companies with over $1 million in EBITDA. Lets go into a little more detail.
Business brokers follow a procedure somewhat similar to a real estate agent. They will typically post a profile of your company on a few different websites and then wait for interest to arise. After a buyer is identified the broker will act as a mediator between you and the investing party interested in acquiring your company. This approach will typically take longer to sell your business, depending on the amount of interest from the market, and it will only usually bring few investors to the buyers’ table.
Investment bankers will follow a process that is a little more detailed. We start by creating a document referred to as a Confidential Marketing Memorandum. This document contains most of the fine details that will help an investor determine if he is truly interested in your company. When we take your company to market we use a very proactive approach to selling your business. This approach starts with some initial research into companies that are similar to yours, avoiding contact with competitors, and then contacting these companies directly. We also use a wide network of private equity groups that are in the business of buying companies that match your profile. Through this marketing campaign we typically draw multiple buyers to the table. Having more than one buyer provides a significant amount of negotiating leverage to you during the process. After the marketing campaign we assist you in structuring the right deal that will meet your financial needs.
The retainer fee sometimes puts off some business owners looking to less their business. Although this fee is not applicable with a business broker, it is still profitable to engage an investment banker because of the added level of work put into the process by the banker. In order to learn more about the process we invite you to read the article “An Exit Strategy: The Process.”