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Business Broker vs. M&A Advisor: Comparisons & Alternatives

January 07, 20236 min read

Business brokers, mergers and acquisitions (M&A) advisors, and investment bankers are all professionals who help business owners sell their businesses. Before we dive into the differences and how to decide which is right for you, let's get on the same page about some jargon. 

"M&A" is often used in conversations about exit strategies and buying and selling businesses; it stands for mergers and acquisitions.

Mergers are when two existing companies become one, whereas acquisitions are when one company buys another company outright.

The semantics don't really matter most of the time, and whether you are seeking one of these exit strategies over another, it's ok to just use the term "M&A" to describe the whole concept.

What is the difference between an M&A advisor and a business broker?

Generally, the decision between working with a broker versus an M&A advisor is based on deal size, scope and client profile.

M&A advisors work on complex business transactions and multi-million dollar deals, whereas your local business broker works with smaller businesses. That said, because some small firms with M&A advisors offer services to individual entrepreneurs and smaller businesses, it is best to ask the specific advisor you are considering.

Business brokers tend to focus on facilitating the sale of a specific business. In contrast, an M&A advisor focuses on helping a company identify and execute opportunities, whether selling all or part of a business, buying a business, or other strategic alternatives.

M&A advisors do not list a business owner's company for sale on their website, whereas business brokers do. It's kind of like online dating versus using a matchmaker.

M&A advisors typically operate more like consultants, seeking out buyers who have shown an interest in potential business opportunities. An M&A advisor (the matchmaker of the M&A world) learns about your business and your desired exit or acquisition strategy and helps identify would-be buyers or acquisition targets, and assists in the negotiation and integration of the sale or acquisition. 

Business brokers operate similarly to real estate brokers by advertising and selling businesses through online platforms or newspaper advertisements, more like the Tinder of the M&A world.

Business Broker Versus M and Advisor

business broker versus m a advisor

What are their transactions like?

M&A advisory firms can work on more complex transactions and provide comprehensive services from intellectual asset valuation to succession planning. Their transactions can involve:

  • Complex business mergers.

  • Businesses with sales spanning multiple locations.

  • Larger transactions, spanning multiple regions.

The bigger the transaction, the more difficult it is to complete.

Business brokers are usually involved with smaller transactions of single stand alone businesses and single location restaurants.

What is the role of a business broker?

Business brokers help facilitate the sale of a business by acting as an intermediary between the buyer and seller.

Here are the steps that a business broker may take in a sale process:

  1. Initial consultation: Business brokers will meet with the seller to learn more about the business and the seller's goals for the business exit.

  2. Valuation: Business brokers conduct a company valuation to determine its market value. This may involve analyzing the company's financial statements, industry trends, future potential growth and other factors. Their valuation methods are quick and dirty and tend to focus on the lower to middle market.

  3. Marketing: The broker will create marketing materials and a marketing plan to advertise the company for sale to potential buyers. This may involve using online platforms, networking, and other methods to reach would-be buyers.

  4. Reviewing offers: The broker will review offers from would-be buyers and negotiate the terms of the sale with the seller.

  5. Closing the deal: Once the seller and buyer agree on the terms of the sale, business brokers work to facilitate the closing process, including transferring ownership, handling legal documents, and ensuring that the selling business owner receives the agreed-upon payment.

  6. Follow-up: Business brokers may also provide post-sale support to ensure the transition goes smoothly for both the buyer and seller.

What is the role of an M&A advisor?

find a buyer for your business

Here are the steps that an M&A advisor may take to help a company identify potential buyers:

  1. Understand the company's goals: The M&A advisor will work with the company to understand its goals and objectives for the sale, including the desired price, timeline, and any other key terms.

  2. Research buyers: The M&A advisor will conduct research to identify businesses that may be interested in acquiring the company. This may involve using databases, industry sources, and other resources to find buyers.

  3. Evaluate would-be buyers: The M&A advisor will review the financial and operational details of would-be buyers to assess their suitability for acquisition. This may involve analyzing the buyer's financial records, industry trends, and other factors.

  4. Present possible buyers: The M&A advisor will present the company with a list of likely buyers and a summary of each buyer's strengths and weaknesses.

  5. Assist with negotiations: If the company decides to move forward with a sale, the M&A advisor can assist with negotiations and the due diligence process to ensure the deal is completed successfully.

Why should you hire an advisor or an investment banker for M&A?

There are several reasons why a company may choose to hire an advisor or investment banker for M&A (mergers and acquisitions) activities:

  1. Expertise: Advisors and business brokers deal with transactions all the time, so they have specialized knowledge and experience in M&A transactions and can provide valuable guidance and support throughout the process.

  2. Network: Advisors have a network of industry contacts and potential buyers or sellers, which can help identify and secure potential M&A opportunities.

  3. Negotiation: Advisors and business brokers are skilled at negotiating deals and can help ensure that the company gets the best terms possible.

  4. Financing: Investment bankers can also assist with securing financing for M&A transactions, either through debt or equity offerings.

  5. Time and resources: M&A transactions can be time-consuming and resource-intensive, and hiring an investment banker can free up the company's internal resources to focus on other priorities.

The choice of the right advisor

factors to choose an advisor

When considering whether to work with a business broker or an M&A firm, there are a few key factors to consider:

  1. Services offered: Business brokers typically specialize in facilitating the sale of small to mid-sized businesses, while M&A firms typically focus on larger, more complex transactions. If you are selling a smaller business, a business broker may be a good fit. If you are selling a larger business or looking for strategic advice and guidance, an M&A firm may be a better choice.

  2. Fees: Both business brokers and M&A firms may charge a commission based on the sale price of the business, or a flat fee, or a hybrid of a fee plus a percentage of the transaction value. Get a quote for the fees the brokers/firms propose to charge, then consider your budget and the services you need when deciding which option is more cost-effective.

  3. Experience and expertise: Both business brokers and M&A firms have specialized knowledge and experience, but they may differ in their focus and areas of expertise. Consider the specific needs of your business and look for a professional who has relevant experience and expertise in your specific industry.

  4. Fit: Ultimately, the most important factor is whether you feel comfortable and confident working with the professional you choose. Consider your communication style and needs, and look for someone you feel you can trust and work well with.

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Business Broker versus M and A Advisor
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Julia Kwinter

I've been helping business owners understand the value of a business for over 20 years. I get it, financial lingo can be intimidating, and that’s why I’m here. I’m a CPA and expert business valuator who teaches business owners, service providers, entrepreneurs and everyday people the simple steps to becoming financially savvy.

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