You’ve found a golden opportunity to buy or sell a business, or perhaps to grow through a merger. Before you plow ahead, you need to consult an expert who can advise you about what to expect and how to maximize the value the process offers to your business. Most people involved in M&A work with either business brokers or M&A advisors. But what’s the difference?
A lot of it comes down to the types of companies and businesses the advisor serves. An individual investor may need something categorically different from an entrepreneur with massive funding hoping to invest in a multinational conglomerate. In general, business brokers oversee smaller operations and work with smaller businesses. M&A advisors tend to work with more complex businesses, navigating complicated sales and negotiations.
Let’s take a deeper look at the differences in scope, skill, and approach you’re likely to find:
- Business brokers tend to shepherd smaller, less complicated transactions to closure, while M&A advisors support complex transactions that require a complex evaluation process.
- Business brokers usually operate on a smaller, more regional basis, and work with single businesses. While M&A advisors can work with smaller companies, they are more comfortable working on larger national or even global transactions, including complex mergers that span several locations.
- Brokers often limit their scope of practice, and may only match buyers and sellers. An advisor can offer a wider spectrum of services, including planning the transaction, structuring negotiations, securing funding, outsourcing options, and more.
- The assistance you’ll get from a broker is typically more limited in scope. M&A advisors adopt a more strategic approach, working with your business to ensure it is fully prepared for a merger or transaction.
- Smaller firms, individual entrepreneurs, and local operations are typically more comfortable with business brokers. Larger entities tend to choose M&A advisors.
- Business brokers primarily earn their money based on a percentage of deal value. While M&A advisors tend also to get a success fee, they may also charge upfront fees, or get fees based on specific efforts, such as managing taxation issues.
- While both advisors can help with valuation, M&A advisors use more complex valuation methodologies that look to strategic potential required investment, future potential, intellectual asset, and other factors. Brokers typically look to local sales, profits, and market factors only.
- A business broker’s primary role is to get the deal closed. Advisors may work on longer-term engagements, including integration efforts to see the transaction through to successful completion.
The process of selling or buying a business can determine your future financial success. Choosing the right advisor requires a keen understanding of your business, your goals for the sale, and your needs. M&A advisors tend to offer much more, but at a much higher price. With brokers, you avoid premium prices, but will likely get less personalized assistance with the sale. The right fit depends on your needs. In some cases, a meeting with a few advisors can help you better understand what it is you need.
