Docstoc

Business Broker or Merger and Acquisition Advisor for Selling your Business-

Document Sample
Business Broker or Merger and Acquisition Advisor for Selling your Business- Powered By Docstoc
					?Most businessmen sell a business only once or twice in their lifetime. Selling a
business may be the most difficult task for a businessman who might have taken years
to build a profitable and reputable business. When he puts it up for sale, he hopes to
recover the price for all that he has put into it. Selling a business can be profitable
decision or one that can result in the loss of one's life's work. It is advisable for
businessmen to hire professionals for selling their business. If your business falls into
the mid-market category and you aim to drive a strategic deal out of your sale, you
will require an expert merger and acquisition advisor. But if your business belongs to
the Main Street and you just want to get the best price for it, you might need a
business broker. Below, we discuss some of the differences between the two
professionals, which can help one decide whom to hire for selling a business.

? Type of Business
Business brokers specialize in what are called main street businesses, which could be
in the range of $100,000 to 1,000,000 in revenues and include businesses like
restaurants, dry cleaners, gas stations, convenience stores etc. M&A advisors usually
take on businesses with larger turnover, like manufacturing units, technology firms,
distributors etc. If the business to be sold is amongst main street businesses, the
services of a business broker to sell the business would be appropriate, whereas if it is
larger, then the services of a merger and acquisition advisor would be needed.

? Targeted Buyer
Business brokers target individual businessmen for selling a business, whereas M&A
advisors are connected with corporate buyers, who seek a strategic reason behind a
merger or an acquisition.

? Business Valuation
Business brokers generally apply "rule of the thumb" valuations for main street
businesses to determine their selling price. Such valuations rarely vary. Merger and
acquisition advisors are called in when there can be a broad interpretation of strategic
value and rules of thumb do not apply. Large businesses generally have high
components of niche services, intellectual properties, strong customer base etc, which
make the strategic value for the business vary widely.

? Complexity of Transaction
Business brokers handle small businesses to sell and their clients consist of
individuals. The process of selling the business is simpler as compared to larger
corporations. Contracts for small businesses are straightforward and negotiations are
based on the requirements of the seller, price and financing. For a merger and
acquisition advisor, the target is a corporate buyer, who is an expert at M&A deals.
Corporate buyers have different teams working for them like legal experts, investment
bankers, valuation professionals etc. and their contracts are extremely complex. A
corporate buyer sends in teams to conduct due diligence and examine the business to
sell in detail. Hence if the business to sell is a large corporation, the seller will need a
merger and acquisition advisor, who is equipped and experienced to negotiate with
such pros.

? Volume of Clients
Business brokers represent as many businesses for sale as they can. For business
brokers, it is a benefit to have many businesses listed with them when they are
contacting individual buyers. Business brokers rely on mass email a campaign,
posting on websites etc. and their attention is divided amongst many clients at one
point of time. Merger and acquisition advisors, on the other hand, have an exclusive
clientele of 3 to 4 clients per professional. With specific industry niches and a
customized database of contacts, merger and acquisition advisors give their clients the
personal and professional touch that they demand.

? Fees
Business brokers have a system of a minimum upfront fee plus around 10% of the
transaction fee on completion of a successful deal. They do not charge monthly fees.
Merger and acquisition advisors, on the other hand, charge a substantial upfront fee or
a monthly fee in the range of $3000 to $10,000 per month. M&A advisors also charge
a percentage of transaction value as fees on completion of the deal, which is decided
on basis of the size of the business. Big Wall Street M&A companies are known to
refuse transactions below $1 million in fees.

Based on the points made above, you can decide whether to hire a business broker or
an M&A advisor for selling your business. The major deciding factor will be the cost
that you are willing to incur. Keep in mind that if you have a small business to sell, it
will not be able to sustain substantial upfront as well as monthly fees of the merger
and acquisition advisor. Hence it would be better to go for a business broker. Go for a
merger and acquisition advisor only if you need to sell a large corporation with high
intellectual property and niche services.

				
DOCUMENT INFO