In the business world, two types of professionals are often called upon when it comes to selling a business: business brokers and M&A advisors. These professionals bring distinct skills, perspectives, and strategies to the table. The choice between a business broker or an M&A advisor can significantly impact the process and outcome of selling a business. This article will delve into understanding these two professionals and which you should choose when selling your middle market business.
What are Business Brokers?
Business brokers are professionals who specialize in facilitating the buying and selling of small to medium-sized businesses. They play a crucial role as intermediaries between buyers and sellers, managing the entire sales process. They are adept at marketing the business, identifying potential buyers, negotiating terms, and coordinating the various stages of the transaction.
The role of a business broker is akin to that of a real estate agent. Business brokers are skilled at presenting businesses in the best light, highlighting the most attractive aspects to potential buyers. They also bring a wealth of knowledge about business valuation, local market trends, and legal requirements, ensuring that the sales process runs smoothly and legally.
What are M&A Advisors?
M&A advisors, or mergers and acquisitions advisors, are experts in handling transactions involving larger, more complex businesses. These professionals are often involved in strategic planning, identifying potential merger or acquisition targets, and negotiating deals. M&A advisors have a more in-depth understanding of finance, law, and business strategy, allowing them to handle the intricacies of larger transactions.
M&A advisors’ role is more consultative, working closely with business owners to understand their objectives and devise a strategic plan to achieve them. They not only help sell businesses but also assist in growing and improving the business to make it more attractive to potential buyers or merger partners.
Distinctions between Business Brokers and M&A Advisors
While both business brokers and M&A advisors assist in selling businesses, there are key distinctions between the two. Business brokers typically deal with smaller businesses, while M&A advisors engage with larger, more complex transactions. Business brokers’ scope tends to be more localized, whereas M&A advisors often work on a national or international scale, dealing with cross-border transactions.
Another significant difference lies in their approach to transactions. Business brokers usually have a transactional approach, focusing on selling the business quickly. On the other hand, M&A advisors take a more strategic approach, focusing on achieving the best possible outcome for the business owner, even if it takes longer.
Who to Choose When Selling a Middle Market Business?
The decision between a business broker and an M&A advisor when selling a middle market business depends on several factors. The size, complexity, and specific goals of the business are critical considerations. For smaller businesses with straightforward operations, a business broker may be the best choice. Their expertise in local markets and ability to facilitate quick transactions can be beneficial.
However, for larger, more complex businesses, or businesses with specific strategic goals, an M&A advisor may be a better fit. These professionals are equipped to handle complex transactions and have the strategic insight to align the sales process with the owner’s objectives.
Steps in Selling a Middle Market Company: Business Brokers vs. M&A Advisors
The process of selling a middle market company can be complex, and the steps involved can vary depending on whether you’re working with a business broker or an M&A advisor.
With a business broker, the process usually starts with a business valuation, followed by marketing the business to potential buyers, negotiating terms, and coordinating the closing process. Business brokers may use various marketing channels, including online platforms, industry networks, and direct outreach to potential buyers.
An M&A advisor, on the other hand, may begin with a strategic review of the business to identify potential growth opportunities and areas for improvement. They may then seek out potential buyers or merger partners that align with the company’s strategic objectives. The negotiation process tends to be more intricate, often involving multiple parties and complex financial arrangements.
The Benefits of M&A for Middle Market Businesses
Mergers and acquisitions can have significant benefits for middle market businesses. It can provide access to new markets, enhance the company’s capabilities, or increase its scale. An M&A advisor can help identify these opportunities and guide the business through the complexities of the transaction.
M&A can also offer a lucrative exit strategy for business owners. By merging with or being acquired by a larger entity, business owners can potentially realize a higher value for their business than they would through a simple sale.
The Confidential Process for Selling a Business with Business Brokers and M&A Advisors
Both business brokers and M&A advisors understand the importance of maintaining confidentiality throughout the business sale process. Revealing too much information prematurely can disrupt operations, unsettle staff, or give competitors an advantage. Both professionals have processes and protocols in place to ensure that information is shared carefully and only with serious potential buyers.
For business brokers, maintaining confidentiality typically involves creating a blind profile of the business, which provides enough information to attract potential buyers without revealing the business’s identity. M&A advisors, on the other hand, may use secure data rooms to share sensitive information with potential buyers, ensuring that confidentiality is maintained throughout the due diligence process.
Why You Need M&A Advisors for Middle Market Companies?
While business brokers can be effective for smaller businesses, middle market companies often require the additional expertise that M&A advisors bring. Given the larger size and complexity of these businesses, the strategic planning, financial expertise, and negotiation skills of an M&A advisor can be invaluable.
M&A advisors can help shape the company’s growth strategy, identify potential merger or acquisition targets, and navigate the complexities of the deal process. They can also bring a level of credibility to the transaction, which can be particularly beneficial when dealing with larger corporate buyers or private equity firms.
Making the Right Choice: Business Brokers or M&A Advisors?
Choosing between a business broker and an M&A advisor is a decision that should be based on the specific needs and objectives of your business. For smaller, simpler businesses, a business broker’s local market knowledge and transactional expertise may be sufficient. However, for larger, more complex businesses, the strategic insight and financial expertise of an M&A advisor may be necessary.
Before making a decision, it’s crucial to speak with both types of professionals, understand their approach, and evaluate their track record. Ultimately, the right professional will be the one that can best help you achieve your objectives, whether that’s a quick sale or a strategic merger.
Selling a business is a significant decision, and choosing the right professional to guide you through the process is crucial. Whether you choose a business broker or an M&A advisor will depend on your business’s size, complexity, and strategic objectives. By understanding the roles, skills, and approaches of these professionals, you can make an informed decision that best serves your business needs.
IAG M&A Advisors offers services that help your middle market business get attention from the right buyers at the right time with the team that helps position you for the most successful exit. Schedule your call to learn more.
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