Selecting the Right Professional: M&A Advisor Vs. Investment Banker Vs. Business Brokers

A business purchase is a big event for both buyers and sellers.

Buying a business is a huge financial commitment, and the transaction will impact employees, investors, and possibly creditors.

To ensure that the process goes smoothly, you need to get help from the right experts. Your team may include a business broker, M&A advisor, or an investment banker. The size and complexity of your business, and the target company, determines the type of advisor you need.

A purchaser is looking for competitive differentiation and uniqueness in the market. An attractive business has a track record of sales, positive cash inflows, and net profits.

Many successful businesses carve out a profitable niche that is repeatable and teachable to a potential buyer. If the company has recurring revenue streams with automatic customers, the firm is even more valuable.

In addition, the purchaser may be a business competitor.

Competitors already know about the business, and they have experience in the same industry. As a result, they understand the value of the business and the potential for growth after purchasing the company.

When you collaborate with the right experts, you can make informed decisions about the transaction.

Working with Business Brokers

Business brokers work on small to midsize businesses under $5 million. They have a reactive focus, based on industry knowledge and marketing efforts to find sellers.

A broker works to understand a seller’s motivations. The seller may be motivated by a desire to retire or to monetize their personal investment and start another business.

Brokers also look for potential obstacles to a sale. A dispute among business partners can derail a sale, or the owner may have a personal issue that slows down the sale process. Your broker can prescreen sellers, to confirm that the seller is ready to provide documents for due diligence.

A broker uses metrics and online valuation tools to determine the business price. They perform research by analyzing the sales of similar companies, industry trends, and market factors. Brokers negotiate the final price on seller’s behalf with broker representation.

Your broker can assist with laws, regulations, permits, and licenses. If you address these issues as they come up, the transaction will go smoothly.

Hiring an M&A Advisor (Broker)

M&A advisors or M&A Broker work on larger transactions than business brokers. If the target business generates revenue of $5 to $10 million and higher, you’ll need an M&A advisor.

Advisors have a consultant focus, providing strategy and planning options for a potential seller. They use a proactive focus regarding structure and timing of a transaction, in order to add value.

The M&A advisor will consider the target firm’s brand awareness and the product and service offerings. An advisor can help the seller assess the company’s current position in the market, the competitive landscape, and how changes in economic conditions may impact a sale.

These transactions involve a number of legal issues, including non-disclosure agreements and due diligence information. Work with an M&A attorney on these issues. The attorney can negotiate letters of intent, and the final purchase agreement.

Both parties in a transaction typically have an M&A advisor or an investment banker.

Retaining an Investment Banker

Investment bankers provide advice on the largest business sales, those with revenue of $100-$200 million and higher.

Many of these larger transactions involve the public markets, and you need experts who understand how securities are registered and issued to the public. Bankers provide a broader range of services, including pre-IPO rollups, public offerings, and broker-dealer relationships.

Because issuing securities is so complex, investment bankers focused on the transaction, and less on strategy and planning for the buyer. Your banker will have a proactive focus regarding structure and timing of a transaction, in order to add value.

Investment bankers use their expertise to price the public offering, and work with broker-dealers who sell the new issue to investors.

Both parties in the transaction will have an M&A advisor or an investment banker. These complex transactions also require specialists in law and corporate finance. You need experts who can manage the process of registering securities for sale.

Put the Right Team in Place

A team of experts can help sellers find an interested purchaser, manage the due diligence process, address legal issues, and negotiate a final sale price.

Finding the right advisor depends on the size and complexity of the transaction. You may need the services of a business broker, M&A advisor (broker), or an investment banker.

Experts help the buyer maintain company culture and employee continuity after the purchase. The buyer may provide incentives for the management team to remain after a sale. Purchasers also need a plan to retain both key customers and the supplier base.

Raincatcher has an M&A team with the background needed to work with large companies. They have experience managing the complex issues of large business sales. Work with Raincatcher and other experts to close a successful business sale.

Business Brokerage
Business Brokerage

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