• What services do Business Brokers/M&A Advisors perform?

• How much do Advisory services usually cost?

• Does the broker really need a one year agreement?

• Shouldn’t I be able to cancel the contract at any time?

• Why should I pay the broker if I find the buyer?

• Why can’t I just sell the business myself?

• I have an attorney/accountant why do I need a mergers & acquisition advisor?

• I have other questions, where can I get answers?

What services do Business Brokers/M&A Advisors perform?

Although services vary by firm, “typical” services provided to a potential Seller might include the following:

• Review your business with you (operations, financial, sales & marketing, etc.) to help understand its true value
  

• Discuss you goals on a potential exit and the different types of exit strategies
  

• Develop a comprehensive Information Memorandum that highlights your company’s unique strengths
  

• Market the company professionally and screen potential buyers
  

• Provide negotiation & deal structuring advice 
  

• Maintain a confidential selling process
  

• Provide overall deal management from initial discussion through closing
  

• Allow you to stay focused on running your business

How much do Advisory services usually cost?

Most intermediaries base their fees on a percentage of the transaction value which aligns their goals with the Sellers – to maximize value.  Typically, the larger the transaction, the smaller the percentage charged. In addition to a success fee, more firms are starting to utilize an up-front retainer fee to cover their initial costs of working with clients.  Fees vary from firm to firm as do the specific services provided.  The APMAA encourages prospective clients to compare not only fee structure but actual services performed.  Since every client is unique and services vary from each firm, there is no “standard” fee and apples-to-apples comparisons are difficult to make.

As in most situations, you get what you pay for and a “bargain” fee might get you sub-par services.  Ask yourself this question, if you were going to get heart surgery, would you want the best surgeon for your condition or the cheapest? Choosing a professional M&A Advisor on perhaps the biggest financial transaction of your life should be no different.

Does the broker really need a one year agreement?

On average, it normally takes between nine and twelve months to sell a business.  The business broker will be committing a large amount of time and effort and wants to make sure that there is enough time to properly structure a transaction and have a successful sale for the client.

Shouldn’t I be able to cancel the contract at any time?

That depends on what type of contract you are signing.  If you are entering into a success fee based contract, the business broker will be performing a substantial amount of work prior to receiving any compensation.  It would be unreasonable to expect the business broker to evaluate your business, prepare an Information Memorandum, and provide any other services only to have the client cancel the contract before they could expect to receive compensation. 

If you want a cancellation clause put into the contract, you may want to consider proposing a retainer fee to cover the cost of the initial services and then an hourly rate to be charged against any success fee.  You should expect the hourly rate for professional services to range from $200 to $450 per hour depending on the level of experience of the broker. Most clients would prefer to “pay for performance” and compensate the broker on a successful closing.  A success fee based arrangement aligns the broker’s goals with those of the clients.

Why should I pay the broker if I find the buyer?

This is a common question with a simple answer:  you are paying the broker for much more than identifying a buyer. The client should expect that the business broker will evaluate the business, prepare a complete Information Memorandum, market the business, screen potential buyers, and manages the deal process in a professional manner.  No broker would provide the client their best effort if they were concerned that their work was being used by the client to conduct a parallel sales process to avoid a fee. Additionally, the broker will be providing the client crucial advice throughout the entire sales process; including evaluating offers (which are about much more than just a price). 

Having an exclusive listing agreement aligns the business brokers goals with those of client so that the client can be assured they are receiving unbiased advice as to which offer is truly the “best”.  For the broker, this type of agreement ensures that they earn their fee on a successful sale of the company and eliminates any fee disputes that could arise.  With exclusivity in place, the broker has more incentive to work with the client toward a successful sale.  A seller should be wary of any broker willing to enter into a non-exclusive agreement – these brokers are typically just trying to collect listings rather than assist in a full sales process. 

Why can’t I just sell the business myself?

This is probably the biggest mistake most owners ever think about making!  It is tempting to “save” the money you might pay a professional, but who will be running your business during this crucial 9-12 month period?  As a business owner do you really have both the time and expertise to take on such an important challenge?  Ask yourself how many business sales you have been involved in.  Is the sale of your own business really the time to get on-the-job training?  It would almost be like asking a surgeon “I know I need my appendix out, just tell me where to cut.”  You are not really paying the doctor because he knows where to cut but because he knows how to make the entire operation a success – and it’s not what you see on the surface. 

I have an attorney/accountant why do I need a mergers & acquisition advisor?

The primary purpose of attorneys is to draft appropriate purchase & sale documents.  A good attorney will advise and protect a client legally within the framework of a successfully negotiated transaction.  The American legal system trains attorneys in adversarial negotiation tactics and the involvement of an attorney too early in the process can strain otherwise productive discussions.  Additionally, few attorneys are qualified to value a company and most have had little or no practical business experience.

Accountants are best used to perform an audit, to help interpret financial statements and to provide advice on the tax consequences for the buyer and seller.  Accountants are trained to create historical financial statements and review tax codes, both of which are “factual” items.

 
A good M&A Advisor will create value by showing buyers what is not in your financial statements. Additionally, they will help keep the selling process confidential and give you insight to market trends.

I have other questions, where can I get answers?

Check out the other information resources, including articles, on our web site.  Additionally, we encourage you to contact our members directly who are always more than happy to answer questions. If you prefer, you van email us at: information@apmaa.com.