Often, intermediary is the generic term applied to people involved in selling a business. There are different types of intermediaries, and they can be classified according to the size of business with which they deal or as a side business. The following comments are not hard and fast, and may vary depending on the situation. But the type of intermediary you should use may depend upon the size of your business and whether it is public or private.
Business Brokers- This type of intermediary deals most often with transaction prices under $1 million, but are often trying to sell larger businesses under $3 million. In many situations they are licensed real estate agents also selling real estate.
Merger & Acquisition Professionals- M&A professionals deal with selling companies valued under $100 million. They delve into the business for sale, develop a detailed Offering Memorandum, develop a marketing plan to suit the sale (local, national, global), and screen potential buyers, with a goal of attracting multiple buyers to drive the price upward.
Investment Bankers- These professionals often focus on raising capital for companies. They may also provide mergers and acquisition advice, or advice on specific transactions, such as a spin-off or reorganization for companies greater than $50 million. Much of their work is with public companies.
Finders- Typically, finders simply introduce buyers to sellers. They are not licensed, nor do they give advice or assist with negotiations.
Consultants- Many consultants help people grow or fix their business and therefore feel qualified to sell businesses, too. While they may be capable of selling a business, they normally don't have the experience, resources and knowledge to maximize a seller's proceeds.
Other Professionals- Often a business owner’s closest advisors….attorneys and accountants will play the role of an intermediary to sell their client’s business. Again, they are very capable, but they most likely won’t have a formal marketing process in place that will attract the best buyers.
Regardless of the type of intermediary you choose, the benefits are many. For example, using an intermediary to help sell your business will provide:
- Better Exposure to More Qualified Buyers
A professional intermediary working on an exclusive basis will do a comprehensive search of potential buyers for your business. This intermediary will screen out unqualified or undesirable buyers and present you with only those buyers who are qualified to complete the transaction. Your intermediary will manage the selling process to create an efficient market, using a vast database of potential buyers that you might not find anywhere else.
- Better Price
The key element to getting a prime price for your business is to initiate bidding between two or more potential buyers. Your intermediary will act as the third-party facilitator who advocates for you throughout the process to get the best price and terms to meet your goals.
Most sellers are concerned about confidentiality during the marketing and selling process. Knowing the business is for sale may cause undue concern for employees, suppliers and customers, and may cause your competitors to take advantage of the situation. Your intermediary should confidentially market your business while you continue to run your business as usual.
- Protection of your personal time
A professional intermediary will handle the myriad details required to market and close the sale of your company. Marketing, screening, communicating details, negotiating, etc. can be a full-time job. Your intermediary allows you to continue to focus on growing your business so you can get the best possible price.
Many buyers are very sophisticated and may have bought multiple businesses, looking at 50 or more businesses annually before closing a deal. Your intermediary can make sure you are protected from experienced buyers who know how to manipulate an inexperienced seller. The typical seller may only sell one or two businesses in a lifetime, and therefore, cannot be expected to be experienced enough to negotiate the best deal.
A good Intermediary will pay for themselves many times over in providing a seller with a higher selling price with favorable terms.
How to Select Your Intermediary
Nothing takes the place of years of experience in selling businesses and keeping current on tax and legal ramifications. Talk to your trusted advisors and ask for qualified referrals. Once you have a few recommendations, meet in person with each one to determine the best fit. Ask questions about how to add value to your business prior to a sale. Get a feel for whether you think you can trust the person to have your best interests in mind at all times.
Once you have made a selection, you will be making an exclusive agreement with one intermediary to ensure that the person is highly motivated to work hard for you with nominal compensation upfront and a contingency fee that offers incentive to find the right buyer at the highest price. For advice on any stage of the planning or selling process, contact O'Keeffe & O'Malley at 913-648-0185.