In the evolving world of business transactions, there remain 3 general types of professionals who play a critical role in facilitating successful transactions: Business Brokers, M&A Advisors (Mergers and Acquisitions Advisors), and Investment Bankers. While these professionals often work in similar areas, they differ significantly in their roles, expertise, and the types of transactions they handle. Understanding these distinctions is essential for owners seeking assistance in buying, selling, or merging with other entities.
Business brokers assist in the buying and selling of small businesses with the focus primarily on transactions on the lower end of the market under $1M in value. They usually provide an estimated value based on market analysis and financial performance to set an asking price for the business. When taking a business to market, they use various channels to attract potential buyers, assist in negotiating the deal terms, and then help buyers and sellers gather necessary documents and information during the due diligence process. Most often these types of transactions are simply “all cash” at closing and can easily be financed through SBA which is available up to $5M or other traditional financing options. An experienced business broker often provides 3rd party recommendations for buyer financing, legal, accounting, and other expertise to help ensure a successful transaction.
Mergers & Acquisition Advisors
M&A advisors specialize in guiding mid-sized companies through the inherent complexity of mergers, acquisitions, and other strategic transactions. This may require specific licensing depending on current federal or state laws, but these advisors work primarily with privately held middle market businesses over a wide value range between just a few million to near $1B. M&A advisors conduct in-depth financial analysis and due diligence to assess the target company’s value and potential risks to set value expectations. When taking a business to market, they rarely set an asking price due to the many different types of potential buyers which can greatly affect market value. They may advertise online along with helping to identify and analyze potential acquisition targets or merger opportunities that align with their client’s strategic goals. These advisors negotiate on behalf of their clients to secure the most favorable terms by assisting in more complex transaction structures including traditional/private financing, seller financing, and earn-outs. These advisors often interface regularly with other professional advisors to properly address tax implications, regulatory requirements, and other legal aspects along with post-closing support services to help ensure a successful ownership transition.
Investment bankers work in larger firms or divisions of financial institutions that offer a wide range of financial services, including underwriting securities, providing corporate finance advice, and managing mergers and acquisitions for large private ($1B+) and public traded companies. They are required by federal and state laws to have specific licensing/certifications as they will often help companies raise capital through public offerings (IPOs) or private placements of equity or debt and provide strategic advice on mergers, acquisitions, and divestitures. These firms often have a large team of experts on staff including data analysts, legal, accounting, and other advisory roles to help ensure a successful outcome.
With the changing landscape in our industry and with many larger companies directly affected by the uncertain economy, there are now many more Investment Banking firms that are doing more M&A advisor type work. Then there are a few M&A firms like ours who bridge across the Business Broker and M&A Advisor categories and for this reason we often like to use the term “Business Intermediaries”. While we can help small businesses, our firm’s hybrid approach allows us to efficiently implement both online and offline M&A strategies with a focus on driving value for lower middle market businesses between $1M to $50M in value. Depending on the complexity of the business and industry, it’s important to understand the level of effort and experience that will be needed in each transaction. While there are many great M&A tools and processes available, the strategy for selling any business should be unique to the business itself and not a one-size fits all in order to fully maximize the results at the closing table. The majority of our business comes from referrals, and we appreciate your continued trust in our firm.
Robert W. Amerine
President, CBI, M&AMI