If you have never bought or sold a business before, then you may not be familiar with the term ‘business broker’ and what it means. However, if you are thinking of entering the world of mergers and acquisitions, then a business broker could be your new best friend, so it’s important to familiarise yourself with their work.
In this concise guide, we will cover:
- What a business broker is
- Their role in buying or selling businesses
- Types of business broker
- The advantages of using a business broker
Let’s begin!
What is a business broker?
In simple terms, a business broker is a company that assists with the process of buying or selling a business. You can think of them as the ‘middleman’, who handles every stage of the process, including acting as go-between for buyer and seller.
Business brokers use their expertise and extensive knowledge of the mergers and acquisitions world to make buying or selling a business as hassle-free as possible for all parties involved.
The role of a business broker in the M&A process
Business brokers have several essential responsibilities that they need to fulfil when helping another business to buy or sell. These responsibilities include:
- Valuations
Determining the true market value of a business is a vital first step in the selling process and a business broker can assist with this. There are several different methods that can be used to value a business. It’s crucial to establish and set an accurate and fair price for both buyer and seller.
- Facilitating contact between buyer and seller
Business brokers are responsible for communicating between buyer and seller. This runs from initiating the very first contact to negotiations and helping to answer questions or concerns from either party.
- Marketing a business for sale
Business brokers can help sellers create attractive, high-quality marketing materials for their company – and ensure that the right buyers receive these materials.
- Screening potential buyers
One of the hurdles that sellers can face is finding buyers that are right for their company. Some buyers may have hidden financial issues, or they may not have a corporate culture that matches the seller’s; making them the wrong people to take over and run the business effectively.
- Assisting with due diligence
Due diligence is a critical part of the process of buying or selling a business. Business brokers can assist in this process and ensure that the buyer is presented with the necessary paperwork from the seller.
- Smoothing negotiations
The negotiation stage is another vital step and business brokers can be invaluable when it comes to helping buyers and sellers settle on suitable terms for the deal. This includes establishing the final price and sorting out any conditions that may need to be met.
- Closing the deal
Finally, business brokers can help seal the deal and ensure that the business is successfully bought or sold.
Types of business broker
You may not realise it but there are different kinds of business broker, each with their own unique specialties.
These include:
- Multi-service brokers: As the name suggests, multi-service brokers provide a comprehensive range of brokerage services, including all the responsibilities detailed above.
- Online brokers: Online brokers specialise in using technology to help sell a business, such as creating a listing on a website.
- Limited-service brokers: Once again, as the name implies, limited-service brokers offer a smaller selection of services. Some may specialise in marketing, while others may focus on the negotiation aspect of a sale.
- Corporate finance: Corporate finance firms are a type of business broker that focuses specifically on businesses with a higher revenue, typically over £5 million.
You will also find a variety of other more specific brokerage services available, including exit advisories and transfer agents. However, if you are buying or selling a business for the first time, it’s probably best to opt for a multi-service broker who can assist you with every stage of the process.
The advantages of hiring a business broker
There are a few significant benefits you can receive when you take on a business broker to oversee the buying or selling of a business.
- As mentioned above, business brokers can be instrumental when it comes to sourcing and vetting potential buyers or sellers. They have access to an extensive network of companies who may be interested in either acquiring or selling. This can exponentially speed up the process, which can be lengthy enough without having to scrabble to find the right buyer. Business brokers can also help you determine which buyer would be best for your business, as they can determine whether a buyer has the finances and relevant experience to go through with the deal.
- Another advantage of using a business broker is their expertise in negotiation and facilitating effective communication throughout a business sale. While you will also have your legal team involved to ensure every legal box is ticked, business brokers can help you and your would-be buyer hash out the various business-focused elements of a sale to ensure you both get a fair deal.
- Last but by no means least, business brokers can assist you with every stage of the selling process, drawing on their expertise and unique resources to make the sale as straightforward as possible. This includes helping to value the business, create professional marketing materials, and mediate between you and potential buyers. Their significant role in the process leaves you free to get on with running your business and preparing for a smooth exit.
Hire an experienced business broker to sell your business
Harris Acquire is a tried-and-trusted business broker dedicated to helping businesses find the best deal, whether they are buying or selling. Our small but agile team can simplify these complex processes and provide friendly, professional assistance through every stage of the journey, from initial contact to completion.
To find out more about our services and how we can assist you, give us a call on 01926 757100 or send an email to Hello@harrisacquire.com.