M&A Advisor or Business Broker: Understanding the Difference

Imagine you want to buy or sell a business.

You might start by looking for someone with expertise and experience to guide you through the process. It is likely you will come across terms like “M&A Advisor” and “Business Broker.” At first glance, they might seem like interchangeable titles. Both mergers & acquisitions advisors and business brokers are invaluable resources to business owners looking to either buy or sell a business.

However, these two groups have different approaches and serve different needs. Let’s break it down in simple terms to understand the difference between an M&A advisor and a business broker.
The size and complexity of the deals each professional handles are key distinctions.
Business brokers focus on transactions involving small and medium-sized enterprises, where the deal size can range from a few hundred thousand dollars to a couple of million. These enterprises often operate at a local or regional level and are quite often purchased by a new owner that plans to continue operating the business as a stand-alone entity. The processes involved are often more straightforward and less time-consuming.

Conversely, M&A advisors handle transactions that may involve multimillion-dollar deals and multi-faceted negotiations. The stakes are higher requiring the skill set to handle intricate financial analyses, negotiate complex contracts, and provide invaluable strategic advice. These larger scale companies are more likely to have a regional, national or global presence attracting both strategic and financial buyers looking to acquire companies that align with their specific criteria.

Finding a buyer is a key component of closing any transaction. The approach to taking a company to market differs dramatically between business brokers and M&A advisors. Typically, business brokers use an approach similar to the real estate industry. They utilize online platforms like business-for-sale websites and industry-specific marketplaces as well as traditional print advertising methods such as industry publications and trade magazines to reach the target audience. Optimizing these listings with compelling descriptions and accurate financial data is crucial to attract potential buyers.

M&A advisors take a proactive approach leveraging their industry connections, networks, and databases to identify potential buyers. These could include strategic buyers (other companies in the same industry), financial buyers (private equity firms or investment groups), or even international buyers. The M&A advisor qualifies these potential buyers based on their financial capability and strategic fit.

The M&A advisor develops a comprehensive marketing strategy. This involves creating marketing materials such as a confidential information memorandum (CIM), which provide detailed information about the company, its financials, operations, competitive advantages, and growth potential.
Using a customize marketing outreach plan, the M&A advisor proactively contacts each potential buyer and determines their interest in the acquisition opportunity.

Both M&A advisors and business brokers play essential roles in the world of business transactions. Business brokers act as intermediaries, connecting local businesses with potential buyers. On the other hand, M&A advisors proactively identify and engage potential global buyers and provide invaluable strategic advice while negotiating complex contracts.

The choice between the two depends on the size, complexity, and strategic importance of the deal at hand. So, whether you’re a business owner looking to sell or seeking to acquire, these professionals are ready to help you navigate any potential transaction. The best way to determine what is right for you is to engage in conversations to discuss your specific needs.

Stage Left Partners has helped dozens of clients manage this journey. Please let us know how we can be of service.

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