How To Assess A Business Broker's Skills To Sell A Business


Clinton Lee of UK Business Brokers advises that selling a business is unlike selling any other property. For one, value perception varies widely from buyer to buyer depending on buyers' individual circumstances, cost of capital and synergies recognised.

The Intermediary

One key variable is the competence of the intermediary assisting with the sale. Intermediaries may go by many names - business broker, M&A advisor, business transfer agent and investment banker etc. - but they perform similar functions. A competent firm of intermediaries can add substantial value to the sale.

As someone who has been matching businesses with intermediaries for a long time now, I appreciate more than most that choosing an intermediary is easier said than done. What follows is a brief guide to making the choice.

What services is the intermediary expected to provide?

A competent intermediary will be able to provide all manner of exit related services including business market readiness assessments, exit preparation advice, valuation etc. Once the business is "market ready", the intermediary would assemble a professional Confidential Information Memorandum to provide to prospective buyers. The intermediary markets the business, deals with prospective buyers, assists management with answering buyer queries and, eventually, handles the negotiation of price and terms.

Some business owners, perhaps for cost reasons, tend to go for a fee structure involving little to no upfront fee for the intermediary and with compensation heavily biased towards a percentage of the final sale price ... if the business sells. It's called the no-sale-no-fee model. The downside of such an arrangement is that there is no incentive for the intermediary to put a lot of time and effort into marketing the business. This fee structure usually turns out to be a false economy.

Hiring a hands-on firm to add value

Where the directors are willing to invest in professional advice, it's worth running a "beauty parade" of intermediaries. Some questions worth asking each prospective partner:

1. What experience do you have selling businesses like mine - in my industry and of a similar size to this one? Would those previous clients be willing to endorse your service?

2. Who will be handling my account? Will it be one of the senior partners / directors? How many hours of this person's time do you expect will be devoted to this project from start to finish?

3. Can you provide a clear picture on all the costs and explain all your fees and the fee structure? What other costs am I likely to incur and can we set a ceiling on those costs? Any arrangement involving payment by the hour could, of course, turn out to be very expensive.

4. Are you capable of advising on multiple exit options e.g. Management Buy Outs? An intermediary whose compensation is entirely tied to the exit price has an incentive to source a deal with a high headline price even if that involves other terms that are unfavourable to the vendor (e.g. a large component of the price being payable in the future or being paid only on certain contingencies being met).

5. Who will be conducting the valuation, what's their background, and will you put the valuation in writing? Note that valuation isn't an exact science and having a qualified valuer put a price to the business is not necessarily going to result in a more "accurate" figure.

6. What can I expect from you at different stages of the process? And how long do you estimate each stage to last? Getting a commitment in writing is helpful in motivating the intermediary to stay on track and deliver on promises.

7. Where and for how long will you market my business? Will those marketing costs be covered entirely by you and if not, how much do I need to budget for this? How will you go about finding strategic / trade buyers?

8. To what extent will I need other professional advice - solicitors, accountants etc. - and how much do I need to budget for these expenses?

9. Do you get compensated by any other parties in relation to the sale of my business? Some intermediaries act for both buyer and seller. Apart from the obvious conflict of interest issue this raises, if the vendor consents to such an arrangement it's worth negotiating the intermediary's fees to reflect this "double" payment.


80% of businesses that go to market fail to find a buyer. The importance of getting the right intermediary cannot be overstated. It's a decision worth spending time, effort and money to get right.

Bio: Clinton Lee runs a consultancy advising business owners on their exits and maintains the UK's largest database of business brokers, their sector specialisations, their geographical coverage, their fees and other relevant data.