M&A advisory is the tier above business brokerage. The adviser runs a process rather than a listing: they build the book, approach a named list of buyers in parallel, run the bidding to a deadline and stay in the room through diligence. That work is bought by sellers whose business is large enough for several buyers to compete for it, and it is priced accordingly.
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The difference is the process, not the title
Anybody can call themselves an M&A adviser, so the title tells you nothing. What separates the tier is what happens after you sign. A broker lists the business and waits for buyers to arrive. An adviser builds a buyer list before the business is on any listing site, contacts them in a controlled order, and holds every interested party to the same timetable so that offers land within days of each other. Competition is the whole product, and it is what a seller is paying the extra points for.
Where the switch pays for itself
Below roughly a million dollars of enterprise value there is usually only one kind of buyer, an individual or a small holding company, and a process with no competitors in it costs more than it returns. Above that, private equity and strategic acquirers enter the picture and the gap between the first offer and the best offer widens fast. The honest test is not your revenue, it is whether five credible buyers exist. If they do, a process is worth running. If they do not, you are buying choreography.
What the engagement letter usually contains
Expect three things a broker listing rarely has. A retainer or work fee payable monthly or at milestones, which pays for the book and the research whether or not the deal closes. A success fee stated as a scale rather than a flat rate, often the Lehman ladder or its doubled form. And a tail of twelve to twenty four months, so that a buyer introduced during the engagement still owes the adviser their fee if you close with them later. Read the tail before the rate.
Questions that separate advisers
Ask how many buyers they will approach and how many of those are funds they have closed with before. Ask for two references from sales in your sector, completed in the last two years, and call them. Ask what happens to the retainer if you take the business off the market. And ask who does the work: at several firms the person who wins the mandate is not the person who runs the process.
Questions people ask about M&A advisory
Is M&A advisory the same as investment banking?
For a lower middle market seller they describe the same job. An investment bank is a firm that does M&A advisory among other things; a boutique M&A advisory firm does that job and nothing else. What matters is which people work on your file, not the label on the door.
What does M&A advisory cost?
A monthly or milestone retainer plus a success fee scaled to the price. The scale usually starts near 8% to 10% on the first tranche and falls as the price rises, which is the Lehman shape. Very few firms print any of this, so the only reliable way to compare is to ask several the same question.
Can I switch from a broker to an adviser?
Yes, once the listing agreement has ended and its tail has expired for any buyer the broker actually introduced. Check both dates before you sign with anyone else, because a tail claim after a closing is the most common way a seller ends up paying two fees.
Do advisers take businesses under a million dollars?
Some do, usually with a minimum fee that makes the effective rate high. If a firm quotes you a minimum of fifty thousand dollars on a business worth six hundred thousand, that is the market telling you the process is the wrong product for the sale.