An M&A broker sits between a main street business broker and an investment bank. The job is to find a buyer for a privately held company that is too big for a listing site and too small for a bank's minimum fee, and to run enough of a process that more than one buyer is at the table when the price is set.
Get quotes to sell my business
The registration question, briefly
Selling a company's shares can be selling a security, and taking transaction based compensation for that is what makes someone a broker under federal law. Congress created a narrow exemption for M&A brokers working on privately held companies, with conditions about control passing and the buyer being active in the business. It is why the honest firms are careful about how they describe their fee, and why this site takes an advertising fee rather than a share of any sale.
What you get for the fee
A buyer list built rather than waited for, a document that presents earnings in a form a funded buyer will accept, and someone whose job is to hold several buyers to one timetable. A seller can do all of it alone. What is hard to do alone is negotiate hard with the person you also need to like you, which is most of what the intermediary is for.
How the fee is built
A success fee on a declining scale, usually with a minimum that binds under a certain price, and often a modest retainer. The published US figures on this site run from 5% to 15% of the sale price across the firms that print anything at all, and most print nothing. The minimum, not the rate, is what decides your effective cost on a smaller sale.
Choosing between one and a listing
If your likely buyer is an individual within an hour's drive, a listing site plus a good lawyer may be the whole answer. If your likely buyers are funds and competitors who will never see a listing, paying someone to reach them is not optional. The test is the buyer, not the revenue.
Questions people ask about M&A broker
What is the difference between an M&A broker and a business broker?
Deal size and method. Business brokers list and wait; M&A brokers approach a named buyer list and run a timetable. The line between them is blurry and the title is unregulated, so ask what they will actually do rather than what they call themselves.
Do M&A brokers charge a retainer?
Many do, monthly or at milestones, and it pays for preparing the information document. Ask what happens to it if you withdraw, and whether it is credited against the success fee at closing.
Can one broker act for buyer and seller?
It happens, and it should be disclosed in writing. A single intermediary paid by both sides cannot be negotiating hard for either, so a seller should know before the first buyer meeting.