Merger and acquisition firms is a label worn by outfits with almost nothing in common: one person operations, regional advisers, sector boutiques and full service investment banks. For a seller the useful question is not which is best but which of them will run a competitive process for a business your size, and what they charge for doing it.
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The four kinds
Solo intermediaries, who bring a contact book and little else and are cheap for that reason. Regional generalists, who cover one metro area across every trade and know the local buyers. Sector boutiques, who cover one industry nationally and whose buyer list is the whole point. And investment banks, who run formal processes for larger businesses and staff a team rather than a person. The right choice depends far more on where your buyers are than on the firm's size.
How to test the buyer list
Ask for the number of buyers they intend to approach, how many are funds they have closed with, and how many are in your sector rather than adjacent to it. Then ask for two references from closed sales in the last two years, and call them. A firm that will not put a number on the approach list is selling you a listing with a better name on it.
What they charge
A retainer or work fee, monthly or at milestones, plus a success fee on a declining scale. The Lehman formula and its doubled variant are the common shapes, and minimum fees are what bind on smaller deals. Almost no firm publishes any of this, which is why comparing them means asking three the same written question and putting the answers side by side.
When you do not need one
If a buyer has already approached you and you would be happy with their price, an adviser adds cost and delay unless you want competition. In that case the money is better spent on a lawyer and an accountant who can test the offer. Advisers earn their fee by creating an auction; with a single buyer there is no auction to create.
Questions people ask about merger and acquisition firms
Is a merger and acquisition firm the same as a business broker?
They overlap at the boundary. Brokers list smaller businesses and wait for buyers; M&A firms run processes and approach buyers directly. The fee, the retainer and the amount of work before marketing are the practical differences.
How many firms should I talk to?
Three is enough to see the spread in fee, approach and honesty, and few enough that the process does not leak. Ask each the same written questions so the answers are comparable.
Do these firms work with buyers too?
Many do both, which is worth asking about. A firm that also represents acquirers may have a better list, and may also have a conflict if one of their buy side clients bids for you.
What size business do they take?
Most state a minimum, either in revenue or in fee. If a firm's minimum fee is a large share of your likely price, that is the market telling you to look one tier down.