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Buy-Side Services Provided by a Business Broker

Business Brokers are an excellent resource for entrepreneurs and business buyers who seek to acquire a privately held company. A description of the most commonly offered services by experienced intermediary firms include:

Acquisition Search:
Business Brokers are a great resource for locating companies as they have access to a variety of specialized databases and resources, in addition to large networks of businesses for sale, prospective sellers, and other business intermediaries from around the globe. The time frame to formally list a business for sale can be very long and therefore not all opportunities that a business broker is working on may be officially listed on the company’s website. Therefore, individuals interested in acquiring a business would be well served by establishing a relationship and registering as a buyer with one or more business intermediaries in the targeted area. Prior to engaging the business intermediary, a buyer should have a resume, financial net worth statement, and a clear understanding of their investment criteria (industry, location, size, price range, earnings requirement). While the majority of business brokers represent the business seller who is responsible for paying their fee and who the broker has a legal and fiduciary duty, buyer representation has become more popular where a business broker will provide a range of exclusive buyer related services to either an entrepreneur, corporation, or Private Equity Group (PEG) on either a fee or commission basis.

Funding:
Securing capital to purchase an existing company can be a daunting process for most buyers. The size of the company, type and quantity of assets, amount of required funding, personal credit scores, industry experience, and business cash flow history will be several of the guiding factors that determine the type of capital that should be considered. Business brokers have well established networks of funding sources and will be an invaluable resource in assessing the myriad of available options and finding the solution that best suits the targeted business and individual buyer requirements. Prior to investing considerable time in any specific business opportunity, the buyer should be prepared to have an open conversation with the broker to fully understand whether their financial situation will support the acquisition of the particular business based upon the price, terms and conditions of sale.

Due Diligence:
The business broker’s value is immeasurable in facilitating the due diligence process especially in the packaging, presentation, and evaluation of the legal, financial, and operational documents required by buyers to properly analyze the business to determine if it meets their investment criteria. Reviewing the financial statement recast with the buyer and advising them on the methodology used to value and price the business is another key role performed by the Broker. During the DD process, the broker should discuss with buyers the specific licenses, permits, contracts, leases, or franchise/dealership agreements, necessary to operate the business and the steps involved to obtain, assign, or have these transferred. Successful business intermediary firms are very selective in the companies they represent. Many turn down 50% or more of the listing opportunities based upon pre-listing due diligence. Therefore, having a business intermediary involved will often save the buyer considerable time during the discovery phase as businesses that are overpriced, unprofitable, or dependent on questionable or illegal business practices have been weeded out.

Professional Referrals:
Business Brokers maintain relationships with professionals in the accounting, legal, valuation, and financial fields. It is in all parties interest to have experienced advisors involved in the transaction as hiring the wrong advisor will, more often than not, cause the deal to fall apart or subsequently fail. Small business sales is a very specialized field and the business broker will be a credible source to contact for referrals to attorney’s, CPA’s, valuators, and financiers who have extensive experience and a core competency in small business transactions.