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M&A Advisor or Business Broker?

The expertise level of service advisors in the business transaction industry can vary widely. Though both M&A Advisors and Business Brokers can be considered part of the same category, there are certainly differences in the scope of the work that they can perform.

Business Brokers focus on smaller deals, with the majority of the valuation coming for a multiple of the owner’s profit.

M&A Advisors are more strategic in their acquisitions, typically helping customers in the middle market space.

At The Firm Advisors, we help both types of clientele. Our team is well-versed in both main street and middle market transactions. That’s why, when viewing our opportunities, you’ll see companies with cash flows as low as $100,000 and as high as $15,000,000.


Some additional information from Investopedia:

Client Profiles

As a result of this different scale, both service providers have different client profiles. Usually, small firms, individuals (including entrepreneurs) will fit the client profile for business brokers. M&A advisors cater to the needs of large organizations and firms, even governments and individual entrepreneurs for large scale projects, spanning multiple regions, the nation, or the world.

Valuation Methods

Because the scope and client profile are different for business brokers vs. M&A advisors, so too are the skill sets necessary to facilitate their services. Business brokers offer services centered around establishments which are relatively easy and simple to evaluate, while M&A advisors offer services around complex business transactions which may be difficult to evaluate.
The valuation methods used by business brokers are confined to current sales, location, and profit numbers. An M&A advisor's valuation methods are elaborate enough to include strategic potential targets, analysis of required investments, intellectual asset valuation, and future potential growth.

Scope of Business Targets

A business broker's assistance is limited in scope. A client will be presented with a list of available sellers or buyers within the regional reach of the broker. M&A advisors work strategically with the client, which can involve starting completely afresh to scout for new targets that would be a good fit for the firm.

Compensation

The manner in which both are compensated also differ to a certain degree. Business brokers work on a commission of the deal value (usually a pre-decided percentage). M&A advisors also work on percentage payouts, but additionally get rewards for their specific engagement efforts, additional services arranged for, taxation, and legal services. The difference in value is a result of the scope of long-term commitment. The role of a business broker is limited to the point of a deal getting done, whereas an M&A advisor may work in continued engagements for an extended period of time for the successful implementation of the venture.

 

The Bottom Line

Selling, buying, or merging a business can make or break your business venture. Selecting the right advisor for your needs requires a thorough evaluation, as it often gets confusing to select between business brokers and advisors. M&A advisors do offer more comprehensive services but come at an additional cost. Business brokers can be an economical option but are limited in scope and service. Considering the above-mentioned points, the right fit for your business should be selected.

 

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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.