Business Broker, Business Transfer Agent, M&A boutique or Corporate Finance practice?
In this article we are unashamedly doing a bit of naval gazing – considering where we fit into the world of business intermediaries and how do clients refer to us as an industry?
There are a number of names for business intermediaries who are in the business of business sales, mergers and acquisitions. These include (and in some cases are not limited to) “business brokers”, “business transfer agents”, “M&A boutiques” or “Corporate Finance practices”.
There are also a number of differentiators between the various business intermediary firms. What industry sector do they focus on? Do they focus on any sector? What size of business or deal size do they normally deal with? If selling a business on behalf of a client, how involved are they in the process? Are they simply introducers or do they actively handle the whole process from start to finish?
How business intermediary firms call themselves is perhaps rather fluid, for example some business brokerages are more corporate finance and visa-versa. However we would define the above nomenclature as follows:
Business Transfer Agents:
Business Transfer Agents (or BTA’s) tend to deal with the smaller end of the market, i.e. businesses with turnovers of £100k to £750k, and with bars, cafes, restaurants and small retail businesses. They tend to take an “agency” approach, advertising widely on the internet. When enquiries are received from buyers, the seller’s contact details are given and the buyer and seller are left to meet and agree a deal (or not) on their own. Some business transfer agents have 100’s of businesses on their lists dealt with by relatively small teams of administrative staff. Success rates with this market and approach tend to be 25-45%.
Business Brokers tend to deal with slightly larger businesses, i.e. with turnovers of £500k to £10m. Sales tend also to be company sales rather than business asset and goodwill sales due to the deal size and tax implications. Some business brokerages are sector agnostic, some specialise in particular sectors. The advantage of being sector specialists is that by default their following of buyers is sector specific. When selling a business good business brokers will put an emphasis on the preparation phase, with a full valuation report to set expectations and inform the seller about the possible deal structures, a detailed Sales Memorandum, telling buyers what they need to know to make a decision, and researching the market for the right strategic buyer. They actively handle buyer enquiries and lead the negotiation of the deal and will manage the due diligence and legal transaction through to completion. Clients are dealt with by an experienced Business Sales/Acquisitions Consultant who will typically manage 10-12 clients at any one time. Success rates with this market and approach tend to be 60-80% depending on how sector focused the business brokerage is.
M&A boutiques or Corporate Finance practices
We will put these two categories together, though some may disagree. M&A boutiques or Corporate Finance practices tend to deal with businesses with turnovers or deal values of £10m to £50m. For deals below this level, fees tend to be too high compared to the value achieved. Deals above this level tend to be dealt with by the top 10 accountancy/consultancy firms. As with business brokers, M&A boutiques or Corporate Finance practices will actively handle the sale process from start to finish, though they tend to do less open advertising. Consultants at these firms tend to have an accountancy background and will provide advice on tax planning and company structuring. Deals in this range tend to be more complex as they typically involve a group of companies or divisions. Consultants M&A boutiques or Corporate Finance practices typically conclude 2-3 transactions per year.
Choosing the right business intermediary for your business
When looking for a business intermediary to work with in selling your business, it is important to pick the right level of intermediary to work with. If you own a small café or retail business, it is best to use a business transfer agent (but try to avoid paying high upfront fees or cancellation clauses). If you own an established engineering or B2B service sector company, choose an experienced business broker who is preferably focused on your industry sector. There is normally a nominal engagement/commitment fee, but you are paying for the preparation, research and advice required to achieve a successful sale at optimum value.
Hornblower Business Brokers are as the name suggests business brokers. We specialise in business sales and acquisitions for the industrial, engineering and professional B2B service sectors. Typical deal values are £250k to £10m. With offices in London and Nottingham we operate both across the UK and internationally. Through our hands-on approach with fewer clients and sector focus we achieve a 70% success rate of sales within 12 months of instruction.
I hope this article has been useful. Any comments from readers would be most welcome!