What is it that You Do?

Confused by all the different terms for professionals involved in selling companies?  You’re not alone.  Intermediaries describe themselves with names such as business brokers, merger and acquisition (M&A) specialists and investment bankers, yet few people understand what those titles mean and how to distinguish what services each one provides.  Much of this is due to the professionals themselves, who often like to use whatever term will impress the most people at a cocktail party regardless of accuracy.  In other cases it is because many of their functions overlap.  To filter past the spin and confusion, it’s important to understand the markets each serves, the size of transactions and specific services provided for each segment.

•    Regulated by the Securities & Exchange Commission, investment banks are financial institutions offering corporate finance services which include issuing and underwriting securities, trading derivatives, raising capital and M&A advisory.  Most investment bank clients are public companies or large privately-held businesses (above $100 million in revenue).  While business sale transactions are a key component of an investment banker’s activities, they are not the only focus.

•    Business brokerage firms typically act solely as an intermediary between a buyer and seller.  They assist with the transaction by setting an asking price, marketing the business for sale, facilitating discussions and helping the other professionals involved (attorneys, CPA’s, appraisers, etc.).  Business brokerage services are most appropriate for transactions under $5 million and are especially useful for businesses that will be sold to individual owner-operators.

•    A hybrid of the two ends of the spectrum are M&A specialists.  While M&A firms offer traditional business brokerage services, they also provide several unregulated investment banking functions.  While they do not provide financing for transactions or underwrite securities, M&A firms can assist in raising capital and sourcing debt.  M&A firms are excellent, more affordable, resources for companies that have not met the minimum size criteria for investment banks, yet have more complex needs than what business brokers typically provide.