What are the situations that the sellers of privately held businesses should turn to intermediaries for help?
Is there a company that is too small or big to use an investment banker?
How does an intermediary – a business broker or investment banker – add value to the process?
The simple answer is almost always.
For large companies, an investment banker will add much value and are almost always used. The intermediary/investment banker will do all of the preparation work, the modeling, the valuation, the offering memorandums, and so on. The large companies, despite their resources, almost always outsource all of that to their intermediary. They rely on their advisors to give them good advice and support to move the sales process through to completion quickly and professionally.
When the company is difficult to sell the intermediary can especially shine. There are so many reasons that a business can be difficult to sell that it is impossible to list them all. Customer concentration. No management depth (everything is run by the owner). Competition. Declining profitability. On and on. An intermediary may be the best way to attract interest in a troubled asset.
For small companies, it may be difficult to get certain types of investment banks to take on the project. And even if one of these larger investment banks takes on the work, the seller may only get the “B” team. The “A” team will be on something else that could possibly produce more fees.
There are highly professional, very competent intermediaries that specialize in businesses of all types. Many of these earn their bread and butter on companies with revenues in the $10 to $20 million range. The seller just has to identify the right firm for the job – which is the best fit for them.
For most owners of privately held businesses, selling their company is a once-in-a-lifetime event. It is really a good idea to work with a professional advisor who has much experience in the process of selling a business. It is really the best way to get the most value for your company and achieve your personal goals.
