How an entrepreneur chooses an intermediary to help with a transaction depends on a variety of factors.
There is not a bright line between what makes a middle market financial adviser a business broker or an investment bank. Those monikers are typically self-selected.
Here are some considerations.
| Business Broker | Investment Bank | |
| Transaction value*: | Lower | Higher |
| Selling a business: | Typically engaged by the seller | May represent either buyers or sellers, but typically do not maintain a lengthy list of client companies available for sale |
| Buying a business: | Buyers are welcome and encouraged to contact business brokers and they will be eager to present buyers with descriptions of and information about companies they represent. | I-banks frequently represent both individuals seeking to buy a business (LBO/MBO) and corporations seeking to make acquisitions. |
| Raising Capital: | Most self-described business brokers don't tackle capital raises; a "sale" to a private equity group, however, may be structured as an investment. | Most self-described investment banks tackle capital raises, including private equity and venture capital placements. |
*The lower the transaction value, the more likely that a self-described business broker rather than a self-described investment bank is to tackle your deal. To be clear, however, there is no line of demarcation and some self-described business brokers effect larger middle market transactions, while some self-described investment banks execute smaller middle market transactions, but this information is a fair guide as a rule of thumb.
The decision about whom to choose to represent you in a transaction might better focus on the following considerations:
What is the industry expertise of the firm I've selected? Understanding the firm's industry experience is likely the number one consideration. The right firm may be able to get your deal done with relatively few contacts.
Where is the firm located? While you might think this doesn't matter, there is much to be said for being able to drive to your advisor's office or to being able to summon him to yours--virtually any time.
Who are the people? It is fair and relevant to weigh personalities in your analysis. You will be going through a high-stress transaction with a firm represented by the people sitting in your office. You'd hope that these are people you'd want in your foxhole with you!
» The 2% Solution from MidMarketMaven
Today, our firm officially announced the launch of a new pricing program for sell-side M&A advisory services; we call it the 2% Solution.Investment bankers and business brokers for years have used a variety of pricing formulas, including the Lehman... [Read More]
Tracked on: June 1, 2006 10:13 PM | Permalink to Trackback